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Coutts, the UK private bank, has been accused by the Swiss regulator Finma of seriously breaching money laundering regulations in its dealings with Malaysian sovereign wealth fund 1MDB.
The Swiss Financial Market Supervisory Authority ordered the bank to “disgorge unlawfully generated profits” of SFr6.5m (£5.2m) after it failed to carry out adequate background checks.
Finma said that, despite the existence of “substantive evidence”, Coutts 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,” Finma said in a statement.
The Royal Bank of Scotland disclosed the investigation by Finma in April 2016. The UK lender sold the international arm of Coutts & Co to Union Bancaire Privee the previous year. Today, RBS said it welcomed the conclusion of the Finma investigation and that “we regret any historic failings in our anti-money laundering processes”.
“Coutts & Co Ltd has progressively and substantially strengthened its anti-money-laundering policies and controls. We are in the process of winding-down this Swiss-incorporated business, following the sale of the majority of the assets last year. As announced in 2014, this sale reflects the revised risk appetite of RBS and its subsidiaries.”
Finma said the case focused on a Zurich-based relationship between Coutts and a Malaysian businessman, with discrepancies over unusual transfers and payments that were expected to come from the businessman’s family instead coming from 1MDB.
Finma also said that internal warnings within Coutts had been ignored, warning that it could also open enforcement proceedings against the bank employees responsible.
The regulator said it had also alerted UK regulator the Financial Conduct Authority, given that Coutts belonged to RBS during the period in question.
Coutts was not the only bank to come under scrutiny by Finma for its 1MDB dealings, with five other banks also put under investigation.