As news of the ‘tuna bond’ scandal in Mozambique started to make news around the globe and three former Credit Suisse bankers were arrested, an all too familiar pattern started to develop. The employees had gone ‘rogue’, the bank was exonerating itself from any wrongdoing, the regulators and prosecutors are accepting of this argument and the focus is very much on the individuals.
I don’t know the inner workings of this case, nor do I really want to know. I don’t have a perverse interest in financial scandal and I am also not trying to make a case for the individuals concerned as I am sure there was undoubtedly some wrongdoing. I certainly saw a few brown envelopes change hands during my time working in Indonesia for Barings, whether it was to speed up the installation of a phone line or secure a valuable introduction, it happened.
But Credit Suisse has to shoulder a fair share of the blame. Stupidity and incompetence are no longer a defence, or at least they shouldn’t be! If all that you have to do to swerve a fine or avoid a federal prosecution is to suggest that your employees have gone ‘rogue’, then the clean-up operation in the world of banking has shuddered to a halt.
This deal was going down in Mozambique, not Wall Street in New York or Threadneedle Street in London. Should there have been an added layer of scrutiny?
The indictment from the US authorities has adopted the bank’s narrative that these employees were ‘rogue’. The charging document indicates that the former bankers acted ‘secretly’ and ‘withheld’ or ‘conspired to withhold’ information from their compliance team.
This isn’t the 1990s when you could count the number of compliance officers within the bank on one hand. Modern day banking sees compliance officers often out-number those transacting the business.
The $2bn loans at the heart of the case were marketed to investors in 2013, ostensibly for financing Mozambique’s fishing industry. But they allegedly had a more sinister purpose and at least a tenth of the money was used for bribes and kickbacks.
The allegations from the US indicated that Credit Suisse identified red flags around the Mozambique deals but failed to investigate them thoroughly enough or was misled by one of the three individuals identified as ‘rogue’. In one incident, a senior executive at the bank objected to the involvement of an executive at Privinvest, an Abu Dhabi-based supplier of boats to the projects. A due diligence report described the executive as a “master of kickbacks”, prosecutors alleged.
Okay, so as a quick summary – ‘red flags’, ‘failed to investigate’ and ‘master of kickbacks’. Looks like an open and shut case, the employees have gone ‘rogue’.
No, it screams of incompetence, negligence, and lack of oversight.