Whistleblowers have made serious allegations against Swiss fintech Leonteq. In addition, EY's auditors are said to have preferred not to look too closely at the long-standing client.
EY stands accused by whistleblowers of having downplayed suspicions of money laundering and tax evasion in an investigation of long-standing client Leonteq, the «Financial Times» (FT, behind paywall) reported Monday.
The allegations center on two deals the Swiss fintech company made for a French workers' cooperative in early 2021.
Both deals should have been reported as suspicious to French authorities for possible money laundering and tax evasion after it was discovered that large commissions were paid to a company in the British Virgin Islands, rather than to the broker in France who sold the investments on Leonteq's behalf, according to the FT.
The whistleblowers also accuse Leonteq and its internal auditor, EY, of failing to conduct a thorough review.
Documents and records related to the trades which were seen by the «FT» would raise questions about weak controls, a culture of rule-breaking, and poor corporate governance at Leonteq, they added. The company traded 29 billion Swiss francs ($31.7 billion) worth of structured products last year, it said.
Zero Tolerance
Leonteq told the FT it has a «strict zero-tolerance policy regarding non-compliant business behavior», and that all allegations were «managed, monitored, and reported with due care and process». All investigations found no material deficiencies, and Leonteq was committed to maintaining the highest standards of integrity and compliance.
Leonteq engaged EY to investigate the two transactions and related matters. The auditing firm's subsequent report had described problems with internal controls and «absence of email and phone-record evidence». However, «no indication exists that would justify the allegations of money laundering or tax evasion», it said.
Just Call
EY's report suggests it took no steps to verify or establish some basic facts about the transactions. «All EY had to do was call the cooperative,» commented a whistleblower.
Information provided to the FT by the French cooperative ID Formation indicated something was amiss. According to their information, neither the manager nor the broker received a commission on the purchase of structured products from Leonteq.
But someone had been paid. Leonteq transferred 120,000 euros abroad, corresponding to 8 percent of the amount of the two deals to a company called Ladoga Capital in the British Virgin Islands, which was connected to Leonteq's sales team in the Middle East.
The whistleblowers told the newspaper the missing information was partly the result of a work environment in which informal communications were common. «A lot of people internally and externally communicate via Whatsapp», one of the sources said.
