Last year Switzerland froze $114 million in accounts linked to Montesinos, who was arrested in June in Venezuela. He was a key figure in propping up Alberto Fujimori’s 10-year regime, and was implicated on video for corruption and bribery of top officials.

The head of the Commission, Daniel Zuberbühler, said that the general manager was responsible for “severe deficiencies in the internal organisation of the bank… and himself approved the relationship [with Montesinos]”.

“He did not recognise Montesinos as a politically exposed person,” Zuberbühler added. “He merely relied on information that was given to him by another customer of the parent bank in Israel without checking any of the information."

The Commission said information about the criminality of Montesinos was in the public domain and could have been accessed by the Bank Leumi le-Israel manager with “reasonable efforts”.

Four other banks involved in the frozen $114m were investigated by the Commission, but were cleared of wrongdoing. They are Fibi Bank Switzerland, Banque CAI (Suisse), UBS and Bank Leu.

As well as being one of the few countries publicly to reprimand banks that break its rules, Switzerland has also taken the lead in discussing how banks should deal with the illicit assets of politically exposed persons. The Swiss foreign ministry is hosting a two-day seminar in Lausanne this week to discuss ways in which frozen criminal funds can be repatriated. Just over a year ago, the FBC publicly reprimanded Credit Suisse, the country's second biggest bank, and more than a dozen others for handling $600m of funds from the former Nigerian dictator Sani Abacha.