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Credit Suisse pledges cooperation in $2 billion US fraud probe

Credit Suisse said Friday it was deceived by three former employees accused by US prosecutors of orchestrating $2 billion in dodgy loans to Mozambique, and pledged to cooperate with a US investigation.

Credit Suisse pledges cooperation in $2 billion US fraud probe
photogearch/Depositphotos

Switzerland's second largest bank said in a statement that the suspects “sought to hide these activities from the bank” and stressed that Credit Suisse was not a target of the US Justice Department indictment. 

“The former employees worked to defeat the bank's internal controls (and) acted out of a motive of personal profit,” the statement said. 

The three suspects, who were arrested in London on Thursday, have been identified as Andrew Pearse, Surjan Singh and Detelina Subeva.

London's Westminster Magistrates' Court has confirmed that they have been released on bail and are fighting extradition to the United States.

According to charges filed at a federal court in Brooklyn, New York, the suspects helped officials in Mozambique secure $2 billion (1.8 billion euros) in loans several years ago for a coastal protection plan.

The funds were then allegedly raided through various kickbacks and bribes.  

Manuel Chang, who served as Mozambique's finance minister from 2005 to 2015, was arrested in South Africa last week and is also fighting extradition to the United States. 

Lebanese businessman Jean Boustani, accused of helping coordinate the alleged fraud, was arrested at a New York airport on Wednesday. 

   – 'Welcome step' –

Details of the dubious loans emerged towards the end of Chang's tenure and helped plunge Mozambique into its worst financial crisis since independence in 1975.

Debt soared to 112 percent of gross domestic product (GDP) by the end of 2017, forcing the country to suspend repayments and arousing distrust from investors.

Donors including the International Monetary Fund and World Bank suspended aid to the impoverished country after the government admitted it had secretly borrowed the $2 billion.

The Jubilee Debt campaign, which has been campaigning to erase Mozambique's debts amassed in the alleged fraud, applauded the arrests. 

“This is another welcome step in holding those responsible for the debt crisis in Mozambique to account,” the group said in a statement.

“The investigation is likely to reveal further evidence of how these loans were used to defraud the people of Mozambique.”

The group also questioned why British courts had not taken action against the three former Credit Suisse employees, since the loans were facilitated from the bank's London offices. 

“There has been a shocking lack of action taken by UK authorities” in the case, the statement further said.

For members

MONEY

Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?

When it comes to borrowing money from a Swiss bank, nationality may play a role in some cases, but not in others. This is what you should know about this process.

Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?
Getting a losn in Switzerland is subject to many conditions. Photo by Claudio Schwarz/Unsplash

Like almost everything in Switzerland, consumer loans are regulated by legislation, in this case the Consumer Credit Act.

It defines a loan as between 550 and 80,000 francs, “offered by commercial providers of financial services”. Lower or higher amounts are not subject to the Consumer Credit Act.

As is the case in many other countries, Swiss banks have strict criteria about who they lend money to. After all, no financial institution wants to deal with people who are not creditworthy.

Whether or not a foreign national can borrow money from a bank depends on their permanent place of residence and permit status.

As a rule, Swiss lenders don’t give loans to non-residents. So if you reside abroad, there is practically no chance that a bank in Switzerland will lend you money.

However, some financial institutions make exceptions for cross-border workers. If you fall under this category, you can use this interactive tool, select “ Permit G” under “Residence Permit” and see what, if any, options, there are.

READ MORE: EXPLAINED: What cross-border workers should know about taxation in Switzerland

If you are a foreign national but have a permanent residence status (Permit C), your chances of getting a loan are practically the same as those of Swiss citizens — provided, of course, that you meet all the requirements set by lenders (see below).

What about other permit holders?

If you have a B Permit, you might be approved for a loan, depending on how long you have had this permit — obviously, the longer the better.

However, “you may be offered a higher interest rate or a limited loan amount. This is because of the statistically higher probability that you will return to your home country. Some lenders require the loan to be repaid by the time the B permit expires”, according to consumer comparison site comparis.ch 

Holders of other, temporary or conditional permits are not accepted.

READ MORE: ‘A feeling of belonging’: What it’s like to become Swiss

What conditions — other than residence permit — should you fill to be considered for a loan?

You must be at least 18 years of age, though additional restrictions may apply to applicants under 25 — for instance, a higher interest rate or a limited loan amount. That’s because “lenders are generally more cautious with young applicants as their financial circumstances are usually less settled and the risk of default is deemed to be higher,” Comparis noted.

The same cautious approach applies to pensioners, especially those who have no regular income. The social security payments (AHV/AVS) do not count as income for the purpose of the loan.

There is also other eligibility criteria, based on employment status and salary. People with a regular income have a higher chance of obtaining a loan than those who are self-employed, temporarily employed, work on hourly basis or, logically, unemployed.

Other factors, including your existing debts, are also taken into account in the decision process.

Basically, lenders favour applicants with a stable income and good financial standing, in much the same way as supplemental health insurance carriers prefer young and healthy people.

Keep in mind that if your loan application is rejected, this will be recorded in the database of the  Central Office for Credit Information, making it more difficult, though not impossible, to get a loan in the future.

The same rules do not apply to American citizens

That’s because Swiss and European banks are subjected to US demands to disclose the assets of Americans overseas in order to prevent tax evasion.

As adherence to these requirements is a major headache for the banks and in some cases also violates their country’s privacy laws, financial institutions prefer not to deal with Americans at all, even those who are permanent residents.

If you are a US citizen who also has Swiss nationality, you may have an easier time of it, but could still face hurdles in obtaining loans and other banking services.

There is no immediate relief in sight, although many organisations representing Americans abroad are lobbying in Washington to change the existing legislation.

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