(Adds further comment from BSI, detail, FINMA no comment)
By Joshua Franklin
ZURICH, June 23 (Reuters) - Swiss bank BSI is appealing a decision by Swiss financial watchdog FINMA that BSI breached money laundering rules through its business relationships and transactions linked to a scandal-hit Malaysian government fund.
FINMA last month ordered BSI to hand over profits amounting to 95 million Swiss francs ($99.4 million) and to shut down once it has been integrated into EFG International, which is in the process of buying BSI.
1MDB is at the centre of a multi-billion-dollar graft scandal, and its transactions have triggered investigations on three continents.
In a statement on Thursday, Lugano-based BSI said it had taken its appeal to the Swiss Federal Administrative Court, arguing that the FINMA procedure was "flawed in many respects and FINMA's decision as such is disproportionate and incorrect".
"In addition, FINMA's communication of the matter has severely harmed the reputation of the bank and its employees," BSI said.
BSI said it had been in contact with FINMA about the 1Malaysia Development Bhd (1MDB) case since autumn 2013 and that all client relationships related to 1MDB were closed in early 2015.
"Accordingly, while BSI acknowledges certain internal shortcomings in the past, BSI believes that FINMA's decision, its timing as well as the manner in which FINMA decided to communicate it were wholly inappropriate," BSI said.
A FINMA spokesman declined to comment on the BSI actions and referred back to its statement in May.
FINMA had said last month BSI had repeatedly missed red flags in various transfers involving 1MDB over several years, and failed to double-check potentially suspect transactions, including a deposit of $20 million described by a client as a "gift".
$1 = 0.9559 Swiss francs Editing by Michael Shields