Credit Suisse has been at the center of a major financial scandal this past year. The Swiss banking giant allowed billions of dollars to slip through the cracks, flouting supervisory law and ultimately leading to losses for thousands of investors. In this article, we’ll explore how Credit Suisse managed to get away with such massive
Credit Suisse has been at the center of a major financial scandal this past year. The Swiss banking giant allowed billions of dollars to slip through the cracks, flouting supervisory law and ultimately leading to losses for thousands of investors. In this article, we’ll explore how Credit Suisse managed to get away with such massive fraud and what lessons can be learned from it. We’ll discuss why the bank was so eager to bypass regulations, how the funds were able to slip through undetected, and what measures can be taken in order to prevent similar scenarios in the future.
What is Credit Suisse?
Credit Suisse is one of the world’s largest banks. According to Supervisory Law, it is required to take measures to prevent money laundering and terrorist financing. However, Credit Suisse flouted these rules by allowing $bn Greensill funds to slip through the cracks. This allowed Greensill to access billions of dollars of credit that it would not have otherwise been able to obtain. As a result, Greensill was able to use this credit to finance its operations and grow its business.
What is Greensill?
Greensill is a UK-based financial services company that specializes in providing working capital finance to companies. The company was founded in 2011 by Lex Greensill, who previously worked as an advisor to the UK government on supply chain finance.
Greensill offers a range of services, including receivables financing, inventory financing, and supply chain finance. The company has provided financing to a number of high-profile companies, including General Motors, Airbus, and Walmart.
Greensill has been embroiled in controversy recently after it emerged that Credit Suisse had allowed billions of dollars of investor money to be used to finance Greensill’s activities. Credit Suisse has since been fined by regulators for its role in the affair.
How did Credit Suisse flout supervisory law?
In the late 2000s, Credit Suisse began to flout supervisory law by allowing Greensill Capital, a financial services firm, to slip billions of dollars through the cracks. Credit Suisse failed to conduct adequate due diligence on Greensill’s activities, resulting in the approval of fraudulent loans. In 2012, Greensill was fined for its role in the 2008 financial crisis. In 2015, Credit Suisse was fined for its role in the 2014 Swiss franc crisis.
In both cases, Credit Suisse put profits ahead of compliance with supervisory law. In doing so, the bank put itself at risk of incurring significant losses.
What were the consequences of Credit Suisse’s actions?
The consequences of Credit Suisse’s actions are far-reaching. The bank has been slapped with a record $5.3bn fine by US regulators for allowing $2bn of funds to be invested in Greensill, a now-insolvent supply chain finance company. The UK’s Serious Fraud Office is also investigating the bank’s role in the Greensill scandal.
This is not the first time that Credit Suisse has been embroiled in scandal. In 2014, the bank was fined $196m by US and UK regulators for helping wealthy Americans evade taxes. In 2018, it was fined $135m by New York state for its involvement in a multi-billion dollar Malaysian sovereign wealth fund scandal.
The string of scandals has led to calls for Credit Suisse to be broken up or nationalised. The Swiss government has so far resisted these calls, but the pressure is mounting on the bank and its CEO Tidjane Thiam.
Credit Suisse’s actions of flouting supervisory law to allow $10 billion Greensill funds to slip through the cracks is an example of how financial institutions must ensure they are following regulations. The consequences of Credit Suisse’s failure to do so can be seen in its current state, as it faces significant challenges due to this incident. Hence, it is essential for all financial institutions and organizations to respect regulations and maintain transparency when performing their activities. This will help ensure that similar scenarios don’t occur again in the future, thereby protecting investors and stakeholders from unnecessary losses.