The Swiss authorities have launched criminal proceedings against Falcon Private Bank a day after its banking licence in Singapore was cancelled over regulatory breaches linked to Malaysia's scandal-hit 1MDB fund.
The move by the Attorney- General's office is based in part on issues raised in the enforcement decision released on Tuesday by the country's financial regulator.
It said it suspects deficiencies in Falcon's internal organisation, which resulted in the bank committing money laundering offences.
Falcon said yesterday it hoped to "contribute to an expeditious clarification" of the allegations.
On Tuesday, the Swiss financial regulator ordered Falcon to turn over illegal profits of 2.5 million Swiss francs (S$3.5 million) and banned the bank from entering into business relationships with foreign politically exposed persons for three years. It also launched enforcement proceedings against two of its former executives.
The regulator cited "serious shortcomings in Falcon's risk management" in relation to US$3.8 billion (S$5.2 billion) in 1MDB-related funds that were transferred to accounts at Falcon between 2012 and mid-2015. "These funds were generally moved on quickly," it noted. "The business relationships and transactions booked in Switzerland and at Falcon's Singapore and Hong Kong branches were unusual and involved a high level of risk for the bank, both through their nature and the amounts transacted.
"Although management's attention was drawn to these matters, it repeatedly failed to properly investigate the business relationships, specifically those with politically exposed persons and high-risk transactions."
Falcon had a client relationship with a young Malaysian businessman with links to the Malaysian government, it said, without naming him. "The bank did not verify how this individual had been able to acquire assets of US$135 million in an extremely short period of time or why a total of US$1.2 billion was transferred to his accounts at a later date - a transaction which was clearly at variance with the information he had provided when opening the account," the regulator added.
A number of bank employees had raised "serious concerns" to their managers about the relationship with this businessman. But the internal warnings were ignored. "The focus was always on trying to process the transactions on time," it said.
The regulator cited an e-mail one of the bank's senior managers sent to the Singapore branch carrying out the transactions, warning that "Head Office is watching you".
Two other banks in Singapore were also penalised this week for breaches in relation to 1MDB-related fund flows.
DBS, which was fined $1 million, said it is donating "profits attributable to its shortcomings to charity" but declined to reveal the amount.
UBS, which was fined $1.3 million, will donate all profits arising from the breaches to creating an anti-money laundering and risk education programme to be run by an independent educational body. "We will sponsor the programme, and it will be open to the financial industry," a spokesman said. UBS also declined to say how much it is donating.