Criminal case opened against BSI bank over 1MDB fund

BSI became Switzerland’s fifth-largest private bank in February when it was bought by EFG International Keystone

The Office of the Attorney General of Switzerland has opened criminal proceedings against the Swiss bank BSI linked to the ongoing case involving Malaysia's troubled state investment fund 1Malaysia Development Berhad (1MDB).

The prosecutor’s office said on Tuesday it suspected ‘deficiencies in the internal organisation’ of BSI.

“It is believed that due to these deficiencies, the bank was unable to prevent the commission of offences currently under investigation in the criminal proceedings relating to 1MDB,” it said in a statement.

The criminal proceedings opened against BSI are based on information emerging from the criminal case against 1MDB and issues raised by the Swiss financial regulator FINMA, it added.

“The information suggests that the offences of money laundering and bribery of foreign public officials currently under investigation in the context of the 1MDB case could have been prevented had BSI SA been adequately organised,” the attorney general’s office declared.

The Swiss announcement came as Singapore’s central bank on Tuesday ordered BSI’s operations in the city-state to close down.

The Monetary Authority of Singapore (MAS) said it had withdrawn Swiss-based BSI Bank’s status as a merchant bank in Singapore and directed it to shut down for serious breaches of anti-money laundering requirements and other lapses.

IMDB case

The Swiss Office of the Attorney General opened criminal proceedings relating to 1MDB in August 2015. The case involves “suspected corruption of public foreign officials, dishonest management of public interests and money laundering”.

1MDB is at the heart of a growing number of investigations both at home as well as in Switzerland, the US, Singapore, Hong Kong and Luxembourg over allegations the development fund was used to funnel money to individuals including Malaysian Prime Minister Najib Razak, who heads the fund’s advisory board. The Swiss estimate that about $4 billion may have been misappropriated while a Malaysian parliamentary committee identified at least $4.2 billion of irregular transactions, according to a report.

The Malaysian attorney general’s office in January cleared Najib of any criminal offences or corruption, declaring that $681 million deposited into his personal bank account was a gift from Saudi Arabia’s royal family.

In April 2016, Swiss prosecutors widened their criminal probe into 1MDB, and asked Luxembourg and Singapore authorities for help with their investigation.

FINMA warning

In February 2016, EFG International agreed to buy BSI from Brazil’s Grupo BTG Pactual SA, in a CHF1.3 billion Swiss-franc transaction that will create Switzerland’s fifth-largest private bank.

BSI said in a statement on Tuesday that its group CEO Stefano Coduri will step down and it has undertaken steps to strengthen management, including the introduction of a new chief risk officer and the appointment of a new group legal counsel.

Swiss financial watchdog FINMA said on Tuesday EFG International’s acquisition of BSI could still go ahead but on the condition that the 143-year-old BSI be fully integrated and then dissolved.

FINMA said it is seizing CHF95 million of profits from BSI and had launched enforcement proceedings against two of its former senior managers.

In an conference call with journalists, FINMA Chief Executive Officer Mark Branson warned the risk of money-laundering had risen in Switzerland in recent years.

FINMA is said to be preparing to penalize six Swiss banks over their ties to alleged corruption in Malaysia and Brazil. Widening corruption scandals at 1MDB and Brazilian oil producer Petroleo Brasileiro SA have prompted the regulator to look at more than 20 Swiss banks and their potential ties to the affairs Branson said on Tuesday.