Credit Suisse settles Mozambique bond probe for $475m

Swiss banking group Credit Suisse is to pay $475m to settle charges brought by both UK and US authorities over anticorruption bond offerings in Mozambique.

Under the terms of the settlement, Credit Suisse will pay the US Securities and Exchange Commission (SEC) almost $100m and the UK’s Financial Conduct Authority $200m. The US Department of Justice levied a $247m criminal fine, of which Credit Suisse will pay $175m after crediting.

Announcing the settlement, the SEC said the scheme involved two bond offerings and a syndicated loan, which raised more than $1bn on behalf of state-owned entities in Mozambique.

The SEC said the funds were part of a hidden debt scheme that also paid kickbacks to indicted former Credit Suisse bankers. Funds were used to bribe corrupt Mozambique government officials.

The SEC further alleged that Credit Suisse misled investors, who were told the funds would be used to support the country’s tuna-fishing industry, and failed to disclose the full extent of Mozambique’s debt and the risk of default.

Credit Suisse’s internal accounting controls were “deficient” and failed to address the known risks of bribery, the SEC said.

“Credit Suisse provided investors with incomplete and misleading disclosures, despite being uniquely positioned to understand the full extent of Mozambique’s mounting debt and serious risk of default based on its prior lending arrangements,” said Anita Bandy, associate director of the SEC’s division of enforcement. “The massive offering fraud was also a consequence of the bank’s significant lapses in internal accounting controls and repeated failure to respond to corruption risks.”

As part of the probe, a London-based subsidiary of Russian bank VTB agreed to pay $6m to settle SEC charges for its role in misleading investors during a second bond offering in 2016.

VTB Capital and Credit Suisse structured a second offering that failed to disclose the extent of debt held by Mozambique, which later defaulted, and did not disclose to investors that funds from the first offering had been misused.