For years, the AML community has been trying to get their message heard at the highest levels of the regulated sector. Business schools have various terms for it, from “tone from the top” to “business culture” to “the rotting fish” (as in, a fish always rots from the head). But for the most part, it’s a very hard sell. CEOs and other board members know that financial penalties – although irritating – will not harm them unduly. The share price may take a short-term hit, but market forces will soon reassert themselves and the ship will be righted. And the media is more likely to focus (understandably) on the criminals making the money than on the businesses laundering it for them (particularly if the laundering technique is complicated and/or boring to explain). But last week was a bad week for regulated sector CEOs – and a good week for AML-ers.
On 20 January 2021 Swiss regulator FINMA issued a notice confirming that Julius Baer bank “fell significantly short in combating money laundering between 2009 and early 2018” and that “organisational failings and misplaced incentives encouraged breaches of the legal obligations to combat money laundering”. (“As an example, a client adviser looking after Venezuelan clients in 2016 and 2017 received bonuses and other remuneration in the millions, even though Julius Baer had reported a number of his clients… to the [Swiss FIU]” – but that’s a story for another day.) One of FINMA’s requirements is that “the bank must establish a Board committee specialising in conduct and compliance issues, or set up a similarly effective mechanism” – I’m fairly surprised that it didn’t already have one, but hey ho.
In a further notice issued a day later, FINMA announced that they had issued written reprimands to two managers at the bank. They stop short (why?) of naming names, but several media sources confirmed that the two lucky recipients of the billets doux were Boris Collardi and Bernhard Hodler. Collardi was Julius Baer CEO from May 2009 until his unexpected resignation in November 2017 (and is now a partner at rival wealth management firm Pictet) while Hodler was head of compliance and took on the CEO mantle for eighteen months. The current CEO, Philipp Rickenbacher, has vowed to clean up his bank’s client base.
On the same day, Angelo Caloia – former president of the Institute of Works of Religion (more informally, the Vatican Bank) – was sentenced to eight years and eleven months in prison after being found guilty of embezzlement and money laundering. He was president of the IOR from 1999 to 2009, and was convicted of embezzling money while managing the sale of Italian real estate owned by IOR between 2001 and 2008, declaring less than the actual value of the sale and pocketing the difference – some €50 million. Two lawyers (father and son) were convicted of the same offences alongside him and also jailed. All three men were fined, were ordered to repay the money, and were banned from public office in perpetuity. In perpetuity: now that’s the right tone to strike.
I hate money laundering 