The Swiss division of J.P. Morgan “seriously breached” anti-money laundering rules relating to the Malaysian sovereign wealth fund 1MDB, Switzerland’s financial market regulator said Thursday.
The agency, FINMA, said the Wall Street bank’s local unit had “failed to adequately identify” increased money laundering risks linked to the “allegedly corrupt” sovereign wealth fund at the center of a massive embezzlement scandal.
FINMA said it concluded enforcement proceedings against J.P. Morgan in June, and was not imposing any penalties — in a possible sign that any profits gained by the bank in the alleged breaches were not significant.
J.P. Morgan was the seventh case in the Swiss regulator’s investigation of 1MDB, or 1Malaysia Development Bhd.
FINMA spokesman Vinzenz Mathys declined to identify any institution involved.
Investigators in Singapore, Switzerland, Hong Kong and the United States have been probing allegations that people close to Malaysian Prime Minister Najib Razak stole more than $1 billion from the fund.
In a statement, FINMA said J.P. Morgan had accepted “incomplete or inconsistent information from clients” without looking into or documenting it further, and cited shortcomings in the bank’s monitoring and control system. The Swiss market watchdog said it brought the case to the attention of the U.S. Office of the Comptroller of the Currency, which has overall responsibility for J.P. Morgan.
“The bank seriously breached anti-money laundering regulations by failing to screen adequately transactions and business relationships booked in Switzerland associated with the Malaysian sovereign wealth fund 1MDB and one of its business partners,” FINMA said. The partner was not identified.
It said J.P. Morgan had shown “good cooperation” and had not appealed FINMA’s decision, which is final and binding.
Still, the regulator said it will conduct an “in-depth review” of the bank’s anti-money laundering systems, and has named a “monitor” that will conduct an on-site review of the bank’s controls — focusing on high-risk transactions, notably involving personal and business accounts.
The U.S. Justice Department has said people close to Najib stole billions of dollars, and last year acted to seize more than $1.5 billion in assets it said were purchased by Najib’s relatives and associates using stolen money from 1MDB, a fund intended to promote economic development projects.
Malaysia’s government has said it found no criminal wrongdoing at the fund founded by Najib, who has denied any wrongdoing.