Former BSI banker regrets 1MDB-related actions

While BSI Bank in Singapore was raking in millions in fund management fees from 1Malaysia Development Bhd’s various fiduciary accounts with them, former BSI Bank (Singapore) Ltd banker Kevin Michael Swampillai and his former colleague Yeo Jiawei manoeuvred to make “secret profits”.

Kevin made some US$6 million, which he says has now been “disgorged” or returned since Singaporean authorities clamped down on him and the bank.

Testifying in the 1MDB-Tanore trial, Kevin explained that he received US$6 million in “secret profits” through deals he and Yeo had brokered with the banks’ relationship managers for the 1MDB-linked accounts.

Under questioning from deputy public prosecutor Mohamad Mustaffa P Kunyalam on how he obtained the money and where it is now, Kevin said the money had been “disgorged” to the Singapore authorities.

He said he and Yeo felt slighted that they were not making profits from 1MDB deals even though they helped set them up, such as the commissions that other bank officers were getting from certain 1MDB transactions. This included the banks’ relationship managers for the 1MDB-linked accounts.

“They [the relationship managers and other bankers] started receiving percentages of revenue from transactions initiated by 1MDB. They received bonuses that ran into millions. When that happened, my colleague Yeo and I felt we were involved in the transaction implementation and that we deserved a little more. We then approached our employer and asked for an increase, which was swiftly declined,” he said.

He called his next move “stupid” as he and Yeo decided to negotiate commissions for themselves with the 1MDB relationship managers. They channelled a portion of the fund management fees or “secret profits” to an entity beneficially owned by Kevin.

“We rather stupidly decided to seek these benefits ourselves. We negotiated commissions to be paid to us. That is how we received our benefit.”

Speaking candidly on the witness stand, Kevin said he “immensely” regrets his actions in dealing with 1MDB, and added that the consequences of his involvement and actions have been severe and are a “source of regret”. He also wishes he had done things differently.

In October 2020, the Monetary Authority of Singapore (MAS) issued lifetime Prohibition Orders (POs) against Kevin for his role in the 1MDB scandal.

According to a statement, MAS prohibited him permanently from performing any regulated activity under the Securities and Futures Act (SFA) and providing any financial advisory service under the Financial Advisers Act (FAA).

“He is also permanently prohibited from taking part in the management, acting as a director, or becoming a substantial shareholder of any capital market and financial advisory services firm under the SFA and FAA,” the statement said.

How 1MDB brought down BSI Singapore

In 2016, the Monetary Authority of Singapore (MAS) sent shock waves through the nation and internationally when it ordered BSI Bank in Singapore to shut down its operations in the city-state.

Little was known about the reasons for its immediate shutdown. BSI Bank (Singapore) Ltd was a wholly-owned subsidiary of the 150-year-old BSI SA bank headquartered in Switzerland; it had been operating in Singapore since 2005.

However, information coming out of the city state then showed that the action was part of the global money-laundering and embezzlement investigations surrounding 1Malaysia Development Bhd (1MDB).

The Swiss authorities, via The Office of the Attorney-General of Switzerland (OAG), also opened criminal proceedings against BSI SA “based on information revealed by the criminal proceedings in the 1MDB case”.

Former BSI Singapore banker Kevin Michael Swampillai, who testified last week at the 1MDB-Tanore trial in Kuala Lumpur, explained how Low Taek Jho (Jho Low) had used fiduciary funds (see main story) with the bank to essentially launder billions of dollars of 1MDB money, which was supposed to be used for investments for the benefit of Malaysia.

Kevin, former head of wealth management services at BSI Bank Singapore, agreed with lead defence counsel Tan Sri Muhammad Shafee Abdullah that the bank had encouraged these transactions because it was making “tonnes of money”.

“Yes, I did have suspicions. I did have concerns at the very beginning during the SRC [International Sdn Bhd] phase of these transactions. I voiced my concerns, not just SRC but even Brazen Sky transactions. I voiced my concerns to my supervisors in the bank. I don’t think I was the only one, for that matter, I believe there were loads of concerns being expressed by compliance in particular.

“I raised my concerns in the beginning, but I think it sort of fell on deaf ears within the higher echelons of the bank, because nothing was being done to stop these transactions.”

The prosecution’s 44th witness added that there was no “factual basis” for these concerns because the clients — 1MDB and the related entities — were not forthcoming with the information.

“The main question was where is the money going to eventually end up, with whom, where — that question — was never answered, was never provided by the account signatory or Jho Low despite the fact that the question was posed many times but was never answered,” Kevin said.

BSI wilfully blind as it was ‘hungry for revenue’

Kevin also testified to the greed of the bank, which was willing to accede to all of Jho Low’s requests because 1MDB was one of its biggest clients ever and it was “hungry for revenue”.

Kevin was asked by Datuk Seri Najib Razak’s lead counsel Tan Sri Muhammad Shafee Abdullah whether, for a client of 1MDB’s magnitude, there would have been a need for board of director papers.

“I’m not sure if we would have needed the BoD’s approval. The way the accounts were authorised, [the] signatories to the accounts [were the ones who] ultimately approved the activity taking place in the accounts. The authorised signatory to a 1MDB-linked account was almost always one individual,” he said.

“I think he chose the bank because he figured out somewhere along the line that BSI was hungry for revenue, and he correctly deduced that the bank would compromise a little in terms of opening these accounts and carrying out those transactions,” Kevin said.

Shafee then suggested that the bank encouraged these transactions because BSI would be making tonnes of money. “Absolutely,” Kevin answered. He agreed that if board minutes had been required for evidence approval, it would have been difficult for Jho Low and 1MDB-linked fiduciary funds such as SRC International, Brazen Sky, Aabar and 1MDB Global Investments Ltd, to be opened at the bank.

Magnitude of transactions previously unseen at BSI

In dealing with the billions of dollars flowing through to BSI, Kevin said he always had the impression that these transactions were undertaken with Najib’s knowledge because SRC was a company owned by the Ministry of Finance (MoF) at the time and Najib was its minister. Najib was also the chairman of the board of advisers of 1MDB and, furthermore, 1MDB was wholly-owned by MoF.

And because of the magnitude of transactions, Kevin said an apex approval was needed by some highly-placed source in the government, but Jho Low was always evasive about the transfers.

“That in the face of persistent questions by BSI Bank on the final destination and use of funds channelled through the fiduciary funds, Jho Low’s consistent response [was] that these transactions were highly confidential government-to-government investments and therefore no further information could be made available.

“Finally, the size of these transactions was of such a high magnitude and frequency that they had to have some kind of apex approval such as that issued by a highly-placed government official such as a prime minister,” he said.

Jho Low exerted ‘tremendous pressure’ to complete transactions at ‘light speed’

Another instance of the bank bending over backwards for Jho Low was his constant haranguing of bank personnel to transfer large sums of cash from 1MDB accounts to other accounts.

Kevin testified about an example of such haste by Jho Low with regard to 1MDB Global Investment Ltd (1MDB GIL), a 1MDB-linked company that opened a fiduciary fund account with BSI.

Kevin said approximately US$2.721 billion had entered 1MDB GIL’s fiduciary fund account and most of it was transferred out at the behest of Jho Low the very next day through several transactions.

“The fact that a large number of fiduciary fund transactions, most of which took place within one day of the receipt of funds amounting to approximately US$2.721 billion in 1MDB GIL’s account in BSI Bank was not surprising to me as I observed from previous transactions involving other 1MDB-related clients that cash did not remain in their accounts for too long.”

He testified that there was always “great haste” by the clients to “invest” the money in fiduciary funds as “quickly as possible”, akin to “light speed”.

“In fact, various employees in BSI Bank were put under tremendous pressure by the clients [specifically the pressure was applied by Jho Low on relationship manager Yak Yew Chee who in turn pressured various departments in the bank] to expedite processes so that the money flow from 1MDB GIL (and other 1MDB-related client accounts) was transferred as quickly as possible from the BSI Bank account to the account of the fiduciary fund and then on to the account of the target company.”

He added that the relevant BSI staff were constantly reminded that they were handling “highly sensitive and time-bound transactions” involving the state sovereign fund and any complacency would not be tolerated by the client.