C4, Bersih 2.0 to pursue asset recovery process in Switzerland

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Finma headquarters in Switzerland

The Center to Combat Corruption and Croynism (C4 Center) and Bersih 2.0 highlight that 1MDB’s recent statement on the Swiss parliamentary motion to discuss the repatriation of assets Malaysia is disingenuous, dismissing the claim that any wrongdoing has been conducted over its funds.

All three cases are indeed centred around 1MDB money, and such blatant money laundering should merit deep concern not only by 1MDB, but by the Malaysian public as well.

“If you look at the official press releases put out by Finma (the Swiss regulators) detailing their sanctions over these three banks, they have 1MDB written all over them. So how can 1MDB so casually say that it has not lost any money at all?”
—Cynthia Gabriel, C4 Center

Previously, 1MDB issued a statement that the sum is “a fine by Finma, on certain banks”, and therefore, “it cannot be claimed by 1MDB or the government of Malaysia as the money does not belong to 1MDB”.

However, what 1MDB fails to appreciate is the clear misconduct over the management of 1MDB funds. Initially, the Swiss Attorney General’s Office announced they were investigating a possible US$4bn misappropriation from Malaysia; this laundered money is the basis for the Swiss Financial Market Supervisory Authority (Finma) to sanction these certain banks.

Finma’s sanctioning of BSI Bank had the largest disgorgement of CHF95m amongst the three banks, and ultimately resulted in the dissolution of BSI Bank in Switzerland. Finma gave notice that:

“In the case of 1MDB, [BSI Bank] executed numerous large transactions with unclear purpose over a period of several years… In [one] case, an account was credited with more than US$98m without any effort to clarify its commercial background.”
—Finma press statement, 24 May 2016

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For Falcon Bank, Finma found that members of the board of directors of the bank were directly complicit in initiating the business relationships with 1MDB, and prohibited them from dealing with “foreign politically exposed persons” for three years. Finma publicly stated that:

“Assets amounting to approximately US$3.8bn were transferred to accounts at Falcon and associated with the 1MDB Group during that period… The bank failed to adequately check the background and risk profile of these complex transactions in sufficient depth.”—Finma Press Statement, 11 October 2016

Finally, RBS Coutts had been sanctioned by Finma because they:

“[U]ncovered serious deficiencies in the bank’s anti-money laundering processes for business relationships and transactions associated with the alleged corruption scandal involving the Malaysian sovereign wealth fund 1MDB […] In total, 1MDB-related assets to the value of US$2.4bn were transferred through Coutts accounts in Switzerland.” — Finma press statement, 2 February 2017

In all three press releases, the ‘penalty’ of CHF95m, CHF2.5m and CHF6.5m respectively is always referred to as a “disgorgement of illegally generated profits” or “unlawfully generated profits”. As such, these are profits derived from the illegal movement of 1MDB funds; so it is disingenous for 1MDB to claim that their house is entirely in order.

Federal Councillor Carlo Sommaruga’s parliamentary motion on 13 March was so crucial because it intended to pave the way for the modification of existing Swiss law to enable the restitution of illegal profits rather than directly seized kleptocratic assets, or otherwise the sum defaults into the Swiss treasury.

While the defeat in Federal Council was regrettable, it is hardly the end of the fight.

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The motion was defeated on technical grounds—Swiss Foreign Minister Ignazio Cassis told parliamentarians, while Switzerland had a track record of restituting seized foreign assets, the motion proposed a measure that was too broad, it had to have more details on 1MDB, and the Swiss government thinks it is premature to rule a judgment in order to preserve its doctrine of separation of powers.

“The Swiss government recognises the principle of restitution… the question is still open as the legal procedure is not yet closed… I am quite optimistic that in the end, the confiscation 1MDB shall be restituted to the people.”
—Peter Hug, International Secretary, Swiss Social Democratic Party

It is therefore possible that the motion can come up again at a later, more favourable date. The Swiss government has historically restituted at least a total of US$1.7bn, inclusive of kleptocratic assets returning to Nigeria (CHF$321m) and to the Philippines (CHF683m).

Meanwhile, C4 Center and Bersih hope to continue to support the asset recovery process by sending an “amicus curiae” submission to the Swiss Federal Courts. An amicus curiae (literally, “friend of the court”) is someone who is not a party to a case and is not solicited by a party, but who assists a court by offering information that bears on the case. The decision on whether to admit the information lies at the discretion of the court.

In lieu of leadership in these dire times, C4 Center and Bersih calls on Malaysians to take hope that the fight continues on in our duty to pursue justice against grand corruption and kleptocracy. We will be closely monitoring the upcoming developments in court appeals by the banks in Switzerland.

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Cynthia Gabriel, Executive Director, C4 Center
Shahrul Aman Mohd Saari, Acting Chair, Bersih 2.0

26 March 2018

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