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Thursday, February 2, 2017

Swiss regulator fines bank which handled Jho Low's Good Star account

The Swiss Financial Market Supervisory Authority (Finma) has ordered Coutts & Co Ltd, which is owned by the Royal Bank of Scotland, to surrender 6.5 million francs (RM29.1 million) in illegal profits from transactions linked to 1MDB.
Finma, in a statement today, said Coutts seriously breached money laundering regulations by failing to carry out adequate background checks into business relationships and transactions associated with 1MDB.
The Swiss regulator added that it was also considering enforcement proceedings against bank employees responsible for the transactions.
"The bank failed to adequately clarify the circumstances surrounding a number of business relationships and unusually large, high-risk transactions.
"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.
"Given the inadequacy of the bank’s anti-money laundering controls in this particular case, Coutts was in serious breach of its duty to ensure proper business conduct," it said.
It noted that among the offending transactions was a US$700 million transfer from 1MDB to an account opened by a "young Malaysian businessman" in the autumn of 2009.
The transaction was detailed by the US Department of Justice in its 136-page filing which said the US$700 million was transferred to Good Star Limited, a company beneficially owned by Penang billionaire Jho Low, at Coutts.
The US filing, aimed at seizing assets acquired using allegedly stolen 1MDB funds, said the US$700 million was intended for a joint-venture between 1MDB and PetroSaudi but was diverted to the billionaire.
Finma said red flags were raised over the transaction, including the bank's legal services claiming "total fabrication" of the documents to support the transfer.
"Nevertheless, the bank failed to clarify the background to the transaction with the necessary diligence," it said.
Finma said another US$1.7 billion in high-risk transactions were made at the bank between 2009 and 2013, bringing the total transactions to US$2.4 billion.
Some of these transactions were highlighted by the DOJ, including pass through transactions involving Dragon Market Limited's account at Coutts. The company was also beneficially owned by Jho Low.
Dragon Market Limited received US$518.5 million in transactions from Granton Property Holdings Limited via Falcon Private Bank.
Granton was among the accounts used for the diversion US$1.26 billion in bonds intended for the development of 1MDB's Tun Razak Exchange.
The Granton account, in the name of Eric Tan, Jho Low's alias, is part of an ongoing court case in Singapore.
Finma said Coutts also did not clarify the use of US$35 million for visits to casinos and the purchase of a range of luxury services such as the chartering of yachts and private aeroplanes.
Finma noted that Coutts was ceasing operations that would require a licence in Switzerland and since the beginning of 2016, had transferred a large part of its remaining customer assets to Geneva-based private bank Union Cancaire Privée.
"Given these circumstances, Finma has decided not to impose wider-reaching measures in this case."However, in order to restore compliance with the law, Finma has ordered the disgorgement of 6.5 million francs in unlawfully generated profits," it said.

Finma said its investigation was done in cooperation with the Monetary Authority of Singapore (MAS).
MAS had in December last year slapped Coutts with a US$2.4 million fine for breaching money-laundering rules.
"Since Coutts belonged to the UK-based Royal Bank of Scotland Group during the period in question, Finma has also brought the case to the attention of the UK’s Financial Conduct Authority (FCA)," it said.- Mkini

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