Swiss prosecutors said Wednesday they had launched criminal proceedings against Zurich-based Falcon Private Bank for alleged money-laundering activities linked to Malaysian sovereign wealth fund 1MDB.

The Office of the Attorney General (OAG) said its investigation and an enforcement decision made by Switzerland's financial market regulator "suggests that the offences of money laundering ... currently under investigation in 1MDB case could have been prevented had the Falcon Private Bank Ltd been adequately organised".

Swiss law requires companies to undertake reasonable organisational measures to prevent "money laundering or corruption offences" by clients, said the OAG.

Allegations of misappropriations of millions of dollars from 1MDB have triggered a corruption scandal that has embroiled Prime Minister Datuk Seri Najib Razak. Both Najib and 1MDB have strongly denied any wrongdoing.

Switzerland's financial market regulator Finma ordered Falcon on Tuesday to surrender 2.5 million Swiss francs (2.2 million euros, $2.4 million) in illegally generated profits for having "seriously breached money laundering regulations by failing to carry out adequate background checks into transactions and business relationships associated with" 1MDB.

Falcon's subsidiary operating in Singapore was shut down by regulators on Tuesday, for "serious failures in anti-money-laundering controls and improper conduct" by senior management both at the head office in Switzerland and the local branch.

Singaporean authorities have arrested the bank's Singapore branch manager, Jens Sturzenegger and fined it Sg$4.3 million (US$3.1 million, 2.8 million euros) for 14 anti-money laundering breaches, according to the Monetary Authority of Singapore (MAS).