The Swiss financial regulator Finma issued an unusually stark warning for other Swiss banks caught up in money-laundering scandals after sanctioning BSI Bank for its involvement in alleged money-laundering and corruption at Malaysian fund 1MDB.
Bern-based Finma has in recent months stepped up warnings about money-laundering controls, an issue which has resurfaced recently thanks to BSI as well as Brazil’s Petrobras and global sporting body FIFA.
«We have made clear over recent years and months about the money-laundering risk having risen in our country and that we are concerned that not all organizations have matched their control processes to this increased risk,» Finma head Mark Branson told journalists after the Swiss regulator banned top BSI execs from similar positions and clawed back 95 million Swiss francs in ill-gotten profits from BSI, which was ordered by the Singapore regulator to wind down.
Clear and decisive
«Here, you have the answer from the Swiss authorities and the Singapore authorities to what will happen when you have a particularly damaging case. I think that answer is clear and decisive both from our side and from the Singapore authorities.»
Finma conducted a 32-month probe into BSI, which it ultimately found to have breached «fit and proper» requirements. BSI, which is being sold to Swiss private bank EFG after being passed from Italian insurer Generali to Brazilian investment bank BTG in recent years, will cease to exist after the regulatory clampdown by Switzerland and Singapore.
Reckless in the extreme
BSI’s dealings with 1MDB appear reckless in the extreme: its management and board under former Chief Executive and chairman Alfredo Gysi allowed the state investment fund to use the bank for a wide range of transactions, and built intermediate structures meant to disguise transactions as well as the people behind them.
The affair is huge in Swiss banking: Branson said that Finma had never before had to force a bank of BSI’s size and importance to shut down. He implied that this would have been the case if EFG hadn’t stepped in to take over BSI. «The question was never posed due to the ongoing takeover process,» Branson said.
New hunting ground
After Swiss authorities grappled with several high-profile cases in the 1980s, money-laundering has in recent years taken a backseat for Swiss banks as they instead sweep their accounts clean of declared tax money under massive international pressure.
However, Swiss banks’ new hunting ground in emerging markets brings substantial risk with it, and the origin of clients’ money is often far more difficult to ascertain than in markets culturally and geographically closer to Switzerland, such as Germany, France or the U.K.
In April, Finma said not all banks had adjusted their money-laundering controls to the increased danger of working with emerging market money, and issued an initial warning. On Tuesday, Finma reinforced the warning.
Six more banks
«It is very, very important that this doesn't become a comprehensive problem and that all banks take their obligations on money-laundering very seriously,» Branson said.
It may be too late for some: Finma said it has launched proceedings against six more banks in connection with 1MDB and Petrobras, without naming the banks.
Coutts — previously owned by British bank RBS and bought last year by Switzerland’s Union Bancaire Privee — Falcon Private Bank, Edmond de Rothschild, Julius Baer, Credit Suisse, J.P. Morgan Suisse, Deutsche Bank, and Goldman Sachs are reportedly also linked to 1MDB.