Credit Suisse to Improve Anti-Money Laundering Processes

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The Swiss Financial Market Supervisory Authority ("FINMA") has detected shortcomings in Credit Suisse Group AG 's CS anti-money laundering compliance processes after investigating the bank in relation to certain cases in the period between 2006 and 2014.

The cases, defined as legacy cases by the bank, were in relation to suspected corruption activities involving the International Federation of Association Football FIFA, the Brazilian oil corporation Petrobras and the Venezuelan oil corporation Petróleos de Venezuela, S.A. Also, the bank was investigated in relation to a significant business relationship with a politically exposed person. In both the circumstances, FINMA concluded that Credit Suisse failed to implement proper anti-money laundering process.

Remedial Measures to be Undertaken

The Swiss bank has been ordered to improve its internal control processes and accelerate the implementation of steps that had been initiated by it in 2015.

One of the measures relates to implementing a "single client view" across every relevant department with which they will be able to see all the client's relationships with the bank instantly and automatically. Though the regulator acknowledged substantial progress in its implementation, Credit Suisse has been asked to complete it for all relationships and for all relevant functions by 2019-end.

Moreover, FINMA will be appointing an independent reviewer in order to make sure that the above measures have been implemented, including the ones initiated by Credit Suisse since 2015. Also, the reviewer would judge their adequacy and effectiveness.

U.S. Banks That Failed Money-Laundering Compliance in 2018

In February, U.S. Bancorp USB had agreed to pay about $613 million in penalty to the U.S. regulators for failing to put together proper anti-money laundering control programs along with intentionally not reporting suspicious activities to the authorities.

Further, Citigroup C was fined by the Office of the Comptroller of the Currency in January, on falling short on its compliance efforts and failing to maintain effective controls related to its anti-money laundering policies. Notably, the bank agreed to pay $70 million as civil penalty.

Our Take

Credit Suisse's three-year restructuring overhaul is finally nearing its end, and benefits derived from it are likely to boost the bank's financials in coming years. Per a Swiss newspaper, NZZ am Sonntag, CEO Tidjane Thiam expects to deliver annual profit of CHF5-6 billion in 2019 and 2020.

Such efforts to improve financials encourage us. However, persistent legal hassles continue to hurt the bank's reputation.

This Zacks Rank #3 (Hold) stock has lost 15.7% so far this year compared with 14.9% decline recorded by the industry it belongs to.

A better-ranked stock in the finance space is Webster Financial Corporation WBS , carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

The company's Zacks Consensus Estimate for current-year earnings has been revised slightly upward, over the past 60 days. Also, Webster's shares have rallied 27.1% over the past year.

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U.S. Bancorp (USB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: USB , C , CS , WBS

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