PKB PRIVATBANK SA - convicted of criminal liability in connection with USD 20 million money laundering case

Speed read.

1. Money laundering activities with a total value of more than USD 20 million were recorded.
2. In a penalty order dated 28 March 2024, the Office of the Attorney General of Switzerland (OAG) has ordered PKB PRIVATBANK SA (PKB) to pay a fine of CHF 750,000.
3. The criminal investigation conducted by the OAG shows that, between 2011 and 2014, the bank did not take all reasonable and necessary organisational precautions in the course of its business activities to prevent two of its employees – a client advisor responsible for the development of South American client relationships and his direct line manager – from committing the offence of aggravated money laundering.

Long read.

In a penalty order dated 28 March 2024, the Office of the Attorney General of Switzerland (OAG) has ordered PKB PRIVATBANK SA (PKB) to pay a fine of CHF 750,000.

The criminal investigation conducted by the OAG shows that, between 2011 and 2014, the bank did not take all reasonable and necessary organisational precautions during its business activities to prevent two of its employees from committing the offence of aggravated money laundering.

• A client advisor responsible for the development of South American client relationships and
• His direct line manager –

key facts

1. The above-mentioned criminal investigation was conducted in the context of the numerous proceedings opened by the OAG in connection with the international corruption affair known as LAVA JATO, with a focus on Brazil, which also affected the ODEBRECHT Group and also had an impact on Switzerland.
2. In this context, the OAG issued a penalty order of 21 December 2016, convicting two companies belonging to the ODEBRECHT Group for bribery of foreign officials and money laundering (see OAG press release of 21.12.2016).
3. it was found that various Brazilian companies had formed a cartel designed to favour them in the award of public contracts by PETRÓLEO BRASILEIRO SA – PETROBRAS (hereinafter PETROBRAS).
4. The companies agreed in advance among themselves who would be awarded the contract and manipulated the offer in the public tender.
5. As a result, they were able to conclude contracts with PETROBRAS in a virtually unrivalled manner and at a higher price. These illegal activities were based on the bribery of public officials working for PETROBRAS.

In February 2017,

6. The OAG opened a criminal investigation for money laundering (Art. 305bis of the Swiss Criminal Code) against
7. An employee of Bank PKB, a consultant responsible in particular for the development of South American client relations and for relations with the ODEBRECHT Group.
8. Subsequently, the investigation was extended to the criminal offences of forgery of documents (Art. 251 SCC) and participation in the bribery of foreign public officials (Art. 322septies para. 1 SCC in conjunction with Art. 25 SCC).

In addition, in July 2018,

9. The criminal investigation was extended to a second natural person, an employee of PKB and direct line managers of the first-named bank employee –

• First for the criminal offence of money laundering (Art. 305bis SCC) and
• Then for forgery of documents (Art. 251 SCC).

On 12 January 2018,

10. Following a report by PKB in which various critical points were set out in connection with compliance with its obligations in the acquisition and implementation of the legal provisions on combating money laundering, the OAG
11. Opened a criminal investigation against PKB on the grounds of the company's criminal liability pursuant to Article 102 (2) of the Criminal Code in conjunction with Article 305bis of the Criminal Code.

Investigative activities

12. The investigation established that the former bank employee had a privileged relationship with the members of the ODEBRECHT group.
13. In this context, bank accounts were opened at PKB as early as December 2006 in the name of companies belonging to the ODEBRECHT Group.
14. Formally, these bank accounts identified the names of frontmen as beneficial owners and served as so-called "black funds", i.e. assets that could not be traced back to Brazilian society itself but were available to it.
15. The bank employee in question ensured maximum flexibility for the client ODEBRECHT and allowed him to act in secret and to incorporate assets of criminal origin into PKB.

1. These were bribes designed to compensate Brazilian officials in exchange for public contracts.

16. The second bank employee was aware of the activities of his subordinate but failed to take the necessary measures to prevent the criminal acts.

The Office of the Attorney General of Switzerland issued a penalty order against the second employee

17. In connection with the two criminal acts described above in the context of the criminal proceedings against the two natural persons, the Office of the Attorney General of Switzerland issued a penalty order against the second employee of PKB on 23 May 2022 for money laundering within the meaning of Art. 305bis of the Criminal Code.
18. The proceedings on suspicion of forgery of documents were discontinued.
19. The OAG opened proceedings against the first-named bank employee, who was responsible for the bank details that could be traced back to the ODEBRECHT Group, for the criminal offences of money laundering, participation in the active bribery of foreign officials and forgery of documents.
20. Following the defendant's death on 20 January 2023, the OAG ordered the dismissal of the proceedings against him and the confiscation of more than CHF 52,000, subject to the costs of the proceedings.

Responsibility of the company

1. In this context, money laundering activities with a total value of more than USD 20 million were recorded.
2. The investigation carried out by the OAG against PKB showed that the bank was poorly organised to combat money laundering at the time of the incident.
1. PKB did not correctly verify the identity of the beneficial owner of the assets deposited on certain bank accounts at the Lugano branch.
2. It also failed to clarify the circumstances and purpose of the transactions carried out and to ensure that they were not out of the ordinary and/or that there was no suspicion as to their origin.
3. Between 2011 and 2014, the money laundering risk analyses, anti-money laundering measures and procedures in force at the bank were not sufficient to prevent the commission of the offence of aggravated money laundering (Art. 305bis no. 2 SCC).
3. By penalty order of 28 March 2024, the OAG ordered PKB to pay a fine of CHF 750,000. The criminal liability of the company is attributed to PKB (Art. 102 para. 2 SCC in conjunction with Art. 305bis no. 2 SCC).

Partial Cessation Order

21. As part of the same criminal proceedings, the OAG issued a dismissal order on 28 March 2024 (Art. 319(1)(a) of the Code of Criminal Procedure) in connection with the other alleged criminal offences, namely bribery of foreign public officials (Art. 102(2) of the Criminal Code in conjunction with Art. 322septies of the Criminal Code).

The LAVA JATO case at the BA

1. The conviction of PKB is part of a series of proceedings conducted by the OAG and are part of the LAVA JATO complex of proceedings.
2. In this context, approximately 20 criminal proceedings are currently pending before the OAG, three of which concern its financial institutions in Switzerland. Currently, around CHF 16 million has been seized in Switzerland in accordance with the OAG's order.
3. As part of the judgments, which have become final, confiscations or claims for compensation (Art. 70 and 71 SCC) totalling CHF 300 million were ordered. In addition, more than CHF 465 million was repaid to the Brazilian authorities with the agreement of the persons involved.

 Original version

• https://www.bundesanwaltschaft.ch/mpc/de/home/medien/archiv-medienmitteilungen/nsb_medienmitteilungen.msg-id-100600.html of the text in Italian.