As Swiss monetary authorities deepen their investigation into Falcon Private Bank’s links with scandal-hit 1MDB, inconsistencies in the entire house of cards are starting to emerge.
By Rasa Sarwari
Corruption-hunting Swiss and Singaporean authorities are targeting banks connected to the 1Malaysia Development Bhd (1MDB) strategic development fund; recently bringing Falcon Private Bank into their sights. The outfit has something of a record, losing its banking license in Singapore only a day before due to regulatory mishandlings.
But as Falcon is forced to close its operations, several other 1MDB-linked banks are still allowed to take business and being let off with minor fines. In fact, of the banks that were fined by Singapore’s monetary authority; UBS handed over $1.3 million SGD in punishment payments and DBS Group Holdings Ltd paid $1 million SGD. Falcon, meanwhile, paid $4.3 million SGD for their conduct.
Cracking down on banks
To catch-up on the foundations of the fall of Falcon, Malaysia’s current Prime Minister, Najib Razak, was the chair of the 1MDB fund. The state-owned investment vehicle is now under investigation across six countries, including the US, Singapore, and Switzerland, where respective authorities are looking into money-laundering and corruption by Malaysian government officials. The allegations are they siphoned off billions of dollars.
In light of this, “regulators are increasingly willing to investigate and punish banks that don’t properly vet their clients or where their money comes from” explains Patrick Emmenegger, a leading economist at the University of St. Gallen in Switzerland. He continues, “Singapore and Switzerland have made real inroads against the banks.” For 1MDB’s part, senior officials have denied wrongdoing and committed to work with the local authorities.
Banca della Svizzera Italiana (BSI) was the first Swiss bank investigated by Switzerland’s Office of the Attorney General (OAG) about the saga, but it seems attention has now clearly shifted to Falcon. This second private bank is owned by the Emirati International Petroleum Investment Co, based in Abu Dhabi, and its officials have also agreed to “cooperate with the OAG to help ensure a speedy resolution to the investigation”. This is the latest development in a year-long investigation, but so far only four people face criminal charges.
Pressing Najib’s inner circle
In January 2016, the OAG said there was evidence that around $4 billion USD had been embezzled from 1MDB and now new allegations that are emerging that point to a $800 USD million Ponzi scheme connected to the fund. In light of this news, Prime Minister Najib Razak has again denied his involvement in any wrongdoing.
But can there be smoke without fire? Despite the Malaysian leader’s continued pleas of ignorance of the matter, the OAG might be unintentionally building a case around him – simply by picking apart his former associates and financial partners. Swiss authorities are currently questioning Falcon about a $681 million USD “pass through” transaction from an anonymous account of a Malaysian businessman. Although the Swiss authorities are not releasing any details of where this money went, the $681million USD is the exact amount seen in Najib’s personal account before Malaysia’s 2013 general election. The beleaguered leader has stated he returned $620 million USD of what he says was a political donation, but the remaining $61 million USD is still unaccounted for.
Although the Swiss authorities are not releasing any details of where this money went, the $681million USD is the exact amount seen in Najib’s personal account before Malaysia’s 2013 general election. The beleaguered leader has stated he returned $620 million USD of what he says was a political donation, but the remaining $61 million USD is still unaccounted for.
The criminal charges that Falcon faces relate to the investigation by Switzerland’s financial watchdog, FINMA buht many of their actions are under the spotlight. For their part the OAG points out that “the information suggests that the offences of money laundering currently under investigation in (the) 1MDB case could have been prevented had the Falcon Private Bank Ltd been adequately organised”.
Falcon have responded to the charges saying that “based on the findings of the regulators, Falcon Private Bank has initiated additional measures to prevent future issues.” However, this will not stop FINMA from taking $2.56 million USD of illegal profits they have earned, as well as raising charges against two unnamed former Falcon official. Though Najib continues to cover his tracks and deny responsibility for the 1MDB scandal, his inner circle of banks and associates are facing criminal persecution from some of the highest international authorities. What will emerge next?