JAIL THE NEXT FRONTIER FOR NAJIB'S BANKERS: 1MDB - FROM 'TROPHY' TO 'COFFIN'

Hanspeter Brunner, former Asia head of RBS Coutts Bank Ltd., Singapore, had jumped ship with a staggering 70 colleagues. Their destination: BSI SA, a small Swiss bank catered primarily to Italian clients but was looking to get big in the shortest time possible.

Brunner’s annual salary at RBS Coutts was S$957,082, not to mention S$456,600 in deferred bonus. His benefits including a monthly housing allowance of S$28,000, a Mercedes-Benz S-Class 500 car, and business-class return air tickets to Switzerland for him and his family. But his fate was with BSI Singapore, or so he thought.

In retaliation, RBS Coutts Bank Ltd. sued Mr. Hanspeter, claiming in its Singapore lawsuit that Brunner should return S$173,524 (US$128,000; £88,690; RM520,871) he received as a cash advance on a deferred bonus plan. It was the golden era where Barclays Plc, Morgan Stanley and UBS AG were expanding their wealth management units in Asia.

Hanspeter Brunner aimed to help BSI more than triple its assets under management in Asia to US$10 billion in the next 5 years. However, by March 2016, the head of Asian operations for Swiss bank BSI SA had suddenly“decided to retire.” No explanation was given, but an educated guess was it has everything to do with 1MDB (1Malaysia Development Bhd).

While Mr. Brunner managed to increase BSI employees in Asia to 280 from 50 over the course of a year and a half since his appointment, the bank’s major client – 1MDB – has thrust BSI into the centre of a global financial scandal.The 1MDB affair has stretched from Malaysia to Singapore, Abu Dhabi, Switzerland, Australia, Hong Kong, U.S., UK and Luxembourg.

The central bank of Singapore has since ordered Swiss bank BSI SA’s local branch to shut down amid an investigation connected to the embattled Malaysian state fund 1MDB. This is the first time in 32 years that Singapore’s central bank withdrew a license from a merchant bank, the last being Jardine Fleming in 1984.

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Interviews and court documents, amazingly, tell a tale of rushed deals, lax scrutiny, million-dollar bonuses and huge sums channeled into obscure offshore funds with few questions asked. The investigations are set to add one more piece of the puzzle into what happened to 1MDB’s missing billions.

First link in the chain is Yak Yew Chee, one of many who defected with Brunner from Coutts, and the man who was to bring BSI and 1MDB together. Mr. Yak, 57, had longstanding ties with people involved in the Malaysian state fund, which was set up the same year Brunner left Coutts and tasked by Malaysian Prime Minister Najib Razak to be “bold and daring.”

Among those connections was the flamboyant Malaysian financier Low Taek Jho, known as Jho Low, who partied with Paris Hilton and is a close friend of Najib’s stepson Riza Aziz. That’s right, Yak Yew Chee was Penang-born businessman and billionaire Jho Low’s private banker at Coutts and he took the relationship with him to BSI, reported Bloomberg.

Jho Low, chief executive officer of Hong Kong-based investment fund Jynwel Capital Ltd., has said he merely provided consulting to 1MDB and didn’t break any laws. But a classified letter issued by Bank Negara Malaysia (Central Bank) sighted by the Wall Street Journal named Jho Low as owner of Good Star Limited that received US$1.03 billion (RM4.2 billion) from 1MDB.

Jho Low was the beneficial owner of multiple accounts at BSI and regularly made sizable transfers between them, as well as accounts he controlled at other banks. Such large transfers would have typically raised red flags had they been between accounts with different owners. But it was a different story in BSI Bank.

Yak’s connections helped BSI’s Singapore unit snag business worth about US$2.5 to US$3 billion from 1MDB and Jho Low, making him a star in the 143-year-old Swiss bank. A 2011 memo from the bank’s CEO at the time congratulated Yak on his “fantastic business successes” and “immense contribution” to the bank.

As a result of Mr. Yak’s success, he earned S$27 million (US$20 million) from 2011 to 2015 at BSI, and some years made more than his boss Brunner. But his glory would soon turn into shame when in February 2016, Yak Yew Chee, former senior vice president at BSI Singapore, was forced to quit amid a criminal probe against him on money-laundering.

When all falls apart, Yak claims that Brunner was trying to make him “a scapegoat of sorts for things that senior management knew and should assume full accountability for, not that there was anything that was done illegally.” According to sources, a committee, which included Brunner, approved and vetted major client accounts including those linked to 1MDB and related entities.

Regulators in Singapore and Switzerland are at the forefront of investigations into transactions linked to 1MDB. The Swiss authorities found that in one incident, BSI was happy to take US$20 million after being told by a client the sum was “a gift”. In another, it accepted US$98 million without any effort to clarify the origin of the funds.

The Malaysian Attorney General’s office twice refused requests by the nation’s central bank for criminal proceedings against the fund. The Malaysian central bank’s new governor, Muhammad Ibrahim, has said a penalty imposed on 1MDB in April marked the end of its probe into the fund. Both 1MDB and Najib have repeatedly denied any wrongdoing.

Singapore investigators have been shocked by the way BSI operated. Ravi Menon, managing director of the Monetary Authority of Singapore, called it“the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector.” The nation’s financial regulator said it would fine BSI about S$13.3 million, on top of revoking its license.

While Yak may have helped bring in the 1MDB business, which would soon turn into a mega disaster, the investigation into where the money went largely centres on another Coutts defector: Yeo Jiawei. The 33-year-old banker has been described by prosecutors as playing a central role in the events that led to BSI losing its Singapore license.

Mr. Yeo was a wealth planner at BSI who has appeared at social events with Jho Low and recommended investment products to 1MDB. As the investigations unfolded, Yeo in March asked his manager, Kevin Swampillai, tofalsely inform police that money transferred to Bridgerock Investment Inc., a company beneficially owned by Yeo, belonged to someone else.

Yeo was the first banker to be charged in relation to cases stemming from 1MDB investigations. He’s been held by authorities since April 15, with 9 charges against him, including money laundering, forgery and cheating BSI byhiding a US$1.6 million annual payment he would have received from a Cayman Islands fund.

The fund received US$2.3 billion in 2012 from a subsidiary of 1MDB called Brazen Sky, but the supposedly cash turned out to be “units” instead. During a hearing where the prosecutor urged the court to deny Yeo bail, it was revealed that Mr. Yeo has interfered with at least five witnesses. Interestingly, Yeo’s immediately family is also being investigated for money laundering offences. - FINANCE TWITTER