An exclusive article by Fred Kahn
Leonteq, a Swiss structured-products issuer and arranger, keeps saying the files add up, yet the contradictions between its messaging and what FINMA, BaFin, and ACPR have put on paper keep piling up, so where exactly is the truth. The firm continues to project confidence that controls worked, distributors were policed, and past reviews cleared the core concerns, while supervisory texts and detailed reporting describe serious control breaches, disgorged profits, and red flags that ordinarily trigger suspicion reporting. The deeper problem is not just that the stories diverge. It is that the public trail does not yet show the kind of synchronized, cross-border follow-through that would resolve the conflict. If both sides cannot be right, the question becomes simple: what actually happened inside the distribution chain, who was paid, who was licensed to sell, and who decided that suspicion thresholds were not met.
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Leonteq AML inconsistencies across the record
The central inconsistency is structural. A structured-products issuer and arranger that pays commissions must prove who earned them, where, and under which license, and must file with the intelligence unit when red flags cluster. Leonteq’s external and internal messaging has emphasized tough standards for distributors and timely remediation. The public record says the opposite. Switzerland’s supervisor concluded that the firm “has seriously breached its risk management obligations and the obligations to ensure suitability,” and that the company “worked with dubious, unregulated distributors in some cases.” The same decision ordered “the disgorgement of profits totaling CHF 9.3 million,” demanded that the group “may only work with foreign distributors that are subject to regulation comparable to that in Switzerland,” required it to “terminate existing business relationships with unregulated distributors,” and appointed an “audit mandatary” to monitor the implementation. Those measures are not edge cases; they rewrite who can sit in the sales chain and on what terms. (Source, FINMA press release, 12 December 2024).
Germany’s supervisor focused on the AML spine. It ordered the German entity to remedy control gaps because “serious shortcomings were found in the company’s outsourcing of internal controls and safeguards, performance of due diligence and compliance with record-keeping and retention requirements,” and it specified that “the notice from BaFin is final and binding.” That language addresses the backbone of an AML program, not a peripheral deficiency. (Source, BaFin publication of measures, 9 November 2023).
France adds the missing texture. A detailed investigation describes how the Paris on-site in early 2023 uncovered damning elements, and how a preliminary inquiry focused on a potential circuit of aggravated laundering of tax fraud. The report quotes the authority’s view that, as early as 2021, “Leonteq Securities Europe and its ownership had sufficient elements to file a suspicion report with Tracfin” (Translated from original text). It also recounts “unrecorded conversations” during the COVID period and that commissions “were diverted to the bank account of a trust located in the United States instead of being paid to Ladoga” (Translated from original text). Each element is a classic AML red flag: an offshore intermediary without the right local permissions, a commission recipient different from the named introducer, and an audit trail that relies on undocumented meetings at a time when many institutions mandated recordings for client interactions. (Source, Les Echos, 10 September 2024).
Set those texts against Leonteq’s public stance, and the gulf is visible. A German business weekly cites the company chief as saying that internal and external examinations showed “that the core of the allegations was baseless” (Translated from original text), while the same article notes that “there were apparently no emails and also no records of telephone calls” supporting the central sales narrative and asks why a British Virgin Islands firm received a commission on a French deal routed through an unrelated team. Source, WirtschaftsWoche, 30 April 2023. A Swiss business daily quotes the company line that it “controls and enforces these standards” and that where it finds a breach it immediately ends the relationship, yet confirms that Leonteq made “adjustments in the leadership structure,” terminated “individual clients,” and launched re reviews of cross border distributors, all “before the EY report was finalized,” while noting “no obligation to document” meetings with professional investors and that investigators “could not reconstruct” how the disputed trades were assembled. (Source, Finanz und Wirtschaft, 21 December 2022).
Those points taken together frame the inconsistency. If distributors were tightly controlled and promptly off boarded, why did Switzerland have to ban unregulated distributors, restrict onboarding of high-risk ones until legal compliance is restored, and claw back CHF 9.3 million linked to two unregulated distributors? If the AML framework was robust, why did Germany find serious shortcomings in outsourcing, due diligence, and retention, and make that finding final and binding? If the external review and internal processes found no basis to alert, how could France assess that, as early as 2021, the file supported a suspicion report, while simultaneously describing commission routing to an unrelated trust and key interactions without recordings? An AML professional does not need intent to be proven. The laws ask whether the controls were designed and operating, whether the audit trail exists, and whether a reasonable professional would have filed given the patterns. On each count, the public record contradicts the corporate narrative.
FINMA’s enforcement and what it contradicts
The Swiss decision is a blueprint of what went wrong in governance and distribution oversight. The authority wrote that the group “has seriously breached its risk management obligations and the obligations to ensure suitability,” that monitoring of the distribution chain was inadequate, and that the company “worked with dubious, unregulated distributors in some cases.” It ordered a ban on business with unregulated distributors, termination of existing relationships with such entities, a restriction on taking on “new distributors that are categorized as high risk until compliance with the law has been fully restored,” and mandated the appointment of an audit mandatary to verify implementation. It also ordered “the disgorgement of profits totaling CHF 9.3 million,” specifying that the profit “was generated in serious violation of regulatory law with two unregulated distributors.” Source, FINMA press release, 12 December 2024.
Each clause cuts against Leonteq’s steady assurance that its standards for intermediaries are stringent and that it reacted decisively to breaches. A manufacturer that truly enforces a zero-tolerance approach does not end up with a regulator ordering it to terminate unregulated distributors and to stop onboarding high-risk ones until an independent monitor says the law is fully met. The sanction proves that unregulated entities were in the chain and that profit linked to them must be surrendered. That is not a theoretical risk; it is the regulator’s way of saying the chain was allowed to carry counterparties that should never have been there. The suitability angle matters equally. The decision did not just fault AML controls; it faulted the duty to ensure that complex instruments were distributed under conditions consistent with investor protections. That is the compliance twin of AML in a structurer-distributor model. If a product is to be sold only to professionals under certain permissions, the gate must check both the seller’s license and the buyer’s category. The decision reads as an official statement that the gate failed.
Two details sharpen the contradiction. First, the insistence that foreign distributors must be subject to regulation comparable to Switzerland is a direct rebuke to any argument that the manufacturer can rely on contractual covenants and self-declarations from intermediaries. Comparable regulation is an objective threshold, not a promise. Second, the mandatory audit is an explicit signal that the supervisor does not accept self-certification. It requires an independent professional to test whether the right counterparties have been removed, whether governance is clarified in writing, and whether reputational matters reach decision bodies with authority to stop deals. That is the measure used when the supervisor doubts both speed and completeness of earlier remediation. Against that reality, the firm’s claim that it cleaned up swiftly reads more like legal positioning than a durable fact.
BaFin’s binding order and the AML spine
Germany’s publication strikes the AML core. It states that “serious shortcomings were found in the company’s outsourcing of internal controls and safeguards, performance of due diligence and compliance with record-keeping and retention requirements.” The text underscores that “the notice from BaFin is final and binding.” (Source, BaFin publication of measures, 9 November 2023). Those phrases matter because they translate directly into the day-to-day capability of a second line to detect and escalate risk. Outsourcing of internal safeguards touches exactly the functions that screen distributors, monitor payment instructions, and test ongoing conduct. If outsourcing control is weak, the very processes that AML depends on cannot be trusted. Performance of due diligence goes to whether the firm actually verified licensure, geographic permissions, ownership structures, and the role of any agent or sub-introducer. If due diligence performance is weak, the onboarded intermediary can sell in the wrong place or with the wrong permission, and the manufacturer will be paying an entity that did not have the right to be in the chain.
Record keeping and retention is the evidentiary glue. If it is deficient, the firm cannot reconstruct who met whom, when, and why a particular commission recipient was chosen. That is exactly what the French reporting highlighted: key conversations and meetings were unrecorded during a period when travel was constrained and remote recordings were common, and commissions were diverted to a trust account instead of the named intermediary. Weak retention aligns with that narrative. In a well-run AML program, the absence of recordings and minutes is not a human error; it is a red flag that demands payment holds, senior review, and suspicion reporting if supporting documents do not appear.
The final and binding character of the German order also narrows the range of acceptable corporate messages. If a regulator says that outsourcing, due diligence, and retention have serious shortcomings and binds that statement into an enforceable notice, then public assurances that the AML spine worked sound hollow. The only credible corporate message after such a notice is to describe precisely how outsourcing oversight was rebuilt, how due diligence was retooled to match risk, and how retention was tightened so that the next audit will not find the same holes. Anything else reads as an attempt to hold the old line against an official finding.
ACPR’s on-site work, EY’s comfort, and the missing filings
The French chronology is where the internal review narrative collides with an AML practitioner’s instincts. The article recounts that in early 2023, during an on-site at the Paris branch damning elements were uncovered, and that the prudential authority referred the matter to prosecutors focusing on aggravated laundering of tax fraud. It quotes that as early as 2021, the firm and its ownership “had sufficient elements to file a suspicion report with Tracfin” (Translated from original text). It details a sale into France involving a British Virgin Islands intermediary that did not have permission to sell in the French market, large commissions, and diversion of commissions “to the bank account of a trust located in the United States” instead of the named intermediary, as well as “unrecorded conversations” that were presented as the explanation for missing documentation in a period when travel was constrained (Translated from original text). Source, Les Echos, 10 September 2024.
Those are not ambiguous signals. A suspicion report threshold is deliberately set below proof. When an offshore intermediary without local permission appears in a sale, when commission routing does not match the documentation, and when the critical interactions cannot be evidenced, a reasonable professional files. Against that, the company’s reliance on an externally commissioned review for comfort is precarious. Independent reporting highlights that the review did not robustly test the plausibility of key meetings during lockdowns, leaned on narratives lacking emails or recorded calls, and did not address the red flag nature of an offshore distributor’s role and the diversion of commissions. Source, WirtschaftsWoche, 30 April 2023, and Les Echos, 10 September 2024. The gap between the comfort suggested by the review and the later supervisory actions is the problem in one sentence. One process concluded that suspicion thresholds were not met, three supervisory angles later treated the same patterns as a cause for disgorgement, for binding remediation, and for prosecutorial escalation.
A related inconsistency comes from Switzerland’s business press. The firm’s communications said it “controls and enforces these standards,” and halts relationships immediately when breaches are found, while the same coverage describes leadership changes, distributor exits, and re reviews launched even before the external report was finalized, and it confirms that there was “no obligation to document” meetings with professional investors, which left investigators unable to reconstruct how certain trades were put together. (Source, Finanz und Wirtschaft, 21 December 2022). That combination, statements of absolution alongside actions that look like remedial triage, is exactly what makes the market ask whether the truth is being told or managed.
The legal context is straightforward and verifiable. Switzerland’s Anti Money Laundering Act sets duties to identify and monitor relationships and to report suspicions to the money laundering reporting office. Article 305bis of the Swiss Penal Code criminalizes money laundering, and Article 305ter penalizes failure to exercise due diligence in financial transactions. Germany’s Money Laundering Act requires risk-based due diligence, controlled outsourcing, and retention. France’s framework requires suspicion reporting when a professional has reasonable grounds to suspect laundering or predicate offenses. None of these laws requires proof of intent. They require effective design and operation of controls, a defensible audit trail, and timely reporting when red flags coalesce. On that standard, the texts in the record are hard to reconcile with the corporate comfort.
What might explain the regulatory hesitation
If the record already contains serious breaches, disgorged profit, binding remediation, and a chronology that points to early grounds for suspicion reporting, why has there not been a fuller, coordinated reckoning? One plausible answer sits outside the narrow frame of files and controls. Acting first can be politically costly. The supervisor that moves decisively also invites scrutiny of its own historical oversight, its earlier examinations, its tolerance for distributor-led growth models, and whether warning signs were missed or underweighted. Moving second, or in parallel but with softer language, spreads that risk.
Cross-border dynamics add another layer. A complete narrative would require alignment across jurisdictions, which can expose asymmetries in powers, resources, and past priorities. The authority that stitches the case together risks being cast as the one that reveals not only an institution’s failings but a wider supervisory blind spot. In a climate where public confidence in enforcement ebbs and flows, no agency wants to become the headline that says the system only acted after the fact. Waiting for another authority to break cover can look like caution, yet it also creates space for corporate messaging to fill the gaps.
There is also the optics of proportionality. A forceful public action today can reopen questions about why similar issues in prior years did not trigger the same response. That backward lens is politically uncomfortable. It can invite legislative attention, budget debates, and calls to revisit earlier cases that share the same distributor geometry. The path of least resistance is incrementalism, a series of bounded measures that fix what is in front of each authority without writing the single, declarative story that would inevitably point back at the supervisors themselves.
These considerations do not diminish the gravity of what is already on paper. They do help explain the measured pace and the fragmented communications. The first authority that fully connects the dots may deliver clarity, yet it will also inherit the narrative about past blind spots. Until someone accepts that cost, the public will see sanctions, orders, and referrals that are individually strong but collectively short of the definitive account that would close the gap between what the firm says and what the record implies.
Related Links
- FINMA enforcement communication on Leonteq
- BaFin publication of measures regarding Leonteq Securities Europe GmbH
- Leonteq auf dem Prüfstand
- EXCLUSIF Leonteq, le champion suisse des produits structurés, dans le viseur de la justice
- Produits structurés : Leonteq chute en Bourse après la sanction du régulateur suisse
- Leonteq statement on recent media article and business update
- Leonteq – The Wolfsberg Questionnaire
- French banking watchdog flags possible fraud at Leonteq to prosecutors, report says
Other FinCrime Central Articles About Leonteq
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