Costly Julius Baer Scandal Clean-Up


The Swiss private bank said a three-year regulatory clean-up of money laundering scandals will draw to a close this year. For the first time, Julius Baer told investors what the review will cost.

A regulatory review of every Julius Baer client will conclude by year-end, the bank said on Monday. The action was sparked by Julius Baer's involvement in several major money laundering scandals, including Venezuelan oil firm PSVSA and soccer body FIFA.

The project to review data on its clients will cost an estimated 87 million Swiss francs ($87.4 million) in total, Julius Baer said in a slide presentation. It is the first time the bank has acknowledged the cumbersome data project – which has infuriated Julius Baer's cadre of influential private bankers – or detailed its costs.

Casting a Shadow

The suspicion is that Julius Baer didn't exercise enough caution when it accepted dicey clients, including in Latin America where Julius Baer is rethinking its business. The bank can ill afford the extra clean-up costs – CEO Bernhard Hodler is struggling to rein in spending, including by cutting jobs. 

Julius Baer has already concluded the documentation in Switzerland, and expects to finish in the rest of the world by year-end, the bank said on Monday. Switzerland's financial regulator Finma ordered the wider probe. The project, dubbed Atlas, has cast a shadow on an era of heady growth under former Julius Baer CEO Boris Collardi.

Ex-Banker Probed

This year, Atlas is estimated to cost 40 million francs, after 34 million francs last year and 13 million francs in 2017. The money is going towards establishing and confirming the identity and source of millions that clients have banked with Julius Baer – something which should form a basic principle of modern private banking.

On top of the so-called client documentation upgrade, prestigious U.S. law firm Quinn Emmanuel Urquhart & Sullivan is reportedly examining all dealings by former employee Matthias Krull. Until eight months ago, Krull was a heavyweight private banker for Julius Baer in Panama. 

CS and Single Client View

In August, the 45-year-old sobbed in court while admitting he helped to laundering money from a PDVSA foreign exchange embezzlement scheme in Venezuela. Nearly 2 million people have fled the country amid shortages of food and medicine, and as violent crime and inflation spiral out of control; Krull was sentenced to a ten-year prison term.

«Atlas» has a parallel at Credit Suisse, where Finma has also ordered improvements to the bank's set-up and risk management following a slew of money laundering scandals. Credit Suisse needs to provide a so-called single client view by year-end. The view seeks to aggregate the complete data of any particular clients as well as his or her connections within the bank at the push of a button.

U.S. Tax Probe Over?

Julius Baer hasn't yet established a similar system, according to one bank insider. Finma hasn't addressed the probe publicly – and it is possible that Atlas' costs will surge past 100 million francs before Julius Baer is able to put it aside.

The bank is within striking distance of putting a years-long U.S. tax evasion probe definitively behind: American prosecutors will shortly file a motion to end a 2016 settlement agreement, Julius Baer said on Monday. The move moots fears that the bank's scandal in Latin America could imperil the U.S. agreement.

Source - Finews

© Nick Kalikajaros 2019