FALCON Bank has "seriously breached" Swiss money laundering regulations by failing to carry out adequate background checks into transactions and business relationships associated with Malaysian sovereign wealth fund 1MDB, the Swiss Financial Market Supervisory Authority (FINMA) said in a statement on its website Tuesday afternoon Singapore time.
The regulator said it has banned Falcon Bank from "entering into business relationships with foreign politically exposed persons" for three years, and warned that the bank will have its licence withdrawn if it breaches regulations again.
FINMA has launched enforcement proceedings against two of the bank's former executives, it added.
The regulator concluded its enforcement proceedings against Falcon at the beginning of October 2016. In the period under investigation between 2012 and the summer of 2015, FINMA identified serious shortcomings in Falcon's anti-money laundering activities and in risk management. Assets amounting to approximately US$3.8 billion were transferred to accounts at Falcon and associated with the 1MDB Group during that period. These funds were generally moved on quickly.
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. In doing so, Falcon was in serious breach of its duty to ensure proper business conduct.