KINIGUIDE | First it was BSI Bank. Then came Falcon Private Bank.
One after another, Swiss prosecutors are putting banks under scrutiny over the 1MDB scandal.
On Wednesday Oct 12, the Swiss attorney-general’s office (OAG) announced that it was initiating criminal proceedings against Falcon, after doing the same with BSI on May 23.
The Singaporeans had also acted, with the Monetary Authority of Singapore (MAS) ordering Falcon to close its Singapore unit and pay a S$4.3 million (US$3.11 million) fine.
In this instalment of KiniGuide, we take a look at Falcon and how it got into so much trouble.
What is Falcon Private Bank?
Falcon Private Bank is a bank providing financial services to high net-worth individuals, and it is headquartered in Zurich, Switzerland.
According to its website, it was established as Ueberseebank in 1965, but was renamed AIG Private Bank in 1998 when it was owned by the American International Group (AIG).
The bank was bought over by the Abu Dhabi sovereign wealth fund International Petroleum Investment Company (IPIC) in 2009, and was subsequently renamed Falcon Private Bank.
Besides Singapore and Zurich, the bank also has offices in Abu Dhabi, Dubai, and London.
It is not to be confused with a Texas-based bank of a similar name, which is unrelated to Falcon International Bank.
What exactly are the Swiss investigating?
The Swiss Office of the Attorney-General (OAG) had been investigating the 1MDB scandal since Aug 14 last year, starting with two unnamed 1MDB officials.
According to an Oct 5 press release this year, “The criminal proceedings being conducted by the OAG focus primarily on misappropriation from the 1MDB sovereign fund of monies intended for investment in the Petrosaudi, Tanjung/Genting and Admic (Abu Dhabi Malaysia Investment Company) projects, as well as the misappropriation of investments in the SRC sovereign fund in the area of natural resources.”
Meanwhile, the Swiss Financial Market Supervisory Authority (Finma) are investigating a total of six banks over the scandal, including Falcon, for potential breaches in financial and anti-money-laundering regulations in Switzerland in relation to the 1MDB scandal.
How did Falcon Bank get involved?
According to Finma, Falcon had several business relationships with a number of 1MDB subsidiaries, and executed US$2.5 billion on behalf of two of these companies. All told, a total of US$3.8 billion in assets associated to 1MDB had been moved through Falcon.
Finma also made mention of a ‘young Malaysian businessman’ who is supposedly a client of the bank and has links to individuals in Malaysian government circles. The person was not named in the press release, but his government ties would have qualified him as a ‘politically exposed person’ (PEP) and should have been subjected to extra scrutiny by the bank.
Where did things go wrong for Falcon?...