Compliance

BSI Says It Was Treated Harshly By Swiss Regulator, Files Court Appeal

Tom Burroughes, Group Editor, 24 June 2016

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The saga involving BSI and the claims around AML failings in Singapore continues, with the Swiss bank filing an appeal against its treatment by the Swiss regulator, FINMA.

Lugano-headquartered BSI is appealing against the Swiss regulator’s allegedly harsh assessment of its relationships and transactions related to 1Malaysia Development Bhd, the Asian state-run fund plagued by corruption scandals, the bank said yesterday.

BSI has filed an appeal with the Swiss Federal Administrative Court against FINMA's decision of 23 May over business relationships and transactions involving BSI that were linked to Malaysia’s 1MDB.

“BSI believes that FINMA's procedure leading to the decision was flawed in many respects and FINMA's decision as such is disproportionate and incorrect,” it said in a statement.

In its 24 May statement, FINMA said: “Through business relationships and transactions linked to the corruption scandals surrounding the Malaysian sovereign wealth fund 1MDB, BSI AG committed serious breaches of money laundering regulations and 'fit and proper' requirements. This is the outcome of enforcement proceedings launched by the Swiss Financial Market Supervisory Authority FINMA. 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. Among other measures, FINMA has ordered the disgorgement of profits amounting to SFr95 million.” 

Since the autumn of 2013, BSI says it has been in “continuous and transparent contact with FINMA relating to the 1MDB and related matters”.

“Where deficiencies have been recognised, BSI has taken, and continues to take corrective measures. All client relationships related to 1MDB have been fully closed in early 2015. Accordingly, while BSI acknowledges certain internal shortcomings in the past, BSI believes that FINMA's decision, its timing as well as the manner in which FINMA decided to communicate it were wholly inappropriate,” the bank said.

“In its appeal, BSI in particular challenges FINMA's assessment of the facts, and holds that the measures ordered are unlawful and disproportionate under the applicable principles of administrative law. In addition, FINMA’s communication of the matter has severely harmed the reputation of the bank and its employees,” it said.

The issue revolves around financial transactions linked to 1MDB. The state-run fund is accused of allowing politicians and other persons to siphon off money for personal use; 1MDB has repeatedly denied wrongdoing. Recent events have highlighted anti-money laundering risks in Singapore. 

The Monetary Authority of Singapore moved in May this year to rescind the merchant banking licence of a local subsidiary of BSI, which is being acquired by Switzerland’s EFG International. The MAS spoke of the “gross misconduct” of BSI Bank and numerous failings on AML controls.

The MAS action against BSI Bank was the first time the regulator has withdrawn such a licence since 1984, when Jardine Fleming (Singapore) was shut down for serious lapses in its advisory work.
 

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