Regulation  

Queen's bank ordered to pay back 'unlawful' profits

Queen's bank ordered to pay back 'unlawful' profits

The Queen’s bank, Coutts, has been ordered to pay back unlawfully generated profits of 6.5m Swiss francs (£5.2m) by the Swiss authorities.

The Swiss Financial Market Supervisory Authority (Finma) found “serious deficiencies” in the bank’s anti-money laundering processes.

Finma’s investigation related to the bank’s relationship with Malaysian sovereign wealth fund 1MDB and a number of unusually large, “high-risk” transactions processed through one of its accounts.

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In a statement Finma said: “[Coutts] did not follow up on relevant internal information and, despite the existence of substantive evidence, failed to report any suspicions to the Swiss authorities until the spring of 2015.

“Given the inadequacy of the bank’s anti-money laundering controls in this particular case, Coutts was in serious breach of its duty to ensure proper business conduct.”

In 2009 Coutts opened a business relationship in Zurich with a young Malaysian businessman.

When the account was opened, information was provided to the effect that $10m (£8m) would be transferred to it from the account holder’s family assets.

Instead, later that year around $700m (£560m) was transferred to the account from 1MDB.

Finma said the reasons given for this transaction were inconsistent, and some information was changed retrospectively.

It added that the documents presented in support of the transaction contained obvious mistakes.

Between late 2009 and early 2013 numerous high-risk transactions totalling $1.7bn (£1.3bn) were processed through the account.

For example, more than $0.5bn (£0.4bn) was transferred to a domiciliary company belonging to the businessman on the basis of intransparent loan agreements.

Finma said that although Coutts had serious grounds for suspicion due to the unusual transactions from 2009 onwards, it opened a further business relationship with the Malaysian businessman in the summer of 2012.

An RBS spokesman said: “We welcome the conclusion of the Swiss Financial Market Supervisory Authority investigation into our legacy international business, Coutts & Co Ltd.

“We regret any historic failings in our AML processes. Coutts & Co Ltd has progressively and substantially strengthened its AML policies and controls.

“We are in the process of winding-down this Swiss-incorporated business, following the sale of the majority of the assets last year.

“As announced in 2014, this sale reflects the revised risk appetite of RBS and its subsidiaries.”