JPMorgan Reprimanded by Swiss in 1MDB Money-Laundering Case

(Bloomberg) -- Switzerland’s financial regulator will conduct a detailed review of JPMorgan Chase & Co.’s anti-money laundering controls after finding the bank seriously breached regulations in its dealings with Malaysian sovereign wealth fund 1MDB.

The regulator, which undertook enforcement proceedings between May 2016 and June 2017, uncovered “serious shortcomings" in connection with relationships and transactions associated with 1MDB, though stopped short of fining the U.S. bank, the Swiss organization known as Finma said in a statement Thursday.

Regulators and prosecutors in the U.S., Singapore and other jurisdictions have investigated how banks were used to funnel money from alleged corruption at 1Malaysia Development Bhd., which has denied wrongdoing. Switzerland in February fined Coutts & Co. Ltd. for violating money-laundering rules and illegally profiting from transactions associated with 1MDB, while Singapore’s central bank in May imposed financial penalties amounting to S$1.6 million ($1.2 million) on Credit Suisse Group AG and United Overseas Bank Ltd.

JPMorgan in particular failed to properly identify money laundering risks related to cash flows between business and personal accounts, the regulator known as FINMA said. It has appointed a monitor to review the bank’s controls on an ongoing basis.

Cash Flows

In one case, JPMorgan credited "hundreds of millions" of U.S. dollars from 1MDB, allegedly earmarked for the purchase of a company, to the personal account of an individual with close ties to a business partner of the sovereign wealth fund, Finma said. The bank also accepted incomplete or inconsistent information from clients without examining it further or documenting it, the Swiss regulator said.

“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,” Jason Lobo, a spokesman for the bank, said in a statement.

Finma is not initiating enforcement proceedings against any individuals, nor imposing any financial penalties or business restrictions on JPMorgan, it said.

Finma has brought a total of seven cases in Switzerland in relation to 1MDB, one of which remains open, it said, without giving further information. A case against UBS Group AG was closed earlier this year and the bank, Switzerland’s largest, was reprimanded with no further action to be taken.

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