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Swiss court orders Falcon bank to hand over ‘illegal’ 1MDB profits

April 16, 2019

Falcon was sanctioned in 2016 for violating money-laundering rules by failing to carry out checks into transactions and business relationships relating to the 1MDB sovereign fund, registered in Switzerland, Singapore and Hong Kong.

The Swiss Federal Court has rejected an appeal by Falcon Private Bank against “illegally generated profits” that Switzerland’s financial watchdog seized from the bank in 2016. The CHF2.5 million ($2.56 million) is linked to the Malaysian 1MDB scandal.

In a decision published on Friday, the court said it had ruled in favour of the Swiss Financial Market Supervisory Authority (FINMA) over “illegally generated profits” it ordered to be surrendered in 2016.

Falcon was accused of seriously violating money-laundering rules by failing to carry out background checks into transactions and business relationships relating to the 1Malaysia Development Berhad, or 1MDB sovereign fund, registered in Switzerland, Singapore and Hong Kong.

After an appeal by Falcon, the Federal Administrative Court reduced the amount confiscated to CHF1.7 million in April 2018. Judges said the bank could deduct general management fees from the confiscated earnings.

On Friday, Switzerland’s highest court annulled this decision and insisted on the full amount to be handed over. It said the purpose of confiscating assets obtained in violation of existing rules was to impose a legal order and to prevent such offences from being profitable.

It said FINMA had a certain discretionary power regarding the amount that could be confiscated.

Money-laundering probes

1MDB is at the centre of money-laundering investigations in at least six countries, including Switzerland, Malaysia and the United States.

The US Department of Justice has said an estimated $4.5 billion was misappropriated from 1MDB, founded by former Malaysian Prime Minister Najib Razak, who is on trial accused of pilfering millions of dollars from the fund.

Switzerland is investigating six people on suspicion of money laundering, bribing foreign officials and other offences as part of an investigation into the Malaysian state fund, the Swiss Attorney General’s office said last year.

The Monetary Authority of Singapore (MAS) has previously ordered Falcon’s Singapore branch to cease operating because of “a persistent and severe lack of understanding” of Singapore’s money-laundering controls. It also accused Falcon’s senior management in Switzerland and Singapore of “improper conduct”.

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