Singapore
- He was the leader of one of the largest mass defections in private
banking history, with more than 100 staff following him from RBS
Coutts Bank in the thick of the global credit crisis to create a
financial phenomenon in Singapore at a little-known Swiss bank.
Hanspeter
Brunner, together with former deputy Raj Sriram and chief operating
officer Gary Tucker, were the kernel of a plan by BSI, founded in
1873 in Lugano, to build up a $10 billion wealth-management business
serving the burgeoning ranks of Asia’s millionaires.
Brunner,
a veteran Swiss private banker who has spent more than two decades in
Asia, offered his Coutts colleagues an extraordinary lifeboat.
Then-parent Royal Bank of Scotland Group was being bailed out by the
U.K. government, while all around the financial industry was
culling tens of thousands of jobs.
Brunner
knew every banker, analyst, back-office worker and client at Coutts,
according to people familiar with the move. When he went to BSI, even
the pantry lady followed, three of the people said. This wasn’t
just a chance for BSI to grab a few star talents in the cutthroat
world of private banking in Asia, this was a wholesale exodus.
Brunner’s lawyer Ng Lip Chih of NLC Law Asia declined to comment.
The
mass move to BSI Bank Ltd., the Singapore unit, forged a sense of
camaraderie among the defectors and cemented a bond with Brunner, who
managed to negotiate pay increases of as much as 40 percent,
according to the people, who didn’t want to be named because of the
sensitivity of the matter. BSI’s payroll swelled from 30 employees
to 200 within a year, according to a company report.
They
little knew that Brunner was bringing them from one crash to another.
In May, Singapore’s financial watchdog ordered the bank to shut its
operations in the city-state, blasting BSI as the nation’s worst
case of banking misconduct.
The
reason was BSI’s links with 1Malaysia Development, the Malaysian
state investment fund at the center of a series of international
fraud investigations, and wealthy Malaysian financier Low Taek Jho,
known as Jho Low.
A
laissez-faire attitude meant deals were done with insufficient
oversight, according to documents filed in a Singapore state
court by Yak Yew Chee, 1MDB’s and Low’s former wealth
manager. With BSI determined to grow fast, there were cases of deals
happening against the advice of a bank compliance officer, the
documents show.
Brunner
had put in place compliance rules when he built up BSI Bank, but some
of those involved in handling the accounts of Low and 1MDB didn’t
follow the rules, a person with knowledge of Brunner’s actions
said.
“There’s
pressure within banks and industry to get the deal done, but the
reality is that if you get the deal done without compliance checks
that’s going to come back and bite you,” said Andre Jumabhoy, a
former prosecutor and an enforcement lawyer at K&L Gates in
Singapore. “Certainly that would appear to be the case with BSI.”
As
business rolled in from 1MDB and Low, BSI became the custodian bank
of $2.3 billion of investments from the Malaysian fund, according to
a report from a Malaysian parliamentary hearing. Yak and team members
were lauded by Brunner and his bosses in Lugano, who handed out
bonuses as big as S$5.5 million ($3.8 million), according to court
papers filed by Yak.
Brunner,
voted “Outstanding Private Banker Asia Pacific” in 2008 by
Private Banker International, promoted a collegial environment and
built strong personal relationships, according to people who worked
with him. He made a point of walking the floors of the bank at least
once a week to meet and chat with people. He would take groups of
colleagues out for lunch or drinks and invite senior ones to dinner
at his S$8.7 million conservation home near the city’s main
shopping district.
Straits
Chinese
The
house in Cairnhill Road, an old Straits Chinese home, was described
by the real-estate vendor as “like living in the royal palace.”
Brunner filled it with Asian artifacts from his trips around the
region, Persian carpets and fine red wines, according to people who
have been to the house and pictures posted on an architectural firm’s
website. He had traditional Chinese doors installed and hunted down
tiles made in Vietnam.
Former
coworkers described Brunner as a man who celebrated success, often
opening his home to staff for an annual party. Along with the wine,
he collected contemporary Asian art, some of which adorned his
office.
But
as the success mounted, so did the investigations.
‘Biggest
customer’
1MDB
became the subject of probes stretching from the US to Switzerland
over money laundering and corruption allegations where billions of
dollars may have been drained from the fund. Prosecutors began to
raise questions about the millions flowing through BSI and accounts
controlled by Low.
Low
was BSI’s “biggest and most important customer,” Yak said in a
mitigation plea in November after being charged in Singapore with
offenses related to transactions allegedly involving Low. US
prosecutors characterized Low as the controller of an illicit
payments scheme that drained billions from 1MDB. Low has described
his role with 1MDB as informal consulting that didn’t break any
laws.
Calls
to Low’s Jynwel Capital in Hong Kong weren’t answered. He has not
been charged with any offense and 1MDB has consistently denied any
wrongdoing.
In
his mitigation plea, Yak, Low’s former private wealth manager, said
“BSI’s management was always prepared to act on Low’s requests
and give Low the benefit of the doubt.”
A
BSI compliance officer on November 6, 2012, flagged Low’s circular
flow of funds to his father and back to him as “nebulous to say the
least and not acceptable in compliance’s view,” according to
court records filed in Yak’s case. Despite this warning, the
transactions were eventually processed, according to the filing. BSI
spokesman Luciano Crobu declined to comment for this story. Attempts
to contact Low’s father were unsuccessful.
‘Dereliction
of duty’
That
breach was among 41 lapses at BSI uncovered by the Monetary Authority
of Singapore. The regulator slammed BSI for having a “pervasive
pattern of non-compliance” and found “considerable evidence of
gross dereliction of duty.”
Heads
soon began to roll from Brunner’s team. Yak, 58, was given an
18-week jail term and fined S$24 000 after being convicted in
November of forging documents and failing to disclose suspicious
transactions allegedly related to Low. Yvonne Seah Yew Foong was
jailed for two weeks and fined S$10 000 on December 16 for similar
offenses. Lawyers for Yak and Seah said they didn’t appeal.
Then
on December 22, Yeo Jiawei, 34, a former wealth planner at BSI, was
sentenced to 30 months in prison, the longest term yet handed down by
the courts in Singapore’s probes linked to 1MDB. Yeo’s lawyer
said he’s appealing.
Giving
testimony in Yeo’s trial, former head of wealth management
services Kevin Swampillai said BSI’s management in Singapore
was a “lame duck committee.” Bankers were allowed free rein in
dealing with clients with a lack of central control, he said.
Brunner
himself may face charges after the Swiss regulator began
proceedings against him and he, Sriram and Swampillai were
referred to Singapore prosecutors by MAS. Tucker has not been accused
of wrongdoing. Efforts to reach Tucker through social media and via
Singapore telephone listings weren’t successful. Sriram’s lawyer
said he declined to comment.
“It
is unprecedented for MAS to name individuals publicly that they have
referred” for investigation, said Sandy Baggett, a Singapore-based
lawyer at Freshfields Bruckhaus Deringer, and former deputy director
for financial securities offenses at the Singapore attorney general’s
office. “That tells you something about the level of evidence they
must have.”
Tarnished image
The
lapses at BSI tarnished Singapore’s image as a financial
center, MAS chief Ravi Menon said, and the government has vowed
tough action to repair the damage to its reputation. The 1MDB scandal
has also resulted in fines for banks including UBS Group and Standard
Chartered, and a former Goldman Sachs Group banker may be banned. On
January 5, Singapore prosecutors charged Jens Sturzenegger, a former
branch manager of Falcon Private Bank Ltd., with 16 offenses related
to the scandal. MAS ordered Falcon Bank to shut in Singapore in
October.
BSI
was acquired by EFG International last year. The Zurich-based lender
has said the deal contains indemnities for BSI’s legal issues.
Daniela Haesler, an EFG spokeswoman, declined to comment on the
matter.
The
1MDB case and revelations leaked in the Panama Papers “demonstrated
that everyone in Singapore needs to be a lot more vigilant about
systems and controls to prevent transnational money laundering,”
said Baggett at Freshfields.
Two
months before MAS ordered BSI to shut in Singapore, the bank
announced Brunner, 64, would retire. Brunner and the bank in August
settled a lawsuit after he sued over deferred bonuses. The private
banker saw himself as instrumental in building up BSI’s business in
Asia, according to a person close to Brunner.
The
legal spat had echoes of Brunner’s departure from Coutts, bankers
to the British royal family. In 2010, Brunner sued for wrongful
dismissal from Coutts while the bank sought the return of an advance
on his bonus. That complaint was also settled, according to court
records.