Switzerland’s financial regulator ordered Coutts & Co. to pay $6.6 million in disgorged profits for violating money-laundering rules and for illegally profiting from transactions associated with 1Malaysia Development Bhd. Swiss prosecutors are reviewing the decision to see if the bank should face a criminal investigation. The Swiss Financial Market Supervisory Authority, or Finma, is also considering enforcement proceedings against those Coutts employees responsible for the bank’s actions.

Coutts, owned by the Royal Bank of Scotland, allowed $2.4 billion worth of assets related to the Malaysian development fund to flow through accounts in Switzerland even though it had good reason to be suspicious of the transactions, Finma said.

The Swiss Financial Market Supervisory Authority – i.e., Finma – said that Coutts had “seriously breached money-laundering regulations by failing to carry out adequate background checks into business relationships and transactions” associated with 1MDB. The bank also ignored internal warnings from some of its employees, Finma said.

In December, the Monetary Authority of Singapore fined Coutts $1.7 million for AML breaches at its branch there.

FACTS AND CIRCUMSTANCES.    A young Malaysian businessman opened an account in the summer of 2009 with the expectation that $10 million would be transferred to it from the holder’s family assets. Instead, about $700 million was moved to the account late that year from 1MDB.

Several Coutts employees reportedly raised concerns with the bank’s compliance department about its dealing with the businessman. In the case of the $700 million transfer, the names of the sender and recipient were transposed, a compliance officer noted, according to Finma. Coutts’s legal department even raised the risk of “a total fabrication” with the transaction.