Credit Suisse is relying more on a controversial U.S. big data firm in its fight against money laundering. The Swiss bank was recently caught in several massive corruption scandals.
Palantir is a panacea: clients including the Central Intelligence Agency and Airbus swear by the Silicon Valley firm's acumen with data. Credit Suisse is also among Palantir's fans: the two firms launched a joint venture called Signac together two years ago (which has since been scrapped).
But the Swiss bank is still drawing on Palantir to help patch up holes in its defense against money laundering. The U.S. firm, which has yet to turn a profit since it was founded 14 years ago, has been providing its Foundry software for Credit Suisse's efforts to win a so-called single view of its clients since 2016, the bank's compliance bossLara Warner told «The Wall Street Journal».
Corruption Woes
The single view program, which seeks to aggregate the complete data of any particular clients as well as his or her connections within the bank at the push of a button, is of particular importance to Credit Suisse. Two months ago, the bank was ordered by Switzerland's regulator, Finma, to establish the ability to single view by the end of next year.
The move was part of a regulatory sanction for Credit Suisse's involvement in a series of scandals including corruption at Brazilian state-controlled oil firm Petrobras and PDVSA, Venezuela's state oil company. CEO Tidjane Thiam made clear last week just how much Credit Suisse is leaning on Palantir, which is named for a crystal ball in J.R.R. Tolkien's «Lord of the Rings».
Ardor vs Cooling
«I love our partnership with Palantir,» Thiam said in remarks to finance professionals in Zurich last week. The bank couldn't replicate a Palantir-quality system in a reasonable amount of time, he argued. The data firm hires only one in 100,000 engineers who apply – professionals who are simply out of reach for banks looking to recruit, Thiam said.
Thus, Credit Suisse prefers to partner with tech firms like Palantir. By contrast, J.P. Morgan cooled on the company three years ago, reportedly dropping a similar partnership to Credit Suisse's original deal with Palantir, which was to root out rogue staff.
Three-Year Efforts
Earlier this month, Thiam praised the single client view function profusely when presenting third-quarter results: «We believe [it] is industry leading and unique,» he said of the system.
The bank has been grappling with the single client view since 2015. Finma has ordered that the function must be made available beyond Warner's compliance department in order to more effectively combat money laundering.
Credit Suisse's failure to do so until now are «organizational weakness», the Swiss regulator said. In order to fulfill the regulatory requirements, Credit Suisse is apparently leaning heavier on Palantir.
Palantir's Growing Pains
The software gurus around Palantir CEO Alex Karp are grappling with their own problems. Co-founder Peter Thiel is still one of its biggest shareholders, but recently trimmed his stake – below the value of Palantir's most recent fundraising round.
Palantir's initial public offering is valued at as much as $41 billion, but CEO Karp needs to convince potential investors on growth plans for the valuation to fly, according to Morgan Stanley. The company wants to hit $1 billion in revenue next year, after $600 million last year.
Credit Suisse's Reward?
Lucrative corporate jobs are viewed as the key to thus growth. In 2016, Palantir launched its Foundry software, after for years customizing individual solutions for customers. The company has a patchy record on delivering: besides J.P. Morgan, Zurich Insurance also ceased working with Palantir.
Credit Suisse has two good reasons for betting on the success of its tie-up with the data firm: the bank is on deadline to fulfill Finma's requirements by the end of next year. Perhaps just as importantly, Credit Suisse's investment bankers are hoping to win the nod for Palantir's IPO.
