M and A

Falcon's On The Market, But Buyers Aren't Biting

Josh O'Neill, Assistant Editor, 15 May 2018

articleimage

A new report suggests that the owner of Switzerland's Falcon Private Bank is trying to sell the business to a pool of potential European investors, but the appetite for a deal is absent due to the firm's affiliation with high-risk assets.

Mubadala, owner of Falcon Private Bank, is struggling to offload the firm as investors are unwilling to part with cash for a company still reeling from an alleged money laundering scandal. 

Falcon has been under investigation in Switzerland since 2016 for allegedly failing to prevent money laundering tied to 1Malaysia Development Berhad (1MDB), the scandal-warped Malaysian development fund. Two years ago, Falcon was stripped of its local licence in Singapore over its dealings with the fund. 

Abu Dhabi state investor Mubadala, which took full control of Falcon last year, has been in talks with potential bidders, including Luxembourg’s Banque Havilland, according to Reuters, which cites five anonymous sources. 

Banque Havilland carried out due diligence on Falcon earlier this year but negotiations collapsed earlier this month, the sources said. 

Other players in Europe’s wealth management sphere have been invited to bid for the Zurich-based private bank, which has some $10.5 billion in assets under management, but none have made an offer due to fears of regulatory backlash, the sources said. 

“Anyone looking to do deals in wealth management in Europe has looked at Falcon but no one has the guts to go ahead and bid,” said one of the sources. This publication has reached out to Mubadala, Falcon and Banque Havilland for comment and will update coverage accordingly. 

1MDB is in the cross-hairs of authorities in at least six countries, including Switzerland, Singapore and the US, where it is being probed over an eye-watering money laundering scandal that allegedly saw Malaysian officials and their associates siphon billions of dollars from the fund. Last week, Malaysia elected Mahathir Mohamad as its new prime minister, ousting the regime of Najib Razak, who has been accused of channelling millions of dollars from 1MDB into his personal bank accounts.

Early last year, Singapore jailed and fined Jens Sturzenegger, a former Falcon branch manager in the city-state, after he pleaded guilty to six counts over his dealings with 1MDB-linked accounts. 

Around this time last year, Falcon Private Bank saw its former head, Erich Pfister, step down from the helm “to pursue a new opportunity outside” of the group. 

More recently, though, Falcon opened its books to wealth generated from what many banks consider high-risk assets: crypto-currencies. 

In January, Falcon announced that both new and existing clients could store wealth created from trading crypto-currencies, such as bitcoin, at the bank. 

Most banks have steered clear of crypto-currencies because of the associated money laundering risks and difficulty determining the origin of funds. Crypto-currencies, generally speaking, allow users to transact with a degree of anonymity without the need for a third-party – most banks’ worst nightmare at a time when watchdogs are hot on the heels of financial crime and regulatory fines are at an all-time high. 

But Falcon, a self-proclaimed “first-mover” in the crypto asset management space, said it “applies required due diligence using specific tools to analyse the transaction history on the blockchain to ensure full compliance with AML (anti-money laundering) and KYC (know-your-client) laws and regulations”.

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes