Deutsche Bank cleared Cyprus funds for businessman Jho Low
Lender acted as correspondent bank for Malaysian facing allegations over 1MDB scandal
Deutsche Bank cleared funds for Jho Low, the Malaysian businessman fighting multibillion-dollar corruption allegations, ahead of his purchase of a house and nationality in Cyprus under the Mediterranean state’s “golden passport” scheme.
Germany’s biggest lender acted as a so-called correspondent bank and processed a cross-border transfer of almost €6m. The payment was made in June 2015 from Mr Low’s Swiss account at Abu Dhabi-owned Falcon Bank to the Bank of Cyprus, according to a transaction record seen by the Financial Times.
The money transfer happened several months after allegations surfaced that Mr Low helped misappropriate vast sums from Malaysia’s 1MDB state investment fund. The businessman, who is under US criminal indictment, has always denied any wrongdoing.
Deutsche’s role in the transaction highlights the hazards of the correspondent-banking model, in which global banks provide international payment services such as clearing US dollar and euro transactions for smaller regional lenders, earning fees in return.
The German lender is one of the world’s largest processors of cross-border payments. In 2019, it pulled out of correspondent bank activities in Cyprus and several other EU countries because of the risks involved.
The payment of €5.96m to Mr Low’s Bank of Cyprus account was made on June 24, 2015, according to the bank’s incoming customer credit transfer document, which also recorded Deutsche’s role as correspondent.
Mr Low then bought a €5m house in the holiday resort of Ayia Napa and made a brief trip to Nicosia in September 2015 to pick up a Cypriot passport, under an official scheme that offered citizenship to foreigners who invested in high-end property.
A fee of €650,000 relating to the property purchase was paid from a Cypriot developer to an agent, according to an invoice seen by the FT. Mr Low also gave €300,000 towards a theological school in Cyprus, according to interviews in local media with Archbishop Chrysostomos, head of the Eastern Orthodox church of Cyprus and a supporter of Mr Low’s citizenship application.
The June payment to the Bank of Cyprus account came almost four months after the investigative website Sarawak Report published a detailed article alleging Mr Low was central to a plot to misappropriate more than $700m from 1MDB intended for a business joint venture. Mr Low vigorously denied the allegations, including in an April 2015 interview with Euromoney, available online and headlined “Jho Low says it ain’t so”.
Bank of Cyprus declined to comment. It reported transactions involving Mr Low later in 2015 to Mokas, the island’s body responsible for combating money laundering, according to local media reports.
The US criminal indictment unsealed in 2018 accused Mr Low of conspiring with others to misappropriate more than $2.7bn from 1MDB. Under a separate provisional financial settlement with the US government unveiled last year, he agreed to forfeit assets including a Bombardier jet, high-end real estate in London, New York and Los Angeles, and a “luxury boutique hotel” in Beverly Hills. He admitted no wrongdoing.
A representative of Mr Low did not respond to a request for comment.
Deutsche Bank is facing regulatory scrutiny over its vetting of transactions for Danske Bank Estonia. Between 2007 and 2015, the German lender processed up to €160bn of potentially suspicious transactions for the tiny Estonian branch of Danske. Last September, criminal prosecutors in Frankfurt launched an investigation into Deutsche’s role in the matter.
Deutsche had limited direct anti-money-laundering responsibilities in the Cyprus transfer involving Mr Low, who was not its client. However, correspondent banks are required to monitor their business partners’ transactions “with a view to detecting any changes in the respondent institution’s risk profile or implementation of risk mitigation measures”, according to a guideline from the Financial Action Task Force, a global anti-money laundering body.
Abu Dhabi's Falcon Bank received $3.8bn in cross-border payments between 2012 and 2015 involving accounts held by offshore-companies linked to the 1MDB scandal, according to an investigation published in 2016 by Swiss regulator Finma.
The watchdog also found the bank had a “young Malaysian businessman with links to individuals in Malaysian government circles” among its clients. The unnamed person acquired $135m in assets “in an extremely short period of time” and later received $1.2bn in payments to his account.
A Falcon spokesperson told the Financial Times that it “does not disclose any information about past, current or potential banking relationships due to Swiss banking secrecy.”
Deutsche also declined to comment on “potential or actual client relationships”. A spokesperson added that “we are checking our banking partners diligently and are monitoring the transactions that we are processing.”
Zurich-based Falcon Bank was sanctioned by Finma in 2016 for “serious shortcomings in [its] anti-money laundering activities and in risk management”. The lender had to pay back SFr2.5m in “illegally generated profits”, was banned from entering new business relationships with foreign politically-exposed persons for three years, and told it would lose its licence should there be a further breach.
Finma and German financial regulator BaFin declined to comment.