Swiss market regulators FINMA also said it had now completed all seven probes into the sprawling scandal that allegedly saw Malaysia's multi-billion dollar state fund raided to buy everything from US real estate to artworks.
"Rothschild Bank AG and one of its subsidiaries have been found to be in serious breach of money laundering rules in the context of 1MDB," a FINA statement said.
"They were in breach of due diligence, reporting and documentation requirements," it added.
The watchdog found that Rothschild and a subsidiary failed to act on "early indications" that a significant client "could be involved in money laundering."
Even though the origins of the clients assets were dubious, Rothschild charged ahead in fostering the relationship and even expanded it, before reporting the client to the Swiss money laundering office "after a substantial delay."
"We note the comments made by the regulator and acknowledge and regret those instances where it has been identified that breaches occurred," Rothschild said it statement emailed to AFP.
Meanwhile, FINMA said it had wrapped its work in probing wrongdoing in connection with 1MDB.
The regulators have slapped modest fines on several banks including Credit Suisse but noted that all the implicated banks have put in place measures to fix what went wrong.
FINMA said it will appoint an auditor to review those measures.
But Swiss criminal cases linked to 1MDB could still be in the pipeline.
Attorney general Michael Lauber has said his office is probing possible wrongdoing by six individuals and two banks, but noted that former Malaysian prime minister Najib Razak (below) is not a target.
Razak has however been charged with corruption in Malaysia, where newly elected Prime Minister Mahathir Mohamad has promised to investigate the 1MDB scandal and take legal action against those involved in the fraud.