NEW YORK (Bloomberg): An ex-Goldman Sachs and Rothschild banker is standing trial in Switzerland, seeking to overturn a fine over allegations he failed to flag suspicious money flows into the bank from Jho Low (Low Taek Jho), the suspected fraudster at the heart of the 1MDB scandal.
More than a decade since 1MDB exploded, the trial may yet reveal snippets about who knew what about Low and his money. The Malaysian businessman and alleged mastermind behind the broader US$4.5bil defrauding of 1MDB, has never been tried in the case and remains at large.
The man, who can only be identified as L., goes on trial Tuesday (Nov 4) morning at the Swiss Federal Criminal Court in Bellinzona. He was found guilty in 2022 of violating reporting obligations during his time at Rothschild Bank AG by the Swiss Finance Department and fined 150,000 Swiss francs (RM780,000).
Andrea Taormina, L.'s lawyer, said that his client was not responsible for filing suspicious activity reports as that was the job of the money-laundering reporting officer.
"Our client did nothing wrong," Taormina said in a statement. The Finance Department's accusation should be time barred given the penalty was handed down more than seven years after the events occurred and "I am confident that the courts will recognise this."
1MDB was originally intended as a development fund to finance big infrastructure projects and spur economic growth in the country. But instead, Low and his co-conspirators, two of whom were convicted in a Swiss court in 2024, were suspected of using 1MDB as a Ponzi scheme to pay bribes and enrich themselves.
It was in 2009, when L. was still a Goldman Sachs banker, that he introduced Low to people he knew at Rothschild, according to Swiss authorities. Taormina contests that assertion and say it's not an accurate description of the facts.
Two Goldman bankers later became embroiled in a different aspect of the 1MDB scandal and the US bank paid US$2.5bil as part of a 2020 settlement with the Malaysian government over its role.
Spokespeople for Goldman and Rothschild, which has since been rebranded as Rothschild & Co., declined to comment. The Rothschild unit where L. worked was sold by the bank in 2019 and is not a party to the proceedings.
Low was very concerned about "political risk and the desire to avoid being extradited in a worst-case scenario," according to internal emails cited by the Swiss authorities in the indictment. "It was suggested that initial residence be taken up in a country with which Malaysia does not have an extradition treaty – for example, Switzerland."
By 2014, with L. now working at Rothschild, concerns about the origins of Low's wealth were circulating within the bank and had been flagged in a report by a consulting firm hired to look into his background. The report concluded that "any funds held by the subject and any transactions in which he is involved must be the subject of enhanced scrutiny to establish their origins."
But by early 2015, L. reminded two colleagues at Rothschild about the size of the fortune Low and his family had brought to the bank, according to the Swiss.
While L. didn't have a direct incentive to suppress any suspicious activity reports, the Swiss authorities said "it can be assumed that he had at least an indirect incentive to maintain the lucrative business relationships with Jho Low and Larry Low for" Rothschild and "that it was therefore easier for him to let things run their course instead of enforcing the filing of a suspicious activity report."
Finma in 2018 ruled that Rothschild Bank and one of its subsidiaries seriously breached money-laundering rules related to 1MDB, by taking on a client and developing the relationship even though there were indications that money laundering might be involved. Rothschild said at that time that it regretted those breaches and that the bank was strengthening its systems to fight financial crime. – Bloomberg
