The Financial Industry Regulatory Authority found the Swiss bank's suspicious activity monitoring programme to be deficient in numerous ways. Firstly, Credit Suisse primarily relied on its registered representatives to identify and escalate potentially suspicious trading, including in microcap stock transactions, or companies with a market capitalization of roughly $50 million to $300 million. However, the financial watchdog discovered that in practice, the system was flawed as high-risk activity was not always flagged and investigated as required.

Additionally, the firm's automated surveillance system designed to safeguard against potentially suspicious money movements was not properly implemented and as a result, a “significant portion” of data feeds into the system were missing information or had other “compromising” issues, FINRA said. Credit Suisse also failed to adequately investigate suspicious activity identified by its own systems, the regulator added.

FINRA's findings date back to January 2011 through September 2013, a period during which Credit Suisse “failed to effectively review trading for AML reporting purposes”. Citing one example of when the bank's systems and procedures were not up to scratch, FINRA said the trading of a New York-based hedge fund followed patterns commonly associated with microcap fraud, such as depositing and then quickly selling, with the proceeds being wired out of the account shortly after the transaction was completed. Although these actions should have sent alarm bells ringing, no one at Credit Suisse reviewed the activity in the account for AML purposes.

Credit Suisse's reliance on its representatives to escalate suspicious trading failed to account for orders it received from its foreign affiliates, which were transferred electronically and therefore bypassed the eyes of sales traders, FINRA noted.

Although the bank self-identified some of its deficiencies and retained an external consulting firm to assist in evaluating them, Credit Suisse initially failed to devote adequate resources to resolving the issues in a “timely fashion” and some remain unresolved today, FINRA said. The regulator found that the banking giant simply did not have enough staff to review the tens of thousands of alerts the automated system generated in any given year.

As a result of the lapses in control, FINRA found that Credit Suisse collectively facilitated the illegal distribution of at least 55 million unregistered shares of securities. 

"It’s critical that firms have effective AML systems in place so that they can comply with their obligations to review and report suspicious transactions, including those involving trading in microcap securities or potentially suspicious money transfers,” said Brad Bennett, FINRA's executive vice president and chief of enforcement.

Credit Suisse had not responded to this news service's request for comment at the time of going to press.