Credit Suisse settles Mozambique ‘tuna bonds’ case with US regulators

Credit Suisse has agreed to pay at least $400m to settle a long-running US probe into its role in Mozambique’s $2bn “tuna bonds” scandal.

A lawyer representing a subsidiary of the Swiss bank appeared at a hearing in Brooklyn on Tuesday and pleaded guilty to wire fraud over the eight-year-old case that triggered a slowdown for what was one of Africa’s fastest-growing economies. Credit Suisse has also entered a deferred-prosecution agreement with US authorities.

The bank has tried to draw a line under a series of historic scandals, even as it deals with the aftershocks of the twin implosions of the niche finance company Greensill Capital and family office Archegos Capital this spring.

But Credit Suisse, which declined to comment, still faces a civil trial over the Mozambique case brought by creditors in London. In August the High Court judge presiding over the lawsuit set a date of September 2023 for the 13-week trial. The US settlement was first reported by Bloomberg.

Tim Jones, head of policy at the Jubilee Debt Campaign, a financial pressure group, said despite the Mozambique loans originating from the UK, British authorities had failed to investigate the bank properly.

“It is over five years since the hidden loans were first revealed,” he said. “The failure to take action in this time is an appalling dereliction of duty on the part of the Financial Conduct Authority and Serious Fraud Office.”

From 2013 Credit Suisse and VTB, the Russian investment bank, arranged $2bn of bonds and loans for Mozambique, ostensibly to set up a state tuna fishing fleet and develop maritime security after the country discovered offshore natural gas.

The loans were taken out by companies to buy equipment including boats from Privinvest, a Gulf shipbuilder, using state guarantees that were issued without the approval of Mozambique’s parliament. The true scale of the debt was concealed from international donors and the IMF until 2016.

The discovery of the loans, the collapse of the companies, and subsequent defaults plunged one of the world’s poorest countries into years of financial turmoil as donors cut off aid. The country’s Centre for Public Integrity has estimated that the fallout forced 1.9m more Mozambicans into poverty.

A probe later revealed that $500m of the funds raised by the loans could not be accounted for. US prosecutors have said that $200m disappeared into kickbacks for Mozambican officials.

Three former Credit Suisse bankers who arranged the bonds pleaded guilty to handling kickbacks, although in a landmark US trial in 2019, a Privinvest salesman was acquitted on all counts. Privinvest denies wrongdoing.

Mozambique is currently holding what is its biggest criminal trial over the scandal, involving more than a dozen suspects including former government officials and the son of the former president. They have denied charges including corruption and money laundering.

The Mozambican state and Credit Suisse are also suing each other in London courts, and each is being sued in turn by investors in the debt.

The UK’s Financial Conduct Authority dropped its own criminal probe into Credit Suisse over the Mozambican scandal in 2018.

Additional reporting by Stephen Morris and Stefania Palma