The UK's Financial Conduct Authority (FCA) and the U.S. Securities and Exchange Commission (SEC) have sent the clearest warning to the banking and finance sector that extensive and high-level corruption and fraud will be rigorously pursued.
The latest scandal, which has become known as the "tuna scandal" in Mozambique, arises from loans arranged by Credit Suisse in conjunction with a subsidiary of the Russian bank VTR, amounting to $1.3 billion, between 2012 and 2016, for the Mozambique government aimed principally at funding a range of government-sponsored schemes including amongst other things, maritime security projects and a State tuna fishery venture. Credit Suisse now faces fines of $175 to the Justice Department, $99 million to the SEC, and $200 million to the FCA for fraudulently misleading investors and violating U.S. bribery laws.
As the extent of the corruption and fraud involved in the loan agreement began to be revealed it became clear that this was a complex legal situation that would take time to unravel. The resulting criminal charges relate to eight individuals being charged in 2018 with money laundering and fraud offences.
Diana Riberio, who heads Giambrone & Partners' recently launched office in Portugal and also leads Giambrone's sub-Saharan initiative, commented "the inevitable conclusion is that Credit Suisse, knowing that Mozambique can be a challenging jurisdiction, failed to scrutinise the activities of their own employees even in the face of warnings and high-risk factors. The regulatory bodies believe that a sum in the region of $50 million, found its way into the pockets of Credit Suisse employees as an incentive to secure more favourable loan deals." she further commented "claiming that the losses were due to rogue employees is a poor defence, given the high-level monitoring expected in all financial transactions in the banking and financial sector with regard to loan agreements of this nature."
Over the past two or three years, Mozambique has regularly been named one of the fastest-growing African economies. However, the external donation and investment mainly from the International Monetary Fund (IMF), the World Bank, the African Development Bank, the European Union and the UK comprising of approximately a third of the national budget, plays a significant part in sustaining the country's success.
The lawyers in Giambrone & Partners' international banking and finance litigation team understand that the regulators themselves must also raise their own standards if the current inextricable march towards commercial globalisation is to be successful. Both commercial organisations and governments must constantly review their internal checks and balances relating to financial regulation or risk worldwide exposure and condemnation should serious breaches be exposed.
Diana also points out "As the murky scandal unfolded and the extent of the corruption was exposed, the subsequent actions created a domino effect whereby the International Monetary Fund suspended its financial support to Mozambique, resulting in the crash of its economy." Diana further mentions "there are other legal actions yet to come in the High Court in England and Wales involving the subsidiary of Russian bank VTB and the shipbuilder Privinvest Group."
Giambrone & Partners' corporate and commercial lawyers point out that the reputational damage to a commercial organisation cannot be overstated in scandals involving corruption and bribery. It would seem that an external legal overview would be an astute strategy, enabling a second pair of impartial expert legal eyes to monitor the activities of employees to ensure compliance with money laundering, bribery and any other issues that could compromise the organisation in sensitive international dealings. A transparent policy would clearly indicate that a business would not be embroiled in corruption and provide a significant measure of confidence surrounding future international transactions.
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