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The financial market regulator has initiated enforcement proceedings in the case of top banker Iqbal Khan. This can have consequences for the big bank.
At Credit Suisse, the issue surrounding the shadow of Iqbal Khan cannot yet be resolved.
Photo: Ennio Leanza (Keystone)
For large bank Credit Suisse, the matter surrounding its top executives like Iqbal Khan is not over yet: Financial regulator Finma announced that it is opening so-called enforcement proceedings against the bank because of the matter. The main question here is whether the shading was properly documented and verified by the responsible bodies.
The bank and the responsible managers are threatened with criticism from the supervisory authorities on this issue. In the event of complaints, Finma generally requires the necessary corrections to be made to the processes. No fines are expected, because Finma can only collect unjustified profits. If the supervisory authority can prove the misconduct of individual administrators, the instruments range from a complaint to a professional ban.
Who knew about the observations?
Earlier this year, the supervisory authority commissioned attorney Thomas Werlen from the Quinn Emanuel law firm to investigate the shadow issue. So far, the bank has unsuccessfully defended itself against this appeal. Werlen’s final report is now available to Finma, but the supervisory authority does not comment on the content. What the special auditor found is serious enough that the supervisory authority is initiating proceedings against the bank.
The bank’s then number two, COO Pierre-Olivier Bouée, along with former security chief Remo Bocalli, is known to have ordered the shadow of then-head of asset management Iqbal Khan. Khan was placed under surveillance because he wanted to switch to UBS. However, Khan noticed the persecutors working for the Investigo company and filed charges of coercion. With that, the whole thing came to light.
A little later it emerged that former human resources manager Peter Goerke had also been followed beforehand. However, to this day, apparently not even Goerke himself knows why this happened.
It is also unclear who in the bank was involved in the shadowing besides Bouée and Bocalli. Former bank chief Tidjane Thiam has always denied knowing of the observations. When Goerkes’ shadow was made public last December, President Urs Rohner’s board of directors had lost trust in Thiam and put him in front of the door.
The big bank won’t be rid of the shadow of the Spygate affair anytime soon.
Before Finma appointed a special auditor, the bank had the Homburger law firm investigate the proceeding itself. The Homburger report already provides indications that many things did not go well at the time, which is now apparently prompting the supervisory authority to act.
Security chief Bocalli and Bouée are known to have communicated with each other using the encrypted Threema app. Also, the email traffic is no longer full and some emails have been deleted. “The deliberate removal of communications could be seen as a violation of proper business activity,” Michael Kunz, of the Kunz Compliance law firm, which specializes in financial market law, told this newspaper.
Documentation obligation violated?
The Homburger report also found that “there are no written instructions” to monitor Khan. This could have violated the bank’s documentation requirements. Because such an important matter must be decided by the responsible bodies and documented accordingly. There are also questions about accounting for the costs of observations, which have apparently been hidden. According to reports from financial circles, the way in which costs have been disguised on Credit Suisse’s books is of particular interest to Finma. The supervisory authority itself does not comment on this.
Credit Suisse announced this morning that it has taken note of the opening of the procedure and that it intends to cooperate fully with the supervisory authority. The bank emphasized that shading was not part of the bank’s culture. Sources at the top of the bank are stressed and relaxed, one source said that the conclusion of the investigation would be quite relaxed. Finma said it would take “several months” to complete its procedures. The big bank won’t be rid of the shadow of the Spygate affair anytime soon.
Credit Suisse chief Thomas Gottstein believes the case will have implications for the entire financial scene. Because it’s about the question of how to communicate with each other within a bank, Gottstein told a “Finanz und Wirtschaft” financial conference. Therefore, the issue could “set a standard for the industry,” Gottstein said.
