JHO LOW’S SHOCK DEPOSIT FROM ‘FAMILY ASSETS’: NAJIB & ROSMAH’S CONFIDANT TOLD SWISS BANK TO EXPECT US$10MIL BUT US$700 MIL LANDED INSTEAD!

GENEVA – Switzerland’s financial regulator has fined Coutts for violating money-laundering rules and illegally profiting from transactions associated with 1Malaysia Development Berhad (1MDB), prompting Swiss prosecutors to review the decision to see if the bank should face a criminal investigation.

Coutts, owned by Royal Bank of Scotland Group (RBS), allowed a total of US$2.4 billion (S$3.4 billion) worth of assets related to the Malaysian development fund to flow through accounts in Switzerland even though it had good reason to be suspicious of the transactions, Finma said.

Finma ordered the bank to pay back 6.5 million Swiss francs (S$9.2 million) in unlawfully generated profits from the transactions, saying Coutts had “seriously breached money laundering regulations by failing to carry out adequate background checks into business relationships and transactions” associated with 1MDB.

In December, the Monetary Authority of Singapore imposed a S$2.4 million fine on Coutts for anti-money laundering breaches at its branch there.

Finma said it was also considering enforcement proceedings against those Coutts employees responsible for the bank’s actions.
A young Malaysian businessman opened an account in the summer of 2009 with the expectation that US$10 million would be transferred to it from the holder’s family assets.

Instead, about US$700 million was moved to the account late that year from 1MDB.

The wealth fund, which has consistently denied wrongdoing, is at the centre of several international investigations into alleged corruption and money laundering by public officials.

Prosecutors in Singapore, Switzerland, the US and other jurisdictions are looking into a sweeping multiyear scheme in which more than US$3.5 billion was allegedly diverted from the investment vehicle.

“We regret any historic failings in our AML (anti-money laundering) processes,” RBS said in a statement. “Coutts & Co has progressively and substantially strengthened its AML policies and controls. We are in the process of winding-down this Swiss-incorporated business, following the sale of the majority of the assets last year.”

RBS sold the Coutts International private-banking unit to Union Bancaire Privee last year. UBP declined to comment on the Finma announcement and said that since it was an asset-only deal, it did not inherit any legal liability.

The Swiss attorney-general’s office said yesterday it had asked Finma for a copy of the enforcement decision to help evaluate whether Coutts’ behaviour meets the test for corporate criminal liability.

Finma said it has also flagged the case to the UK Financial Conduct Authority.

Coutts is not the first Swiss bank to be sanctioned for its 1MDB dealings. Falcon Private Bank and BSI, both based in Lugano, were ordered to shut down their Singapore banking units as punishment for facilitating illicit payments. BSI was fined 95 million Swiss francs last year for ignoring clear warning signals, according to Finma chief executive Mark Branson.

– BLOOMBERG

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