Credit Suisse Probe Escalates -- WSJ

By Margot Patrick 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 3, 2020).

Switzerland's financial regulator said Wednesday it had started enforcement proceedings against Credit Suisse Group AG over the physical surveillance of two bank executives last year.

The Swiss Financial Market Supervisory Authority, known as Finma, said it would pursue indicated violations of supervisory law in relation to Credit Suisse's surveillance and security activities, "and in particular the question of how these activities were documented and controlled."

The action escalates a probe by Finma that was announced in late December. At the time it said it would focus on corporate governance and compliance issues raised by the activities. It appointed an outside lawyer to investigate the surveillance earlier this year.

In February, Chief Executive Tidjane Thiam resigned, having failed to contain the reputational fallout from the spying.

Credit Suisse on Wednesday said it "will continue to fully cooperate with Finma and is determined to support the effort to ensure a complete and expeditious conclusion of the review of this episode and incorporate lessons learned."

Credit Suisse regularly surveils its employees under compliance programs, such as by monitoring work phone calls and emails. It has said it draws a line, though, at physical surveillance of employees outside of work.

The spying scandal began in September 2019 when the bank's former international wealth management head, Iqbal Khan, spotted and confronted an investigator following him in Zurich. Mr. Khan was due to start at rival UBS Group AG the next month. An outside law firm hired by the Credit Suisse board found that the surveillance had been ordered by the bank's chief operating officer to protect the bank's interests. The COO resigned and hasn't commented.

The law firm said some messages between individuals involved had been deleted.

Then, in December, a Swiss newspaper published details and photos of the surveillance of a second executive. The law firm again found the COO had ordered it. In both instances, the law firm said there was no evidence Mr. Thiam knew about the activities.

In its public report on Mr. Khan's surveillance, the law firm said its ability to investigate was constrained in part because some messages it sought to review had been deleted. In December, Credit Suisse said the surveillance of the second executive, which took place in February 2019, had been masked by the responsible individuals so there was no identifiable trace in the bank's systems of the activities.

That incident triggered Finma's investigation and led to the board losing confidence in Mr. Thiam's leadership to stem the crisis. He was replaced in February by Thomas Gottstein.

Finma can censure firms it supervises, ban executives from the industry and take other actions to make sure firms comply with rules. It doesn't have criminal enforcement powers but can refer cases to prosecutors.

Write to Margot Patrick at [e-mail]

(END) Dow Jones Newswires

September 03, 2020 02:47 ET (06:47 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.