(Bloomberg) -- Julius Baer has turned to a U.S. law firm to help scour the accounts of convicted banker Matthias Krull, who pleaded guilty in August to helping launder $1.2 billion from Venezuela’s state-owned oil producer, according to people familiar with the move.
Quinn Emmanuel Urquhart & Sullivan LLP, the bank’s outside counsel in the U.S., is leading the review, three people with knowledge of the matter said, asking not to be identified because it’s confidential.
One of the people said Krull has privately conveyed to the bank that he didn’t use Julius Baer accounts to launder Petroleos de Venezuela S.A. money. Still, Julius Baer has asked the law firm to review more than 500 accounts worth more than $500 million that he managed to determine if he acted alone or if he had help from other employees, the person said.
Oscar Rodriguez, Krull’s lawyer in Miami, declined to comment as did a spokesman for Julius Baer. A spokeswoman for Quinn Emmanuel didn’t immediately return a message seeking comment.
Krull is German, and was working in Panama when he committed the crimes. He was charged in July and pleaded guilty the next month to a conspiracy that prosecutors say involved money managers and brokerages, as well as banks and real-estate firms. He’s cooperating with investigators, who are also looking into Venezuelan President Nicolas Maduro, his three stepsons, and Raul Gorrin, owner of the Globovision television network in Venezuela, one of the people familiar with the matter said.
Julius Baer, Switzerland’s third-largest wealth manager, significantly expanded over the past decade, pursuing new overseas clients. It’s now conducting a company-wide review of client portfolios with a particular focus on Latin America, as well as examining its Panama business and exiting Venezuela, others familiar with the matter have told Bloomberg News.
The Quinn Emmanuel investigation could take six months and cost more than $20 million, the person with knowledge of the probe said.
Julius Baer shares fell as much as 1.5 percent in early Zurich trading on Tuesday, underperforming Switzerland’s main index.
The Zurich-based bank must be particularly vigilant as it’s in the final year of an agreement to avoid U.S. prosecution after admitting in 2016 that it helped thousands of Americans conceal billions of dollars in assets. Under that deferred-prosecution agreement, Julius Baer paid $547 million and agreed to cooperate with any U.S. government agency to flag all criminal conduct by its employees for any violations of federal law. Two bankers pleaded guilty.
Federal prosecutors in New York have voiced no concerns to the bank about its role in Krull’s crimes, according to one of the people. Baer hasn’t been charged for any wrongdoing.
Krull’s plea though raises questions about the possibility the bank should have done more to supervise one of its rainmakers in a country caught up in corruption scandals. The bank is cooperating with the U.S. Justice Department, two people said.
“Banks in high-risk places have to be really careful about who their customers are and how bankers and their relationship managers are dealing with those customers,” said Ross Delston, an anti-money laundering expert not involved in the case.
“Panama has been thought of as an offshore financial center for years, which enhances its ability to attract high net-worth clients,” Delston said. “Some of those clients do not have legitimate sources of wealth. Banks are expected to pay more attention to high net-worth customers in high-risk countries like Panama and Venezuela.”
The bank has also been embroiled in the corruption probe at soccer’s global governing body. One former Julius Baer banker pleaded guilty in a New York federal court in June 2017 to his role in channeling money from an Argentinian sports-marketing company to officials at FIFA. In March this year, Julius Baer said it suspended an employee in Russia while the bank looked into allegations made by Swiss federal prosecutors as part of a probe into deals by an arms maker.
Finma, Switzerland’s financial regulator, is monitoring the bank’s review with Quinn Emmanuel, three of the people said. Finma started an enforcement proceeding against the bank related to money laundering but won’t say when that may conclude.
(Updates with Julius Baer share price in 8th paragraph.)
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