Swiss watchdog fines Coutts over 1MDB money-laundering breaches – Channel NewsAsia international money laundering

SINGAPORE: RBS unit coutts co was ordered to pay 6.5 million swiss francs (US$6.57 million) for breaching money-laundering regulations in its relationship with malaysian sovereign wealth fund 1MDB, said switzerland’s financial regulator on thursday (feb 2).

The bank failed to adequately clarify the circumstances surrounding a number of business relationships and unusually large, the swiss financial market supervisory authority (FINMA) said in a news release.

A total of US$2.4 billion worth of 1MDB-related assets were transferred through coutts accounts in switzerland.

The regulator noted that in the summer of 2009, a young malaysian businessman opened an account with coutts in zurich, with the expectation that US$10 million would be transferred to it from the account holder’s family assets.

Instead, about US$700 million was transferred to the account from 1MDB in the autumn of the same year.International money laundering

The reasons given for this transaction were inconsistent, and some information was changed retrospectively, said FINMA.

It added that the documents supporting of the transaction contained obvious mistakes, not least the fact that the identities of the contracting parties were transposed.

The regulator cited an internal email from member of the bank’s compliance unit: ‘it would be the first time in my career that I would see a case where (in) an agreement over the amount of US$600 million or so the role of the parties has been confused.’

Nevertheless, the bank failed to clarify the background to the transaction with the necessary diligence, said FINMA.

The regulator detailed numerous high-risk transactions with a total value of US$1.7 billion that were processed through the account between late 2009 and early 2013.

Coutts also took no action to clarify the use of US$35 million for visits to casinos and a range of luxury services, including the chartering of yachts and private aeroplanes, FINMA said.International money laundering

It noted that a number of bank employees expressed serious, timely concerns to their managers and the compliance unit about the bank’s relationship with the malaysian businessman.

FINMA cited a statement from a bank employee in singapore who was responsible for providing advisory services to the malaysian businessman: ‘I feel very uncomfortable with this guy and the transactions that are going through the account. I think the management has to make a decision whether to keep this relationship.’

The management, however, decided to continue with the business relationship and process the transactions, said FINMA. It said: as early as march 2012 the following was noted in an internal bank meeting about the business relationship with the malaysian businessman: ‘[X] is a key client who we are comfortable with the source of funds, source of income and activity performed on these accounts’.International money laundering

Apart from ordering coutts to pay back the 6.5 million swiss francs in unlawfully generated profits, the regulator added that it would also consider opening enforcement proceedings against the bank employees responsible.

We regret any historic failings in our AML (anti-money laundering) processes, RBS said. Coutts co ltd has progressively and substantially strengthened its AML policies and controls.

The company is currently in the process of winding down. FINMA said it decided against wider-reaching measures for this reason.

In december, singapore’s central bank imposed a penalty of S$2.4 million (US$1.70 million) on coutts due to money-laundering breaches related to 1MDB. Source: CNA/reuters/dt