Jeevan Vasagar in Singapore
3rd Feb 2017
Swiss financial supervisor sanctions bank over lapses linked to Malaysian fund
Swiss authorities have accused Coutts, the private bank, of repeatedly ignoring internal warnings over its dealings with a businessman who has been linked to a plot to loot billions of dollars from 1MDB, the Malaysian state investment fund.
Numerous “high-risk” transactions were processed through a Coutts account opened by the Malaysian businessman in Zurich, including the use of $35m for visits to casinos and the purchase of luxury services such as chartering yachts, according to the Swiss inquiry.
Finma, the Swiss financial regulator, ordered Coutts to pay back profits of SFr6.5m, which were allegedly generated unlawfully. It is also considering enforcement proceedings against bank employees.
The Swiss action is the latest step in a global regulatory crackdown against banks involved in the 1MDB scandal.
Switzerland’s attorney-general’s office has previously said that up to $4.8bn was diverted from companies linked to 1MDB, a fund set up by Najib Razak, Malaysia’s prime minister. Mr Najib denies any wrongdoing.
In total, 1MDB-related assets to the value of $2.4bn were transferred through Coutts accounts in Switzerland, according to Finma.
The details of the unnamed businessman in the Finma statement match those of Jho Low, a Malaysian dealmaker who opened a Coutts account in Zurich in 2009. Mr Low, who has previously denied any wrongdoing, has been accused by authorities in the US of purchasing luxury properties, art and a $35.4m private jet as part of a conspiracy to launder money stolen from 1MDB.
About $700m was transferred to the unnamed businessman’s account from 1MDB in the autumn of 2009, according to the Swiss regulator.
US investigators have previously alleged that Mr Low ordered the transfer of $700m of Malaysian public money to a Coutts account in Zurich that year.
Finma said that the reasons given for the transaction were “inconsistent” and some information was changed retrospectively, while the supporting documents contained “obvious mistakes”.
A member of the bank’s compliance unit raised concerns while legal services spoke of the risk of a “total fabrication”.
Subsequently, several high-risk transactions with a total value of $1.7bn were processed through the account, Finma said.
The bank failed to clarify the circumstances surrounding some unusually large and high-risk transactions, the regulator said.
“In addition, it did not follow up on relevant internal information and, despite the existence of substantive evidence, failed to report any suspicions to the Swiss authorities until the spring of 2015,” Finma said in a statement.
In December, Singapore’s regulator fined Coutts S$2.4m for breaches of anti-money-laundering regulations and failing to meet due diligence requirements for politically exposed persons.
Royal Bank of Scotland, which is in the process of winding down its Coutts international wealth management business after selling the majority of its assets, said in a statement: “We regret any historic failings in our AML processes. Coutts has progressively and substantially strengthened its AML policies and controls.”
RBS is keeping the UK part of the bank, which includes Queen Elizabeth II among its clients.
Last month Mr Low and his family achieved a legal victory in New Zealand, winning control of several trusts set up for their benefit and paving the way for the family to contest a US effort to seize more than $1bn in allegedly 1MDB-related assets worldwide.
Mr Low could not be reached for comment on Thursday.