Julius Baer is closing its office in Panama after the arrest and conviction in the US of a former employee of the bank in the central American country for laundering money embezzled from Venezuela’s state oil company.

The Zurich-based private bank, which manages about SFr40bn ($40bn) across Latin America, said it decided to exit both Panama and Peru as part of a review into its operations in the region.

It has decided to focus on the larger and faster growing markets of the continent, such as Brazil where it bought wealth manager Reliance earlier this year, it said.

Matthias Krull, the German banker at the centre of Venezuelan scandal, worked for Julius Baer in Panama when he participated in a scheme to launder $1.2bn that was stolen from Petróleos de Venezuela.

In August Mr Krull pleaded guilty to one count of conspiracy to commit money laundering in Miami, Florida and is due to be sentenced next week. Julius Baer itself hasn’t been charged, but is conducting an internal probe into the affair.

“We are very committed to keep our current clients in Panama and Peru and will offer to relocate our key employees” to offices in the Bahamas or Chile, said Julius Baer.

Peru is an advisory office with only two relationship managers, whereas Panama is a larger operation with four client advisers and a booking centre that employs more than 30 people, some of whom will be made redundant.

Julius Baer has been at the forefront of a scramble by Switzerland’s private banks to manage the wealth of the world’s new ultra-rich, embarking on an aggressive and acquisitive expansion across Asia and other emerging markets.

The pace of its growth has led to questions about the robustness of its compliance checks on clients’ sources of wealth. The closure of the Panama and Peru offices will reduce the number of countries it operates in to 27.

Bernhard Hodler took over as chief executive of the SFr400bn private bank late last year after the surprise defection of his predecessor Boris Collardi to Geneva-based rival Pictet.

While Julius Baer’s pre-tax profit increased 18 per cent in the first half of the year, the stock has dropped by almost a quarter in the past year, underperforming its main rivals UBS and Credit Suisse.

This is partly because Mr Hodler warned in July global trade tensions had prompted clients to adopt a more conservative attitude to investing. The bank’s shares fell 2.7 per cent on Tuesday.

The US justice department said after Mr Krull was convicted in August that he “and members of the money laundering conspiracy used Miami, Florida real estate and sophisticated false-investment schemes to conceal that the $1.2bn was in fact embezzled from PDVSA”.

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