Credit Suisse escapes criminal action over $2bn Mozambique scandal
UK’s financial watchdog drops probe into loans arranged to fund fishing fleet
Credit Suisse has escaped criminal prosecution by the UK’s financial watchdog over the $2bn “tuna bond” scandal in Mozambique, where loans to set up a state fishing fleet vanished.
The Financial Conduct Authority has decided to drop its criminal probe into the matter, informing the bank in August that it has downgraded the case to a regulatory investigation, according to people familiar with the matter.
The U-turn is a boon to the bank as the FCA was previously looking 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 exposed by a number of corruption scandals, from Fifa to Petrobras, the Brazilian oil company.
The FCA regulatory investigation focuses on both the bank and individuals involved in the tuna-bond scandal, who now face a fine or a ban at worst, rather than potential jail time.
The FCA started scrutinising the matter after the International Monetary Fund suspended lending to Mozambique over $2bn of “hidden loans”, arranged by Credit Suisse and Russian bank VTB, for a new state-owned fishing company and two other companies owned by Mozambique’s national intelligence agency.
The US Department of Justice still has a criminal investigation open into the matter. The DoJ is probing not only Credit Suisse but also VTB and BNP Paribas for their roles in the affair, while the US Securities and Exchange Commission is running a parallel regulatory probe. Swiss authorities are also investigating.
Credit Suisse, the FCA, VTB and BNP Paribas declined to comment.
The corporate investigations firm Kroll last year found that $500m of the borrowed money had gone missing. It also concluded that Mozambique had paid over the odds for more than $700m worth of fishing boats, naval vessels, radars and maritime security.
The tuna bond scandal put the brakes on what had been one of Africa’s fastest growing economies and Mozambique defaulted on the debt last year.
It first sold bonds to international investors five years ago to finance a new state-owned fishing company, Ematum, but was later found to have spent the bulk of the funds on naval vessels and other security equipment.
After the government was forced to restructure the original $850m tuna loan in 2016, it emerged that two other companies had taken loans of $1.2bn for maritime security equipment that had not been disclosed to donors.
This week Mozambique’s government said it had reached a deal with creditors to emerge from default on the former tuna bonds.
Credit Suisse is still involved in the saga as it is representing investors in one of the previously hidden loans, who want to strike a similar deal for their debt which is also in default.
The decision by the FCA turns the heat up on the regulator to realise its pledge to start bringing criminal money-laundering cases. It is yet to file charges in any. Earlier this year, it said it has 75 cases of money-laundering open on both companies and individuals “many of which” had both a criminal and regulatory element.
Politicians have demanded more action by UK agencies that fight financial crime to attempt to stem the tide of hundreds of billions of pounds that is estimated to flow through the City of London.