PARIS (AFP) - Swiss financial regulators announced on Tuesday (May 24) they have agreed to the takeover and dissolution of Lugano-based BSI Bank, which has been linked to a Malaysian corruption scandal.
The Swiss supervisor FINMA accused merchant bank BSI of "serious breaches" of money-laundering rules in its dealings with the Malaysian sovereign wealth fund 1Malaysia Development Berhad (1MDB), which is at the heart of a financial scandal swirling around Malaysia's Prime Minister Najib Razak.
In the toughest punitive action yet announced in the affair, FINMA said in a statement it was approving the takeover of the merchant bank by Zurich-based private banking group EFG International on the condition that BSI is integrated "and thereafter dissolved" within 12 months.
It ordered the seizure of 95 million Swiss francs of BSI's "illegally generated" profits. FINA said it was investigating two former top managers to determine what they knew about the illegal activities, warning that it may launch further probes.
"In the case of 1MDB, the bank executed numerous large transactions with unclear purpose over a period of several years and, despite clearly suspicious indications, did not clarify the background to these transactions," the Swiss regulator said.
The Office of the Attorney-General of Switzerland said earlier in the day that it had opened criminal proceedings against BSI "based on information revealed by the criminal proceedings in the 1MDB case".
Malaysia's prime minister, who founded 1MDB in 2009, has battled allegations that billions were looted from the investment vehicle in a vast campaign of fraud and embezzlement stretching from the Middle East to the Caymans.
The fund, which ran up more than US$11 billion in debt in a series of much-questioned investments, has steadfastly denied money was stolen or that it was in financial trouble.
Datuk Seri Najib also faced questions after the Wall Street Journal revealed US$681 million in transfers to his personal bank accounts. But since the scandal erupted last year, Mr Najib has weathered the allegations by curbing scrutiny by the authorities, purging officials demanding accountability, and stifling media reporting.
He insists the US$681 million was a gift from the Saudi royal family, most of which he returned. A Saudi official in April said that was true, but only after weeks of silence that cast doubt on the claim.
Singapore's central bank, which is working with the Swiss authorities in its investigations, said Tuesday that it was kicking out BSI. Mr Ravi Menon, managing director of the Monetary Authority of Singapore, described the wrongdoing as the "worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector".
The Singapore central bank said it had asked state prosecutors to investigate six senior executives of BSI Bank for possible criminal offences and fined it S$13.3 million for 41 breaches of Singapore's laws against money laundering. Among those facing investigation is former chief executive Hans Peter Brunner.
