Swiss authorities have once again put the spotlight on global private banking compliance after the Office of the Attorney General of Switzerland issued a summary penalty order against Banque Pictet et Cie SA (Pictet Bank) and one of its former senior relationship managers. The case, centering on aggravated money laundering tied to the sprawling Lava Jato corruption scandal, highlights both the evolving legal landscape for corporate liability and the far-reaching consequences of compliance failures at even the most prestigious financial institutions.
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Pictet Bank and Aggravated Money Laundering: The Swiss Enforcement Case
Between June 2010 and May 2013, Pictet Bank processed more than USD 4.1 million in transactions originating from corrupt payments. These funds flowed through accounts controlled by offshore companies linked to a Petrobras employee and were allegedly intended to conceal their criminal origin. The events that unfolded over these three years led Swiss prosecutors to uncover serious gaps in Pictet Bank’s anti-money laundering (AML) controls, resulting in both individual and corporate convictions.
The investigation established that a former senior relationship manager at Pictet Bank’s Wealth Management division, who became head of the Brazilian market, authorized and facilitated 54 suspicious transfers both within Switzerland and abroad. These transactions were debited from an account held at Pictet Bank in the name of an offshore vehicle, whose ultimate beneficial owner was the Petrobras official. The funds were traced back to bribes orchestrated by an intermediary working on behalf of Dutch oil services firm SBM Offshore in connection with lucrative Petrobras contracts.
Swiss prosecutors determined that the elaborate web of payments and the use of shell companies were designed to obscure the origins and true beneficiaries of the funds. Under Article 305bis sections 1 and 2 of the Swiss Criminal Code, these activities met the criteria for aggravated money laundering, particularly as they involved significant sums and spanned a multi-year period.
Compliance Failures and Corporate Criminal Liability at Pictet Bank
The case against Pictet Bank was not limited to individual misconduct. Swiss investigators concluded that serious organizational shortcomings at the bank created an environment where money laundering risks went unmanaged. Specifically, compliance staff failed to recognize the high-risk nature of the accounts held by the Petrobras official and the intermediary. Even after processing dozens of high-value transfers, monitoring controls were not triggered or adequately followed up.
At the time, Switzerland’s AML framework already required financial institutions to identify and escalate red flags related to foreign public officials and complex ownership structures. The lack of enhanced due diligence in this instance constituted a violation of Article 102 paragraph 2 of the Swiss Criminal Code, which assigns criminal liability to legal entities when organizational failings enable serious offenses such as aggravated money laundering.
Ultimately, Pictet Bank was fined CHF 2 million. Authorities acknowledged some mitigating factors, such as the bank’s cooperation during the investigation and subsequent corrective actions, including improvements to compliance procedures. Nevertheless, the penalty serves as a warning to all Swiss and international financial institutions that corporate liability for weak AML systems is not just theoretical—it is actively enforced.
The Lava Jato Scandal, Petrobras, and Swiss Financial Exposure
The criminal proceedings against Pictet Bank and its former employee form part of the broader fallout from Operation Lava Jato, a landmark anti-corruption campaign in Brazil. Lava Jato exposed how senior executives at Petrobras, Brazil’s state-owned oil giant, and numerous politicians accepted bribes from construction and oil service companies in return for inflated contracts.
As billions in illicit proceeds flowed through the global financial system, Switzerland became a key jurisdiction for investigators due to its long-standing reputation as a destination for offshore wealth. Swiss prosecutors launched several related cases, freezing assets and securing convictions of bankers, intermediaries, and public officials connected to the scheme.
The Pictet Bank case illustrates how cross-border corruption scandals are increasingly difficult to contain. Funds traced back to corrupt activity in Brazil found their way into Swiss accounts managed by international bankers. Without robust AML controls and an acute awareness of the risks associated with politically exposed persons (PEPs), banks unwittingly became part of the problem. The legal consequences for those lapses are now clear, as Swiss regulators and prosecutors have made AML enforcement a priority.
Legal Framework: Money Laundering, Bribery, and Swiss Criminal Law
The prosecution of Pictet Bank and its former relationship manager was grounded in specific provisions of the Swiss Criminal Code. Article 305bis addresses money laundering, including aggravated forms that involve larger amounts or prolonged criminal conduct. Article 322septies deals with the bribery of foreign public officials, a frequent element in transnational corruption cases.
Switzerland’s AML legal framework requires banks to conduct rigorous customer due diligence, particularly for clients who are public officials or operate in high-risk sectors. The regulations mandate monitoring of complex or unusually large transactions and require banks to report suspicious activity to the authorities. Corporate criminal liability is addressed under Article 102, which allows for the prosecution and penalization of institutions whose organizational failings permit criminal acts by employees.
Notably, the investigation into Pictet Bank did not find sufficient evidence to prove intentional complicity in the underlying bribery. While the laundering of proceeds from corrupt payments was established, the criminal proceedings for direct involvement in foreign bribery were dropped in accordance with Article 319 paragraph 1 letter b of the Swiss Criminal Procedure Code.
Remediation, Cooperation, and the Path Forward
Following the public exposure of the Petrobras scandal and the prosecution’s findings, Pictet Bank undertook a series of remediation measures. These steps included the reorganization of its compliance and risk management functions, the introduction of stricter protocols for onboarding and monitoring clients from high-risk jurisdictions, and investments in staff training.
The willingness of Pictet Bank and the former relationship manager to cooperate with Swiss authorities was cited as a mitigating factor during sentencing. Both parties accepted the summary penalty order without appeal, allowing the matter to become final.
From a regulatory perspective, the case underscores the importance of proactive compliance and organizational culture in preventing financial crime. The reputational damage, legal exposure, and financial penalties experienced by Pictet Bank serve as a cautionary tale for other private banks navigating the complex terrain of cross-border wealth management.
Conclusion: Lessons from the Pictet Bank Conviction for AML Compliance
The criminal conviction of Banque Pictet et Cie SA and its former relationship manager is a stark reminder that even the most established financial institutions are vulnerable to lapses in AML controls. The case reveals how gaps in risk classification, due diligence, and transaction monitoring can enable the flow of illicit funds across borders, implicating banks in global corruption scandals.
Effective AML compliance is no longer just a regulatory requirement but a strategic imperative. Institutions must remain vigilant, adapt to evolving criminal techniques, and invest in robust controls to protect the integrity of the financial system. As enforcement actions grow more sophisticated and cross-border cooperation among regulators increases, banks must assume greater responsibility for their role in detecting and preventing financial crime.
Related Links
- Swiss Criminal Code – Article 305bis (Money Laundering)
- Swiss Criminal Code – Article 102 (Corporate Criminal Liability)
- Swiss Criminal Code – Article 322septies (Bribery of Foreign Public Officials)
- Swiss Financial Market Supervisory Authority (FINMA) – AML Regulation
- Swiss Federal Office of Justice – Overview of Swiss AML Laws
Other FinCrime Central Articles About Switzerland’s Relentless Crackdowns
- Julius Baer Hit With $5 Million Fine in Damaging Money Laundering Case
- Ex-Credit Suisse Executive Fined CHF 100,000 for Money Laundering Role in Mozambique Scandal
- Swiss Morgan Stanley Unit Fined: Major Money Laundering Scandal Uncovered
- Major AML Gaps at Swiss Bank Reyl Led FINMA to Do a Deep Dive Investigation
Source: Swiss Federal Authorities
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