Switzerland’s financial regulator fined Coutts & Co. Ltd. for violating money-laundering rules and illegally profiting from transactions associated with Malaysian sovereign wealth fund 1Malaysia Development Bhd.
Coutts, owned by Royal Bank of Scotland Group Plc, allowed a total of $2.4 billion worth of 1MDB-related assets to flow through accounts in Switzerland even though it had good reason to be suspicious of the transactions., the Financial Market Supervisory Authority, or Finma, said.
Finma ordered the bank to pay back 6.5 million Swiss francs ($6.57 million) in unlawfully generated profits from the transactions, saying the bank had “seriously breached money laundering regulations by failing to carry out adequate background checks into business relationships and transactions” associated with 1MDB. The bank also ignored internal warnings from some of its employees, Finma said. In December, the Monetary Authority of Singapore imposed a 2.4 million Singapore dollar ($1.7 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 $10 million would be transferred to it from the holder’s family assets. Instead, about $700 million was moved to the account late that year from 1MDB.
The wealth fund, which has consistently denied wrongdoing, is at the center of several international investigations into alleged corruption and money laundering by public officials. Prosecutors in Singapore, Switzerland and the U.S. and other jurisdictions are looking into a sweeping multiyear scheme in which more than $3.5 billion was allegedly diverted from the investment vehicle.
“We regret any historic failings in our AML processes,” RBS said in an e-mailed statement. “Coutts & Co. Ltd. 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 didn’t inherit any legal liability.