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Fed Enforces Credit Suisse (CS) to Improve AML Practices

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The Swiss bank Credit Suisse (CS - Free Report) has been ordered by the U.S. Federal Reserve to improve on its anti-money laundering (AML) policies due to loopholes in Credit Suisse USA's compliance risk management program. The order has been generated with the joint agreement between the New York Department of Financial Services and the central bank.

The Fed has ordered the bank to submit a written program within 90 days stating the modifications in its policies, reflecting diligence work over illegal activities and regular reporting of the same to regulators.

Therefore, Credit Suisse has agreed for submission of the plan, strengthening its anti-money laundering compliance and controls. Moreover, an amended customer due diligence program will be submitted, which would ensure collecting, analyzing and retaining accurate records of clients’ information of all account holders. The bank has also agreed to work on plans for scrutinizing and reporting dubious activities, leading to independent testing of its compliance with Bank Secrecy Act/Anti-Money Laundering requirements.

Per Reuters, the bank is devoted to meeting the terms “in a timely and thorough manner,” and it is already on the path of “extensive enhancement plan” for its New York operation, said Credit Suisse.

“The bank has already been implementing an extensive enhancement plan to its New York Branch BSA/AML procedures, processes and oversight, which predominantly addresses the requirements of today’s agreement,” Credit Suisse said in a statement.

The Fed’s order follows the charges levied by Swiss prosecutors recently on the bank related to a multi-year old case from 2008 stating Credit Suisse’s failure on addressing money laundering associated with a Bulgarian crime ring involving the movement of cocaine-trafficking money. However, the bank has denied charges with astonishment on such an old case by the regulators.

We believe the ongoing regulations and controls on banks will be a step forward toward improving risk and compliance policies, aiding in the reduction of illegal activities. Regulatory authorities are investigating scandals and improving policies with a determination to put ahead a landmark judgment in a bid to terminate such shrewd practices in the future.

Notably, the ongoing process will undoubtedly dent Credit Suisse’s reputation in the global arena. Nevertheless, resolution of such issues will likely restore investors’ confidence in the stock.

Currently, Credit Suisse carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Shares of the company have gained 17.6% in the past six months compared with 22.4% growth recorded by the industry.

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