Falcon Bank’s Former Singapore Manager Sent to Prison in 1MDB Probe

Wall Street Journal
Jan. 11, 2017

The former branch manager is the fourth person to go to prison in the city-state’s probe of a Malaysian state investment fund

A Singapore court Wednesday sentenced a former branch manager of Switzerland’s Falcon Private Bank AG to prison for crimes connected to the alleged multibillion-dollar misappropriation at Malaysian state investment fund 1MDB.

Jens Sturzenegger, 42, a Swiss national who managed Falcon’s Singapore unit, was charged last week with 16 offenses under various laws, including one that requires banks and their officers to enact due-diligence checks on clients to prevent money laundering.

The court Wednesday handed a 28-week prison sentence and a fine of 128,000 Singapore dollars (US$89,000) to Mr. Sturzenegger after he pleaded guilty to six offenses. These include three counts of providing false information to police and central bank authorities, and three counts of failing to report suspicious transactions. The remaining charges were taken into consideration in his sentencing but won’t be pursued separately by the prosecution.

While the charges didn’t directly link Mr. Sturzenegger to fund flows at 1Malaysia Development Bhd., Singapore’s central bank and regulator had said in October that the branch manager had been arrested that month in connection with the city-state’s probe into the alleged misappropriation of billions of dollars from the Malaysian fund. Prosecutors have called the investigation Singapore’s largest-ever probe of alleged money laundering.

On Wednesday, prosecutors told the court that Mr. Sturzenegger had lied to officers of the central bank and to the Singapore police’s white-collar crimes investigation unit as they examined Falcon transactions related to 1MDB fund flows. Mr. Sturzenegger’s lawyer said that his client had not derived any personal gain in relation to bank transactions, and sought a more lenient sentence, court documents showed.

The charges refer to Mr. Sturzenegger’s business dealings with Malaysian financier Low Taek Jho, or Jho Low, who global investigators have said was key to orchestrating the alleged 1MDB misappropriation. The Wall Street Journal has previously reported that global investigators believe hundreds of millions of dollars of 1MDB money made its way through an account held at Falcon in Singapore to the personal accounts of Malaysian Prime Minister Najib Razak.

Mr. Najib has been cleared of wrongdoing by Malaysia’s attorney general, who said that the money deposited in his account was a legal donation from Saudi Arabia and most of it was returned. Mr. Najib, the Malaysian financier Mr. Low and 1MDB have all denied any wrongdoing. 1MDB has pledged cooperation with any lawful investigation. None of the three could be reached immediately on Wednesday.

Falcon declined to comment on Wednesday. The bank has previously said it is initiating new control measures to prevent future issues and that it has been cooperating with authorities.

Investigators in at least five countries are probing the finances of 1MDB in response to allegations that billions of dollars have gone missing. Swiss investigators say they believe that as much as US$4 billion was misappropriated from the fund through several banks, including private banks in Singapore.

In October, Singapore’s central bank withdrew the merchant-banking license of Falcon’s Singapore branch that Mr. Sturzenegger managed for what it called “persistent and severe lack of understanding” of its regulations, and fined it S$4.3 million.

The same month, Switzerland’s Office of the Attorney General expanded its scrutiny of Malaysia’s 1MDB by opening a criminal investigation into Falcon. The Swiss attorney general’s office said at the time that internal “deficiencies” at the Zurich-based bank may have caused it to fail to prevent alleged money laundering associated with 1MDB.

Mr. Sturzenegger is the fourth person to be handed a prison sentence in Singapore’s 1MDB-related investigations.

In recent months, Singapore courts have convicted three former bankers at the local branch of another Swiss private bank, BSI SA, for crimes related to their handling of fund flows connected to 1MDB. They were given prison sentences of varying lengths for crimes such as failing to report suspicious transactions, forgery and attempting to obstruct the course of justice.

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