Rothschild Bank AG and one of its subsidiaries were found to have seriously breached money-laundering rules in the multi-billion-dollar 1MDB Malaysian corruption case, which has ensnared lenders around the world.
Swiss financial regulator Finma said Friday it will appoint an outside auditor to review controls put in place by the bank and its Rothschild Trust (Schweiz) AG unit. The decision wraps up the last of seven investigations by the authority relating to Swiss banks and the Malaysian state investment company.
Finma found that the bank entered into, and then expanded, a “significant business relationship” with an unnamed client in relation to the 1Malaysia Development Bhd. corruption scandal, even though there were indications that money laundering might be involved. Still, Rothschild Bank has taken steps to improve compliance and the Swiss regulator stopped short of imposing a fine.
Rothschild Bank told Bloomberg it received notice of Finma’s decision and that the group “acknowledge and regret those instances where it has been identified that breaches occurred.” Rothschild Bank “constantly strengthen our systems and procedures and are determined to continue to do so to identify and combat the increasingly sophisticated financial crime faced by the industry.”
Regulators and prosecutors in the U.S., Singapore and other jurisdictions have investigated how banks were used to funnel money from alleged corruption at 1MDB.
1MDB was used as a Ponzi scheme by a clutch of conspirators to pay bribes and enrich themselves, Switzerland’s top prosecutor said this month after former Malaysian Prime Minister Najib Razak was charged with corruption for his role in the affair.
Switzerland last year fined Coutts & Co. for violating money-laundering rules and illegally profiting from transactions associated with 1MDB, while Singapore’s central bank imposed financial penalties amounting to S$1.6 million ($1.2 million) on Credit Suisse Group AG and United Overseas Bank Ltd. In December, Finma said JPMorgan Chase & Co. breached regulations in its dealings with the Malaysian fund.