[SINGAPORE] Even in Asia's cutthroat world of wealth management, the news of a mass defection at RBS Coutts, venerable bankers to the British royals, came as a shock.
Lenders battered by the financial crisis were fighting for Asia veterans who could bring the lucrative accounts of the region's growing ranks of millionaires, and Coutts rainmaker, Hanspeter Brunner, had jumped ship with a staggering 70 colleagues. Their destination: BSI SA, a small Swiss bank looking to get big in a hurry.
That coup in 2009 set off a chain of events that has now thrust BSI into the center of the widening financial scandal involving 1Malaysia Development Bhd. The 1MDB affair has stretched from Malaysia to Singapore, Abu Dhabi, Switzerland, the Caribbean, Hong Kong and the US and touched the upper reaches of global finance.
But no bank has drawn more scrutiny than BSI and its operation in Singapore, where several well-connected bankers are now under investigation. Interviews and court documents tell a tale of rushed deals, lax scrutiny, million-dollar bonuses and huge sums channeled into obscure offshore funds with few questions asked. The investigations are set to add one more piece of the puzzle into what happened to 1MDB's missing billions.
First link in the chain is Yak Yew Chee, one of the renegade band who defected with Brunner from Coutts, and the man who was to bring BSI and 1MDB together.
Yak, 57, had longstanding ties with people involved in the Malaysian state fund, which was set up the same year Brunner left Coutts and tasked by Prime Minister Najib Razak to be "bold and daring."
Among those connections was the flamboyant Malaysian financier Low Taek Jho, known as Jho Low, who partied with Paris Hilton and is a close friend of Najib's stepson Riza Aziz. Yak was Low's private banker at Coutts and he took the relationship with him to BSI, according to people familiar with the events.
Low, chief executive officer of Hong Kong-based investment fund Jynwel Capital Ltd, has said he provided consulting to 1MDB that didn't break any laws and has been asked by a Malaysian parliamentary committee to assist in its probe of the fund.
Low was the beneficial owner of multiple accounts at BSI and regularly made sizable transfers between them, as well as accounts he controlled at other banks, people familiar with the transactions said.
Such large transfers would have typically raised red flags had they been between accounts with different owners, the people said. Low wasn't available for comment, according to a woman who answered the phone at his office.
Yak's connections helped BSI's Singapore unit snag business worth about US$2.5-US$3 billion from 1MDB and Low, making him a star in the 143-year-old Swiss bank, the people said.
A 2011 memo from the bank's CEO at the time congratulated Yak on his "fantastic business successes" and "immense contribution" to the bank, according to court papers Yak filed. Yak earned S$27 million from 2011 to 2015 at BSI, and some years made more than his boss Brunner, the people said.
Yak's lawyer from Legal Clinic LLC said he couldn't comment. BSI said it continues to cooperate with authorities and declined to comment further. 1MDB said it had nothing to add to its previous statements on its ties with BSI. Coutts also declined to comment.
Regulators in Singapore and Switzerland are at the forefront of investigations into transactions linked to 1MDB. The Malaysian attorney general's office twice refused requests by the nation's central bank for criminal proceedings against the fund.
The central bank has said a penalty imposed on 1MDB in April marked the end of its probe into the fund. Both 1MDB and Najib have consistently denied any wrongdoing.
Singapore investigators have been especially damning of the way BSI operated. Ravi Menon, managing director of the Monetary Authority of Singapore, called it "the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector."
The nation's financial regulator said it would fine BSI about S$13.3 million and revoke its licence in the city.
While Yak may have helped bring in the 1MDB business, the investigation into where the money went largely centres around another Coutts defector: Yeo Jiawei. The 33-year-old banker has been described by prosecutors as playing a central role in the events that led to BSI losing its Singapore licence.
Yeo was a wealth planner at BSI who has appeared at social events with Low, 34, and recommended investment products to 1MDB, according to the people.
As the investigations unfolded, Yeo in March asked his manager, Kevin Swampillai, to falsely inform police that money transferred to Bridgerock Investment Inc, a company beneficially owned by Yeo, belonged to someone else, according to court documents.
Yeo was the first banker to be charged in relation to cases stemming from 1MDB investigations. He's been held by authorities since April 15, with nine charges against him, including money laundering, forgery and cheating BSI by hiding a US$1.6 million annual payment he would have received from a Cayman Islands fund. The fund got US$2.3 billion in 2012 from a subsidiary of 1MDB called Brazen Sky, according to a Malaysian parliamentary hearing report.
Yeo's lawyer has said in court that he intends to fight the charges.
Five others who defected to BSI from Coutts, including Yak, also face possible criminal action after being referred to prosecutors by the MAS. Only Swampillai, head of wealth management services, is still with the bank and he's been suspended, according to the MAS. Swampillai's lawyers at Aldgate Chambers LLC declined to comment.
Yak said in an Aug 14 e-mail, reproduced in court papers, that Brunner was trying to make him "a scapegoat of sorts for things that senior management knew and should assume full accountability for, not that there was anything that was done illegally."
A committee, which included Brunner, approved and vetted major client accounts including those linked to 1MDB and related entities, according to the people familiar with the events. Brunner, a Swiss national, had also travelled to meet with the clients, the people said.
Yak left BSI in February and a month later BSI announced that Brunner, 64, was retiring, thanking him for a "pleasant collaboration." Lawyers at NLC Law Asia LLC representing Brunner, who was named Asia's 'Outstanding Private Banker' by Private Banker International magazine the year before he moved to BSI, declined to comment.
BSI as a whole, meanwhile, is being bought by EFG International AG. The takeover, proceeding at a reduced price, was approved by Swiss regulators on May 24, the same day that BSI's group CEO resigned and the Singapore authorities announced that its Singapore branch would be closed.