Another Private Bank Braces Itself For "Penalties And Sanctions" Over 1MDB

Another Private Bank Braces Itself For "Penalties And Sanctions" Over 1MDB

The Swiss branch of Coutts Bank, known popularly in the UK as ‘The Queen’s Bank’, has acknowledged in its recent submissions to the London Stock Exchange that it has been cooperating with the Swiss financial authority FINMA and other international regulators over its involvement in the 1MDB affair and expects a judgement shortly.

The bank has told shareholders that it may face “penalties and/or regulatory sanctions” for its role in the affair.

Coutts first disclosed that it was under investigation in April, as reported in the Financial Times. The bank said that it was cooperating not just with the Swiss, but with investigators from other jurisdictions also.

The Malaysian economics writer Ganesh Sahathevan picked up on their updated announcement at the end of last week. In its latest filing Coutts stated:

“As previously disclosed, the Swiss Financial Market Supervisory Authority (FINMA) is taking enforcement proceedings against Coutts & Co Ltd (Coutts), a member of RBS incorporated in Switzerland, with regard to certain client accounts held with Coutts relating to allegations in connection with the Malaysian sovereign wealth fund 1MDB. The proceedings are at an advanced stage. Coutts is also cooperating with investigations, one of which is at an advanced stage and may conclude in the near term, and enquiries from authorities in other jurisdictions in relation to the same subject matterThe outcomes of such proceedings, investigations and enquiries are uncertain but may include financial penalties and/or regulatory sanctions.

No evidence of wrongdoing by 1MDB or PetroSaudi?

Central role? Hanspeter Brunner was head of Coutts Singapore at the time of the $700 m transfer.... before moving to BSI where he took on 1MDB and Jho Low's accounts.

Central role? Swiss banker Hanspeter Brunner was head of Coutts Singapore at the time of the $700 m transfer…. before moving to BSI where he took on 1MDB and Jho Low’s accounts.

The role of Coutts in the 1MDB money laundering scandal was first reported by Sarawak Report together with the Sunday Times in February last year, making it the first bank to be identified in the 1MDB scandal.

Since then several other banks have been investigated for their roles in funnelling the stolen billions, including BSI, which has now been shut down as a result and Falcon Bank, now facing prosecution for systemic failures to prevent money laundering.

Coutts originally received the first $700 million dollars diverted out of the fund via its initial so-called joint venture with the then minor oil company PetroSaudi in September 2009. A subsequent $330 million was later also sent directly to the same account in the name of the Seychelles based company Good Star Limited in 2011, making a total of $1.03 billion stolen through Coutts.

Tim Buckland - ex-White & Case lawyer who claimed PetroSaudi owned Good Star Limited.... then became a director of PetroSaudi

Tim Buckland – ex-White & Case lawyer who claimed PetroSaudi owned Good Star Limited…. then became a director of PetroSaudi

As Sarawak Report has detailed, the Good Star account with Coutts Zurich was set up just a couple of days before the transfer which finally banked on October 2nd.  Compliance officers at the bank originally approached to handle the money, which ironically was BSI, had rejected the deal on grounds of its suspicious circumstances.

Email correspondence shows that Good Star Limited was failing to give full details of its beneficial ownership to the banks, which ought to have precluded the acceptance particularly of such an enormous sum of money.

Nevertheless, after heavy pressure from 1MDB’s CEO, Shahrol Halmi, Coutts agreed to accept the deal, as did 1MDB’s own banker in this transaction, Deutsche Bank KL.

PetroSaudi still claiming ownership of Coutts account

Sarawak Report identified the actual beneficial owner of Good Star Limited at the time of that  original report as being the Malaysian financier who was acting as a proxy for Najib Razak at 1MDB, Jho Low.

We confirmed the details of his shareholding later last year and these were substantiated by the United States Dept of Justice in its court filing on the seizure of 1MDB’s stolen assets in July of this year.

Nevertheless, the 1MDB joint venture partner PetroSaudi and its lawyers continue to assert that it is the owner of Good Star Limited.

It was a claim which the British and Geneva based company made from the start, including in legal documents passed to 1MDB and to relevant banks at the time of the original transfer, when it argued that the $700 million payment was a repayment of a ‘loan’ owed to PetroSaudi.

See Email from PetroSaudi’s legal team at White & Case, London:

From: Yong, Jonathan [mailto:[email protected]]
Sent: Wednesday, September 30, 2009 3:17 AM
To: Chia, Brian; Lim, Jo Yan
Cc: Buckland, Timothy; Broke, Philip; Reynolds, John; Rimmer, James; [email protected]; Shahrol Halmi; Casey Tang; [email protected]; KL, Filing Asst16 AAR
Subject: Funding/ Completion Instructions and Documentation
Importance: High

Dear Brian and Jo Yan,

Ahead of tomorrow’s funding and completion, please refer to the below points and the attached files.

  1. Bank Account Details

(a) Account details for payment of 300,000,000 USD (to be paid into the account set up with J P Morgan (‘JPM’)  in the name of 1MDB PetroSaudi Limited (the ‘JV Company’)

Pay to:                   Chase Manhattan Bank New York
ABA:                      021000021
Swift:                    CHASUS33
Account:                  001-1-008182
In favour of:             J.P.Morgan (suisse) SA
Swift:                    MGTCCHGG
Reference:                For further credit to account 7619400

(b) Account details for payment of 700,000,000 USD to an account in the name of PetroSaudi International Limited (Saudi)

To:                       J P Morgan Chase Bank, New York, USA.
ABA:                      21 000 021
Swift:                    CHASUS33
Account:                  544-7-44876
In favour of:             RBS Coutts Bank Ltd
Swift:                    COUTCHZZ
Reference:                For further credit to account 11116073

This central claim that account number 11116073 at Coutts belonged to PetroSaudi has been detailed as a lie in the 136 page Dept of Justice report and conflicts with every known aspect of the case.

PetroSaudi Director Tarek Obaid holds a Swiss as well as a Saudi passport and has continued to frequent Geneva without arrest over the past year

PetroSaudi Director Tarek Obaid holds a Swiss as well as a Saudi passport and has continued to frequent Geneva without arrest over the past year

The Director and Shareholder of PetroSaudi, the Swiss/Saudi passport holder Tarek Obaid has continued to make this claim, despite the copious evidence showing it to be untrue.

A letter signed by Obaid sent to 1MDB in May of last year, which was in turn presented to the Auditor General and to the Public Accounts Committee, stated again clearly that PetroSaudi was the sole shareholder of the company:

Tarek Obaid continues to claim he owned Good Star

Tarek Obaid continues to claim he owned Good Star

Moreover, lawyers acting for PetroSaudi have continued throughout the year to claim to the international press that Good Star was a subsidiary of its group.

Email trails covering the final payment of the $700 million, which took place on October 2nd, in fact confirm that Jho Low was supervising the transfer, whilst Shahrol Halmi and PetroSaudi dealt with compliance at the banks. The final comment on emails between the parties was from Jho Low telling PetroSaudi’s Patrick Mahony to inform Tarek Obaid that the money would shortly be going through – “Should be cleared soon” he told them:

Jho Low "

Jho Low “Should be cleared soon”

The grounds on which Coutts Zurich stand most culpable in this matter is their apparent acceptance of the lightening fast transaction for $700 million from 1MDB without obtaining the actual name of the beneficial owner of Good Star and without establishing Good Star’s claimed relationship to PetroSaudi.

Neither, clearly, did the bank obtain sufficient proof that the transfer had been approved at Board level by 1MDB, because in fact records show that the Board had specifically refused to pay the money into anything but the Joint Venture account and had not been informed of any “loan repayments” by this date.

The fact that the bank is now being investigated over these 1MDB transactions and says it is braced for penalties indicates that it accepts that the deal was fraudulent, the money stolen and that it failed in the necessary compliance on the deal.

Why has PetroSaudi yet to be prosecuted for fraud?

PetroSaudi Director Patrick Mahony continues to claim he was innocent of fraud

PetroSaudi Director Patrick Mahony continues to claim he was innocent of fraud

In which case, Sarawak Report believes Malaysian are entitled to ask why the company Directors of PetroSaudi and their lawyers have themselves yet to be prosecuted for fraud in the context of their blatant complicity in this case?

Research by Sarawak Report indicates that the transaction by Coutts was facilitated thanks to Jho Low’s contacts at their Singapore office, managed by the Swiss national Hanspeter Brunner, now sacked from BSI and under investigation for his later dealings with more of money stolen from 1MDB.

Good Star had been incorporated in the Seychelles a few months earlier in 2009, citing Coutts Singapore as its ‘principle client’.  This raises the observation that staff at a very senior level at Coutts, namely Hanspeter Brunner in Singapore, were aware that the actual owner of Good Star was the politically connected Mr Low and not PetroSaudi. And yet they approved the deal.

Hanspeter Brunner left Coutts in just a matter of weeks following the Good Star transfer, removing himself and 90 staff to BSI (one of the largest walkouts in Asian banking history). At BSI he continued to do business with Jho Low, opening numerous accounts for himself, his companies, 1MDB and its subsidiary SRC.

Furthermore, the money from Coutts Zurich was by 2014 largely all transferred to Jho’s accounts at BSI in Singapore.

Despite, these actions Coutts, like BSI, failed to report the suspicious activity and indeed took receipt of the further $330 million transfer from 1MDB into the very same account, this time allegedly to fund ventures by “1MDB BVI”.

Once again PetroSaudi acted as a front, pretending to borrow money for a deal which then went straight to Jho Low

Once again PetroSaudi acted as a front, pretending to borrow money for a deal which then went straight to Jho Low

Throughout this unravelling of the PetroSaudi deal and despite the prosecution of a growing number of banks for their negligence in preventing such monster theft and fraud, PetroSaudi itself has aggressively denied any wrongdoing on its part, threatening press with libel actions and accusing Sarawak Report of corruption, fraud and madness.

For months the directors of the company claimed they were not under investigation and had not been questioned over possible wrongdoing on their part.  After Sarawak Report obtained proof from their own admission that they have in fact been extensively questioned the same Directors have claimed they were questioned and then cleared.

Kept in the dark? President of PetroSaudi and Chairman of MasterCard Global, Rick Haythornthwaite told SR "even if I were to be in possession of information relevant to your query, I would be unwilling to assist you in your questionable activities”

Kept in the dark? President of PetroSaudi and Chairman of MasterCard Global, Rick Haythornthwaite told SR “even if I were to be in possession of information relevant to your query, I would be unwilling to assist you in your questionable activities”

Yet, Tarek Obaid himself has not been able to deny that he received an $85 million “brokerage fee” from Good Star Limited, the company he claimed to own, just days after the $700 million PetroSaudi deal.

On the same day he received a further $20 million from another Jho Low company, Acme Time in Singapore (totalling exactly 15% of the total amount siphoned off by Jho Low using his own company as a front).  $33 million of that money was then passed on to fellow director Patrick Mahony.

Sarawak Report therefore suggests that it is high time that the Swiss authorities and the British authorities initiated formal proceedings for fraud against these two Directors and their colleagues in the joint Swiss and British based company and confiscated their assets obtained using 1MDB’s  stolen money.

Any findings of misdemeanours against Coutts, after all, can only be read as confirmation of PetroSaudi’s guilt and lies.

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