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<\/figure>\n\n\n\nUnder Article 102<\/a> of the Swiss Criminal Code, Lombard’s AML program was not sufficient to prevent the offense. In particular, its AML program failed to ensure that the source and economic purpose of the funds were investigated and documented.<\/p>\n\n\n\n Lombard has disputed the court’s decision, stating it never knowingly or wilfully participated in money laundering. Additionally, the bank emphasized that it had proactively submitted a suspicious-activity report in 2012 and had subsequently cooperated with the authorities.<\/p>\n\n\n\n As such, the ruling is not final. This case is critical because it concerned whether the bank had the right governance, escalation and investigative arrangements in place to sufficiently prevent employees from facilitating criminal proceeds.<\/p>\n\n\n\n One of the less-discussed elements of the backstory is the former employee\u2019s connection to the customers before joining the bank. Allegedly, the relationship manager already knew Karimova and some members of the Office before he joined Lombard.<\/p>\n\n\n\n This creates a blind spot. While a banker’s existing network can prove commercial value, it can create significant risk and conflicts, especially when tied to an influential network such as the Office. Compliance teams should therefore treat pre-existing relationships as a distinct risk factor. <\/p>\n\n\n\n The Swiss court has ordered the seizure of over CHF 400 million ($487 M) connected to the laundering offense or under the Office\u2019s control. The Lombard case forms part of the broader Karimova investigation, whereby Swiss authorities froze almost CHF 800 million across the relevant proceedings beginning in 2012.<\/p>\n\n\n\n Regulatory penalties fall short<\/a> of the overall costs of non-compliance.<\/p>\n<\/blockquote>\n\n\n\n Switzerland and Uzbekistan agreed that the confiscated Karimova-related assets would be returned through a United Nations trust-fund structure. Harry Varatharasan, Chief Product Officer at ComplyCube, mentions, “Regulatory penalties fall short of the overall costs of non-compliance. Asset restraints, remediation, and reputational effects far outweigh the headline fines.”<\/p>\n\n\n\n The next step in this case will be Lombard’s appeal. Compliance teams should expect closer scrutiny of whether controls are effective in practice. This is especially true as the Swiss Financial Market Supervisory Authority (FINMA)<\/a> identifies private wealth management as a sector with elevated money laundering risks.<\/p>\n\n\n\n Despite submitting a suspicious-activity report, this case shows how regulators may reconstruct and challenge businesses on whether compliance controls could effectively challenge and prevent illicit funds. The lesson is that detection does not automatically prove that the AML framework is effective. <\/p>\n\n\n\n Despite a customer having genuine source-of-wealth evidence, individual transactions may still appear suspicious. Thus, compliance teams should understand whether a transaction has a clear purpose, not whether a client can afford the transaction. For example, this can include alerts on transactions that are unusually large or inconsistent with the customer\u2019s expected activity.<\/p>\n\n\n\n Learn how transaction screening<\/a> can support identifying and detecting risk in real time.<\/p>\n\n\n\n Businesses should maintain clear audit trails and provide real judgment on how challenges are resolved. For instance, this can include what concern was identified, what questions were asked, and what evidence was used to resolve it. Reports do not need to be lengthy. Instead, it needs to show more than the fact that a customer or transaction was approved.<\/p>\n\n\n\n Learn how case management tools<\/a> can help teams maintain a consistent audit trail.<\/p>\n\n\n\n In situations where an employee might know or have worked with a customer, that relationship should be disclosed. This is particularly true if the relationship holds high commercial value, as it can create unconscious bias or make it hard to challenge a customer’s explanation. An independent review of the relationship can help ensure the relationship does not replace due diligence.<\/p>\n\n\n\n Learn how KYC questionnaires<\/a> can help you identify and manage these relationship risks.<\/p>\n\n\n\nEmployee Risk Hiding in Plain Sight<\/h2>\n\n\n\n
Relevant questions can include:<\/h3>\n\n\n\n
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The Full Impact of the Case is Understated<\/h2>\n\n\n\n
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Compliance Takeaway and What to Expect Next<\/h2>\n\n\n\n
1. Review the Purpose of Transactions<\/h3>\n\n\n\n
2. Documented Escalation<\/h3>\n\n\n\n
3. Treat Employee Relationships as a Risk Factor<\/h3>\n\n\n\n
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