Swiss banking watchdogs slammed the Zurich operation of Israel's Bank Leumi, ordering the appointment of an external auditor. The Swiss Federal Banking Commission also ordered Leumi to fire the general manager of its Swiss operation, the first time it has taken such a step.
The commission's announcement did not specify the name of the manager. Leumi's website has his name as Meir Gruss, but the bank says Gruss left in September.
The regulator charged Bank Leumi Le-Israel (Switzerland) is failing to exercise due diligence in opening and managing with politically "exposed persons", such as Peru's former top spy Vladimiro Montesinos.
The general manager being ousted was reportedly involved in dealings with Montesinos, who is in Peru pending trial on charges ranging from money laundering to murder.
The audit, scheduled for 2002, is designed to ensure Leumi's compliance with money-laundering safeguards.
Among many other things, the commission also accuses Leumi of failing to clarify the source of funds in unusual transactions, and falling short on internal controls in it private banking operation.
Reuters adds: In a statement, Bank Leumi said the Montesinos funds at its bank amounted to 15% of the $114 million blocked in Switzerland, and said its relationship with Ruggell Trading Inc, the name in which the Montesinos account was opened, had begun before Montesinos' political position was known.