The Swiss Financial Market Supervisory Authority (Finma) uncovered serious deficiencies in the bank’s anti-money laundering processes associated with the Malaysian sovereign wealth fund.
The bank failed to adequately clarify the circumstances surrounding a number of business relationships and unusually large, high-risk transactions.
The value of 1MDB-related assets transferred through Coutts accounts in Switzerland totalled $2.4bn (£1.9bn, €2.2bn).
Wider-reaching measures not imposed
The regulator ordered that Coutts disgorge CHF6.5m (£5.2m, $6.6m, €6.1m) in unlawfully generated profits.
It opted, however, not to impose wider-reaching measure as, between the end of 2015 and the beginning of 2016, Coutts transferred a large part of its Swiss customer assets to Union Bancaire Privée (UBP).
This process is currently at an advanced stage and is likely to be concluded by the end of this year.
Given these circumstances, Finma has decided not to impose wider sanctions.
The Swiss regulator, however, is considering initiating enforcement proceedings against the bank employees responsible.
Ongoing involvement
Coutts’ involvement with the scandal-plagued Malaysian sovereign wealth fund dates back to 2003, when some employees of the bank’s Singapore branch entered into business relationships with individuals associated with 1MDB.
Through its branch in Singapore, Coutts was the first Swiss bank to accept assets from those individuals.
When the Coutts employees moved to another bank in Singapore in 2009, some of the business relationships were transferred to Coutts Zurich.
In the summer of 2009, Coutts opened a business relationship in Zurich with a young Malaysian businessman. When the account was opened, information was provided to the effect that $10m would be transferred to it from the account holder’s family assets.
Instead, in the autumn of 2009, approximately $700m was transferred to the account from the Malaysian sovereign wealth fund 1MDB.
The reasons given for this transaction were inconsistent, and some information was changed retrospectively. The documents presented in support of the transaction contained obvious mistakes.
A member of the bank’s compliance unit noted in an internal email: “It would be the first time in my career that I would see a case where [in] an agreement over the amount of [$600m] or so the role of the parties has been confused.”
The Legal Services unit even spoke of the risk of a “total fabrication”.
