KINIGUIDE The 1MDB saga has left a trail destruction across three continents, with key corporate and banking figures having to resign, bankers charged and accounts frozen.

However, the biggest casualty to date is BSI Bank, which faces criminal proceedings for, among others, failing to adhere to anti-money-laundering regulations in handling transfers linked to 1MDB.

An international investigation, primarily led by Swiss and Singaporean authorities, has unravelled the 143-year-old bank.

Malaysiakini looks at the significance of these developments and BSI’s role in the 1MDB saga.

About BSI

Banca della Swizzera Italiana, or BSI, was founded in 1873.

It began an international expansion in 1969 and spread its wings to Hong Kong in 1981 and later Singapore in 2005.

According to BSI’s 2015 annual report, it had 1,256 employees in Switzerland and 656 employees outside the country, with 310 in Asia.

It is currently owned by Grupo BTG Pactual but is in the process of being acquired by EFG International for 1.33 billion Swiss franc. The amount is expected to be lesser following regulators’ action against BSI.

The unmaking of BSI

Even before Swiss and Singapore authorities hammered the nail into BSI’s coffin, the bank was already disintegrating as the 1MDB probe gained momentum.

Last month, Bloomberg reported that several senior employees had left BSI Singapore, including committee members who vetted major clients during 1MDB's time as well as its head of compliance.

The chief operating officer for BSI’s Asia operations, Gary Tucker, had also left the bank, while BSI’s head of Asia operations, Hanspeter Brunner, announced his retirement.

But the most devastating blow came when Singapore on Tuesday ordered BSI Bank in the city state to be shut down.

It was the first such action by Singapore authorities in 32 years.

Switzerland’s financial regulator, the Swiss Financial Market Supervisory Authority (Finma) also ordered similar action, approving EFG International’s complete takeover of BSI.

This was on condition that BSI will be dissolved within 12 months through its integration into EFG International.

What did BSI do wrong?

Both Switzerland and Singapore authorities have released general statements on BSI’s offences, which have been short on specifics.

In Switzerland, Finma concluded that BSI was in serious breach of the statutory due diligence requirements in relation to money laundering and serious violations of the principles of adequate risk management and appropriate organisation.

In Singapore, authorities found BSI to be in “serious breaches of anti-money-laundering requirements, poor management oversight of the bank's operations and gross misconduct by some of the bank’s staff.”

These were in context of investigations linked to 1MDB.

Connecting the dots

Prior to the investigations initiated by Swiss and Singapore authorities, whistleblower portal Sarawak Report had highlighted the role of BSI in the diversion of 1MDB's funds.

It started with the US$1.83 billion which 1MDB had channelled overseas for its joint-venture activities with PetroSaudi International between 2009 and 2011.

This is the same amount that Bank Negara later ordered 1MDB to repatriate, which the Malaysian fund had failed to do and for which it was fined.

Of this sum, US$1.03 billion did not go to the joint-venture. It was instead diverted to Good Star Limited’s account at RBS Coutts in Zurich, whose beneficiary owner is Penang-born billionaire Jho Low.

Here is where BSI comes in.

More than half of the diverted sum, or US$529 million, was transferred to Abu Dhabi Kuwait Malaysia Investment Corporation’s (BVI) account at BSI Singapore between June 28, 2011 and Sept 4, 2013. The beneficiary owner was also Jho Low.

Sarawak Report, based on leaked Singapore investigation papers, had as early as April last year reported that Jho Low controlled at least 45 bank accounts at BSI under various company names.

These revelations appeared consistent with the findings of Finma which noted: “In the context of the 1MDB case, the bank (BSI) failed to adequately monitor relationships with a client group with around 100 accounts at the bank.”

It said funds were moved within these accounts without proper justification.

Coincidentally, 1MDB’s subsidiary Brazen Sky Limited also banked with BSI where its US$1.1 billion in ‘fund units’ was held.

Furthermore, Singapore court proceedings showed that SRC International, a former subsidiary of 1MDB, also had its accounts at BSI.

BSI banker Yeo Jiawei was charged for allegedly signing a fraudulent reference letter in the name of BSI to Citigroup Inc's head of anti-money laundering to facilitate the transfer of US$11.95 million from SRC International to Equity International Partners Limited.

The beneficiary owner of Equity International Partners Limited was Tan Kim Loong, an associate of Jho Low and also the original beneficiary of Tanore Finance that funnelled US$681 million to Prime Minister Najib Abdul Razak’s personal bank accounts.

Singapore prosecutors described this component as a “new front” in its investigation but it is unclear how it is linked to Jho Low’s movement of US$529 million into, within and out of BSI.

Information disclosed to the public is likely just a small portion of the investigations but more details are expected as court proceedings in Switzerland and Singapore commence.

Is this the end of the 1MDB saga?

On the contrary, it is just the beginning.

Sarawak Report claimed that the US$529 million in Jho Low's account in BSI was cleared out of BSI Singapore and was believed to have been moved to Hong Kong.

It is unclear which financial institution it went to. Hong Kong authorities have acknowledged an investigation but little information has been provided so far.

Finma is also reportedly looking into RBS Coutts, from which the US$529 million came from before it entered BSI’s system.

Furthermore, other banking institutions are also expected to be in the line of fire.

One key institution is Falcon Private Banking, which Tanore Finance used to transfer US$681 million (often referred to as RM2.6 billion) into Najib’s AmBank account.

Sarawak Report claimed that US$650 million of this money was transferred back to Tanore Finance’s account at Falcon Private Banking in Singapore on Aug 30, 2013.

Interestingly, EFG International, which is set to take over BSI, had also acquired Falcon Private Bank's Hong Kong arm for 800 million Swiss francs from Aabar Investments PJS in 2014.

This KiniGuide was produced by Nigel Aw.