Swiss credit escaped criminal prosecution by the UK’s financial watchdog over the $2 billion ‘tuna bond’ scandal in Mozambique, where loans for the creation of a state fishing fleet disappeared.
The Financial Conduct Authority decided to drop its criminal investigation into the matter, telling the bank in August that it had downgraded the matter to a regulatory investigation, according to people familiar with the matter.
The U-turn is a boon for the bank as the FCA previously sought to use its criminal money laundering powers in what would have been one of the first cases of its kind. Credit Suisse is already in the crosshairs of Swiss regulators for money laundering weaknesses revealed by a number of corruption scandals, from Fifa to Petrobras, the Brazilian oil company.
The FCA’s regulatory probe focuses on both the bank and the people involved in the tuna bond scandal, who now face a fine or a ban at worst, rather than a possible prison sentence.
The FCA began looking into the matter after the International Monetary Fund suspended loans to Mozambique of more than $2 billion in “hidden loans”, arranged by Credit Suisse and Russian bank VTB, for a new fishing company state-owned and two other companies owned by Mozambique’s national intelligence services. agency.
The US Department of Justice still has an open criminal investigation into the matter. The DoJ is probing not only Credit Suisse but also VTB and BNP Paribas for their role in the case, while the United States Securities and Exchange Commission is conducting a parallel regulatory investigation. Swiss authorities are also investigating.
Credit Suisse, FCA, VTB and BNP Paribas declined to comment.
Last year, business investigation firm Kroll found that $500 million of the borrowed money had gone missing. He also concluded that Mozambique had paid beyond the odds for more than $700 million in fishing boats, warships, radar and maritime security.
The tuna bond scandal dampened what had been one of Africa’s fastest growing economies and Mozambique defaulted on its debt last year.
She first sold bonds to international investors five years ago to fund a new state-owned fishing company, Ematum, but it was later discovered that she had spent the bulk of the funds on warships and other safety equipment.
After the government was forced to restructure the original $850 million tuna loan in 2016, it emerged that two other companies had taken out $1.2 billion loans for maritime safety equipment that did not had not been disclosed to donors.
This week, the Mozambican government said it had reached an agreement with creditors to emerge from default on old tuna bonds.
Credit Suisse is still involved in the saga as it represents investors in one of the previously hidden loans, who want to make a similar deal for their debt which is also in default.
The FCA’s decision puts pressure on the regulator to fulfill its commitment to start bringing criminal money laundering cases. He has not yet filed a complaint. Earlier this year it said it had 75 money laundering cases opened against businesses and individuals “many of which” had both a criminal and regulatory element.
Politicians have demanded more action from Britain’s financial crime agencies to try to stem the tide of hundreds of billions of pounds set to flow through the City of London.
Additional reporting by Joseph Cotterill and Max Seddon.