Swiss financial watchdog FINMA said on Thursday the Swiss subsidiary of U.S. bank JPMorgan had committed serious anti-money laundering breaches in relation to Malaysian sovereign wealth fund 1MDB.
The case adds to the political storm that has raged for more than two years over the scandal at 1Malaysia Development Berhad (1MDB), the focus of money-laundering investigations in at least six countries including Singapore, Switzerland and the United States.
Malaysian Prime Minister Najib Razak, who chaired 1MDB’s advisory board, has denied any wrongdoing.
The case has already swept up Swiss private banks Edmond de Rotschild, BSI and Falcon; the international arm of the British queen’s bank Coutts, and big banks UBS and Credit Suisse.
“Enforcement proceedings conducted by FINMA between May 2016 and June 2017 uncovered serious shortcomings in the anti-money laundering controls of J.P. Morgan (Switzerland) Ltd in connection with business relationships and transactions associated with the allegedly corrupt Malaysian sovereign wealth fund 1MDB,” FINMA said in a statement.
The ruling, which imposed a monitor on the bank but did not involve any monetary penalties or business restrictions, had not been appealed and was final, FINMA said.
The bank had failed to identify heightened risks in some instances, FINMA said, while in others it failed to adequately manage risks after identifying clients as politically exposed persons requiring special scrutiny.
“The bank failed in particular to identify the money-laundering risks relating to cash flows between business accounts and personal accounts,” the supervisor said.
“In one case, it credited hundreds of millions of U.S. dollars from the 1MDB sovereign wealth fund, allegedly earmarked for the purchase of a company, to the personal account of an individual with close ties to a 1MDB business partner.”
Part of that money was then transferred to a business account associated with the person, FINMA said, without the bank having questioned the purpose or procedure behind the transactions or the substantial sum that stayed in the private account.
JPMorgan said the findings arose from activities which had since been tightened.
“The resolution announced by FINMA relates to matters that took place many years ago in the Swiss private bank, and since that time we have increased training, added staff and made improvements in monitoring and surveillance,” the bank said.
A FINMA-appointed monitor would be carrying out an on-site review of the “appropriateness and functioning” of the bank’s controls, the Bern-based agency said.
FINMA said one of a total of seven enforcement proceedings it had brought against financial groups in relation to 1MDB remained open. It did not name the final bank involved.