Swiss bank BSI to be shut over Malaysia embezzlement mess

Geneva - Lender to be taken over by another Swiss lender, EFG International

A Swiss private bank will face criminal proceedings and be liquidated after allegedly committing serious breaches of anti-money laundering regulations in connection with the suspected embezzlement of a Malaysian state investment fund.
Switzerland's market supervisor indicated on Tuesday that BSI helped transfer money to the Alpine country connected to the Malaysian fund called 1MDB. Investigations so far into 1MDB have indicated that $4 billion earmarked for development projects in Malaysia may have been misappropriated from state-owned companies.
The Swiss market supervisor, Finma, said that in the 1MDB case, BSI "executed numerous large transactions with unclear purpose over a period of several years and, despite clearly suspicious indications, did not clarify the background to these transactions".
The Swiss attorney-general's office opened criminal proceedings against the bank, whose chief executive resigned on Tuesday. BSI will be taken over by EFG International, another Swiss bank, on condition that BSI be integrated and dissolved within a year
In Singapore, authorities said they were ordering BSI's local branch to shut down, citing serious breaches of anti-money laundering requirements, poor management oversight and gross misconduct by some staff.
Switzerland opened an investigation last year of two former fund officials and persons unknown on suspicion of bribery and money laundering, among other offenses.
Finma said the bank had business relationships with a range of sovereign wealth funds, with accounts in both Switzerland and Singapore. It said senior management "did not question why the sovereign wealth funds should use a private bank to provide institutional services and pay excessive out-of-market fees for doing so".
"In one case involving a deposit of $20 million for example, the bank was happy to accept the client's explanation that the funds involved were a 'gift'," the supervisor said. "In another case, an account was credited with more than $98 million without any effort to clarify its commercial background."
In another case, it said, $20 million was transferred through a variety of BSI accounts on the same day before being transferred to another bank - the kind of transaction that is "often a clear indication of money laundering".