Details Emerge Of Further Fines Against Bankers Over 1MDB

Details Emerge Of Further Fines Against Bankers Over 1MDB

The Swiss paper Tages Anzeiger has reported on further penalties over 1MDB handed out by the Swiss authorities, this time against two bankers responsible for waving through the $700 million stolen by Jho Low during the first so-called ‘joint venture’ investment into the bogus oil company PetroSaudi.

According to the paper’s research division the penalties were handed out in September and they have now got the details of the findings of the financial investigation by the authority FINMA, which exposes how the bank ignored glaring red signals over Jho Low, including his changing tales about what the money was for.

New insights include the information that shortly after opening the account in September 2009 Jho apparently paid 1MDB executive Casey Tang (who also had an account with Coutts) $1.7 million just before Casey took on the role on behalf of 1MDB of assuring the bank all was well with the payment to Jho’s shell company, Good Star Limited (Seychelles).

Apparently, these key oversight professionals saw nothing to worry them in that – others might have seen the potential of a big, fat bribe. Yet, even when a senior member of the bank’s legal department issued his own huge concerns – “I have a very bad feeling and do not rule out that we have a total fake up” – they decided to overrule recommendations to block the account.

Jho also came up with the excuse that the payment to Good Star Limited from 1MDB was  for it to perform an ‘Asset Management’ role for the fund. Yet, Good Star Limited was nothing more than a mailbox company in the Seychelles and when interviewed the Coutts managers observed that Jho Low exhibited a poor understanding of the asset management business.

Worse, shortly after Jho altered the entire reason for the money, calling it a loan instead.  Then, a few months later, Jho came back to process a further $330 million of transfers from 1MDB, but in his correspondence he described 1MDB as the borrower and not his company.

The bank had justified allowing this irregular activity concerning such vast sums of money to continue on the basis that the money was not being invested in personal items for Jho…. except it was plain it was:

As of June 2010, Low had paid $ 35 million directly from his Zurich account for private pleasure – private jets and yachts, casino visits to Las Vegas or Macau. Even before, Low managed to finance his luxury excesses with money from Zurich, simply by taking a short detour.

It was only shortly after Sarawak Report exposed the whole sham early February 2015 that the bank finally started a full investigation, by which time the money had been moved out to BSI Singapore and the two bankers had moved to other jobs.  Just eight weeks later, on 29 March 2015, RBS sold Coutts International to Union Bancaire Privée (UBP) for an undisclosed figure.

The two bankers received a few thousand in fines and one has been banned for their extraordinary ‘negligence’ in allowing a theft that deprived Malaysians of billions of expensively borrowed money in the name of development.

However, if that seems a slap on the wrist for what some might see as criminal lack of oversight, consider the continuing failure to further the case against the two operatives from PetroSaudi itself who both received fat multi-million dollar payments out of that same Good Star account, namely Director Tarek Obaid and his management colleague Patrick Mahony.

Follow the green line to see how payments went from Good Star to Obaid and Mahony's private accounts in late 2009

Follow the green line to see how payments went from Good Star to Obaid and Mahony’s private accounts in late 2009

Still at large - the front men at PetroSaudi have been investigated by Swiss prosecutors over multiple charges for months

Still at large – the front men at PetroSaudi have been investigated by Swiss prosecutors over multiple charges for months

Read the article in translation:

How the bankers failed in the 1MDB scandal

The federal government has lost two Zurich banking professionals because they did not report dirty money. The episode provides a rare insight into a huge money laundering operation

Christian Brönnimann, Zurich
[translated]

Stealing billions from a treasury requires three things: influential friends, unscrupulous lies, and willing bankers who do not want to know exactly where their customers’ money is coming from. Thus, Malaysian businessman Jho Low succeeded in bringing unimaginable sums of money from a sovereign wealth fund under his control – thereby leading a life of absolute luxury.

The consequences are devastating. With the hundreds of millions that Low squandered, it would have been possible to build much-needed hospitals or schools in the poor areas of Malaysia. But instead of flowing into the country’s development, the money from the Malaysian state fund 1MDB went to exclusive parties with stars like Paris Hilton or Miranda Kerr, for penthouses, yachts and private jets – and even for the Hollywood movie “Wolf of Wall Street”. with Leonardo DiCaprio.

$ 4.5 billion was stolen from the sovereign wealth fund, according to the investigators, maybe more. Swiss banks played a central role.  Over 7 billion dollars from 1MDB flowed through accounts in Zurich and Lugano – a large majority, illegal, says the Federal Prosecutor.

How is it possible that nobody stopped it?

The research desk of Tamedia has gained access to a criminal decree of the Federal Department of Finance of last September. It is directed against a management employee of the former Coutts Bank in Zurich. The 50-page document shows in detail how Jho Low managed to smuggle the first 700 million through Switzerland. It is a rare, in-depth look into the center of a massive money-laundering operation where Coutts executives brushed away all doubts about Jho Low’s dealings. No less than ten red traffic lights hit the Swiss bank.

1. The miraculous rain of money
When Jho Low opened an account at Coutts in mid-2009, he was 28 years old and a blank slate. He claimed that over the next few years there would be about $ 10 million in the account. Yet at the end of September 2009, the sovereign wealth fund 1MDB suddenly transferred $ 700 million.

Low did not hold the account not in his name, but in that of a mailbox company in the Seychelles. He submited to the bank a contract between the latter and the sovereign wealth fund. It stated that 1MDB used the letterbox company as an asset manager. A strategy of the sovereign wealth fund is to invest a lot of money. On the other hand, according to the contract, the fund wants to help the Seychelles firm fulfill its purpose as an alleged asset manager.

Sounds dodgy, thought Coutts and locked the account of the Seychelles company. But three days later, the bank unlocked it after a meeting with Jho Low. Coutts anti-money laundering chief Daniel Meier wrote in an e-mail saying there was enough evidence that the payment was “true and valid” – correct and valid.

2. The legal service warning
On October 7, an experienced member of the Coutts Legal Department countered. In an alarming e-mail they stated: “The set-up is anything but plausible.” The 28-year-old Low took over total control of the money, which was not necessary for asset management. “I have a very bad feeling and do not rule out that we have a total fake up.”

A second meeting between Coutts bankers and Jho Low in Zurich took place on October 9th. After that, Meier wrote in a report that Low had displayed poor knowledge of the wealth management business. Nevertheless, there is basically no reason to doubt his explanations.

3. Oral explanations – but no documents
On October 28, Jho Low returned to Coutts Bank in Zurich. This time he is accompanied by a 1MDB director. Orally he explaine to Meier and his supervisor, Reto Schärer, that everything was alright with the money. But they did not produce documents that would confirm that. “In the end, we did not receive everything we initially wanted,” says Daniel Meier years later during an investigation by the Swiss Financial Market Authority Finma. The 1MDB Director ultimately “confirmed for a short time that he knew about the set-up and was in agreement”.

In the e-mail of October 7, the legal service had previously warned: “We have to verify the case”, but not “with the representatives of us” presented by 1MDB. Because these might have embezzled the money.

4. The bribe for the sovereign wealth fund director
If Meier and Schärer had looked a little closer – they would have the decisive hint at the latest now that they have to pull the rope immediately. The 1MDB director who met them at the third meeting also had an account with Coutts. In August 2009, Jho Low transferred $ 1.7 million to this account – just weeks before the first $ 700 million went from the sovereign wealth fund to Low.

5. The warning from Singapore
The Coutts branch in Singapore also had Jho Low accounts. Mid-November 2009, local bankers informed their colleagues in Zurich that they suspected Low of money laundering, among other things, because of high payments for casinos and jewelry. Therefore, a message had been sent to the Singapore authorities. The consequences in Zurich: none. “We believed that we had a better understanding of our customers than those in Asia,” explained Daniel Meier years later during the Finma investigation.

6. A new justification for the 700 million
In January 2010, the following curiosity: Jho Low replaced the original justification for the 700 million transfer. On a paper he now forwarded to Coutts, his Seychelles firm was no longer described as an asset manager. Instead, he claimed it had received a 700 million loan from the sovereign wealth fund. This step was apparently agreed with the two Coutts executives. “The customer is cooperative and delivers as promised,” wrote Meier to Schärer.

7. Reverse Parties
But then Meier fell on a hurdle. The loan agreement contained a capital error. The parties were reversed. On paper, Low was lending the 700 million to the sovereign wealth fund. Meier asked the young man to correct that. From “our discussions” he understood that it should be the other way around, he writes Low on January 26, 2010 by e-mail. It then took almost a month for Low to file a new version of the loan agreement with exchanged contractors.

8. First media reports
At the end of January 2010, Coutts Singapore again raised the alarm. Bank employees had discovered the first newspaper reports on Low. This is primarily about its lavish spending behavior in the nightclubs of New York. The “mysterious Malaysian” had left tens of thousands of dollars in a few weeks for parties and alcohol. “No one spends his own money like that,” the “New York Post” quotes a connoisseur of the scene.

“I feel very uncomfortable with this guy,” wrote a Coutts customer advisor in Singapore in an e-mail that she forwarded to Meier and Schärer in Zurich. Then the thing went to the very top. The bank’s CEO personally participated in a teleconference between Coutts Zurich and Coutts Singapore in early February. It was noted they must be more careful with the private transactions of Low over at the Singapore branch. In Zurich they decided they could continue driving as before. Because there was no such private expenditure.

9. The private expenses
But that was not the case. As of June 2010, Low had paid $ 35 million directly from his Zurich account for private pleasure – private jets and yachts, casino visits to Las Vegas or Macau. Even before, Low managed to finance his luxury excesses with money from Zurich, simply by taking a short detour.

Between October 2009 and October 2010, Low had more than half of the $ 700 million transferred to a US law firm. Amongst other things, he bought a five-star hotel in California for $ 45 million, several luxury apartments in New York and a private jet.

Further high amounts of money from Zurich ended up in accounts at other low-cost banks, with Low’s business partners – and even with the then Prime Minister of Malaysia, Najib Razak, who is currently in Kuala Lumpur. For the production of the Hollywood strip “Wolf of Wall Street” flowed 10 million.

10. Eliminate traces
In 2011, the sovereign wealth fund 1MDB would once again transfer $ 330 million to Low’s Coutts account in Zurich. In September 2013, Low requested the immediate closure of the account – and a confirmation that all account files had been destroyed that do not need to be kept.

In February 2015, the online portal “Sarawak Report” began to expose the 1MDB scandal. Only now did Coutts submit a money laundering report. Meier and Schärer were already working with the competition. Shortly afterwards it was announced that Coutts would disappear from Switzerland. In 2017, Finma sanctioned Coutts for serious violations of anti-money laundering rules and collecting unlawfully earned profits of 6.5 million Swiss francs.

Last September, the finance department also fined Meier and Schärer. Because they did not fulfill their obligation to report suspected money laundering to the authorities. Schärers penalty is final. Meier has recurred. Neither want to comment on this article. Their negligence has been instrumental in helping Low and his accomplices steal billions from the Malaysian people. Schärers fine is 13,000 francs.

The Financial Market Authority Finma has found serious violations of the anti-money laundering regulations by the banks BSI, Falcon, Coutts, Rothschild and J. P. Morgan and has also complained to UBS and Credit Suisse. The collection of unlawful profits was the largest at BSI with 95 million francs.

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