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FINMA Unveils Grave AML Violations at Banque Audi (Suisse) SA: Enforcement Measures and Compliance Challenges Revealed

Switzerland's financial regulator, FINMA, has disclosed a myriad of grave anti-money laundering (AML) breaches uncovered at Banque Audi (Suisse) SA, revealing a significant lapse in compliance standards within the banking institution. The findings of FINMA's investigation paint a concerning picture of systemic failures and disregard for regulatory obligations at Banque Audi.


FINMA Unveils Grave AML Violations at Banque Audi (Suisse) SA: Enforcement Measures and Compliance Challenges Revealed

According to FINMA's statement, the bank was implicated in a series of egregious violations, ranging from concealing information from regulatory authorities to neglecting warnings from auditors regarding AML protocols. Notably, the bank was found to have serious shortcomings in its handling of politically exposed persons (PEPs), a critical area in AML compliance. Moreover, it failed to adequately clarify the origin of assets for high-risk clients and neglected to report suspicious transactions to the Money Laundering Reporting Officer (MLRO).


The severity of these violations prompted FINMA to take decisive action against Banque Audi. The regulator ordered the disgorgement of profits totaling 3.9 million Swiss francs ($4.34 million) and imposed a capital surcharge of 19 million francs on the bank. These penalties underscore the gravity of the breaches committed by the institution.


Despite the enforcement actions taken by FINMA, Banque Audi has demonstrated a degree of cooperation and willingness to address the identified deficiencies. The bank has initiated corrective measures, including the replacement of personnel in key positions and a significant increase in compliance resources. Additionally, it has undertaken a thorough review of certain client relationships and submitted multiple reports to the MLRO.


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However, the regulator noted that Banque Audi has opted to maintain certain high-risk client relationships, a decision that raises concerns given the nature of the violations uncovered. While the bank's efforts to rectify its compliance shortcomings are commendable, the decision to continue these relationships may pose ongoing risks to the integrity of its AML framework.


Furthermore, FINMA's investigation revealed a serious breach of supervisory law, wherein the bank failed to adequately clarify the origin of assets in high-risk client relationships. This failure was exemplified by a specific instance where a payment from a politically exposed person was made into the account of a high-ranked Lebanese official, yet the bank refrained from reporting these transactions to the appropriate authorities.


In light of these findings, FINMA has imposed additional measures on Banque Audi, including further corrections to its AML defense mechanisms and the appointment of an audit mandatary to monitor the implementation of prescribed measures. Moreover, the bank has been prohibited from entering into new relationships with politically exposed persons or high-risk corporate clients for a period of two years or until the specified measures are fully implemented.


"It has decided to continue certain high-risk client relationships," stated FINMA regarding Banque Audi's response to the investigation.


"In the course of the proceedings, the bank has co-operated with FINMA and took measures to restore compliance with the law," the regulator said in a statement.


Today’s action arises from an on-site inspection in 2021 when FINMA reviewed the client relationships with politically exposed persons (PEPs) from several countries.


The regulator discovered serious shortcomings in the prevention of money laundering which prompted enforcement proceedings in 2022, which concluded with today’s penalties.


As part of the on-site inspection, FINMA by default obtained all internal audit reports.


In a specific report, the bank’s internal auditors had pointed out shortcomings in the prevention of money laundering with regard to certain relationships and demanded that measures be taken. “However, this specific report was initially not mentioned to FINMA and was not submitted to it,” the regulator noted.


The bank, owned by a large Lebanese banking group, was found to have:

  • Serious shortcomings in dealing with PEPs

  • Ignored auditor’s warnings about AML protocols

  • Failed to inform regulator about auditor’s concerns

  • Inadequately clarified origin of assets for high-risk clients

  • Failed to report these transactions to MLRO

  • Ignored or failed to investigate press reports about these clients


It is noteworthy that individuals allegedly responsible for the violations of supervisory law have left the bank and the Swiss financial sector. Consequently, FINMA has refrained from initiating proceedings against these individuals that could result in an industry ban from the Swiss financial center.


Overall, FINMA's actions against Banque Audi underscore the regulator's commitment to upholding the integrity of the Swiss financial system and ensuring compliance with AML regulations. The enforcement measures imposed serve as a stark reminder to financial institutions of the imperative to adhere to rigorous AML standards and regulatory requirements in safeguarding against illicit financial activities.

By fLEXI tEAM

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