The Swiss financial regulator pulled up Rothschild for dealings with the Malaysian 1MDB scandal. The illustrious private bank is one of a swath of Swiss firms with ties to the alleged $4.5 billion graft scheme.
Finma's laundry list of 1MDB violations is long: Rothschild and its trust arm failed to check where assets from a client came from, disregarded signs that the funds were linked to money-laundering and took the money anyway, and told an anti-money laundering authority of the matter much too late, and failed in documenting so-called high-risk transactions.
The financial regulator didn't name the client, but it is almost certainly Jho Low, the AWOL Malaysian financier who is being sought in connection with 1MDB. Last year, Low succeeded in booting Rothschild as a trustee of some of his luxury assets including The Viceroy L'Ermitage Hotel in Beverley Hills, CA, a Bombardier private jet, and a luxury penthouse in the Time Warner Building in New York.
Rothschild, part of the eponymous French-British dynasty which traces its wealthy roots back to the 18th century, had already begun bettering its compliance and money laundering combating practices. The private bank and trust arm, which is run by CEO Laurent Gagnebin, will get an audit agent to oversee whether those are being properly seen through.
Rothschild Regrets
A spokesman for Rothschild acknowledged the sanction, and said the bank regrets the violations. «We constantly strengthen our systems and procedures and are determined to continue to do so to identify and combat the increasingly sophisticated financial crime faced by the industry.
The sanction wraps up an enforcement push of at least three years by Finma, which sanctioned seven banks in all including Credit Suisse, J.P. Morgan, Falcon Private Bank, and Coutts' private bank outside the U.K. for dealing with 1MDB.
Rothschild's is surprisingly mild, considering what bankers had perceived as a hard line on others involved in 1MDB such as Banca della Svizzera Italiana, or BSI: that bank was effectively shut down by Finma – which BSI is fighting – and Singapore's regulator. It is now part of EFG International.
