THE Monetary Authority of Singapore (MAS) announced Tuesday that it is withdrawing the merchant bank status of Falcon Private Bank Ltd over “serious” breaches of anti-money laundering (AML) regulations as well as improper conduct by senior management at both the bank’s island state branch and its headquarters in Switzerland.
In a statement, MAS said it has also fined Falcon Bank SGD4.3 million (US$3.1 million) for 14 breaches of the “MAS Notice 1014 – Prevention of Money Laundering and Countering the Financing of Terrorism”, and slapped financial penalties on two other banks for similar reasons – SGD1 million (US$725,000) on DBS Bank Ltd (DBS) for 10 breaches and SGD1.3 million (US$942,000) on UBS AG’s Singapore branch for 13 breaches.
The authority said the actions were taken following supervisory examinations conducted on fund flows involving 1Malaysia Development Berhad (1MDB) that took place between March 2013 and May 2015. It added that it partnered several overseas counterparts for the probe, in particular the Swiss Financial Market Supervisory Authority (Finma).
This is the second Swiss bank ordered shut by Singapore over violations linked to 1MDB, the state investment firm founded by Malaysia’s scandal-plagued Prime Minister Najib Razak in 2009. 1MDB is currently the subject of numerous multi-agency probes across the world, as well as a civil lawsuit filed recently by the United States’ Department of Justice (DoJ).
SEE ALSO: Singapore: Another 2 BSI bank officials charged amid probe into Malaysian state fund
In May, MAS kicked out BSI Bank for similar violations – its first time shuttering a financial institution in 32 years – and referred six members of staff to the Public Prosecutor to determine if they had committed crimes.
Yesterday, two former senior private bankers at BSI Singapore were charged with various criminal offences for failing to disclose information on suspicious transactions to a Suspicious Transaction Reporting Officer. Most of the offences relate to Low Taek Jho, a businessman linked to 1MDB who had accounts with BSI Singapore.
#Singapore clearly brooks no misconduct amongst its financial institutions #1MDB #rightsignal pic.twitter.com/YquC0toBBP
— Anita Gabriel (@AnitaGabrielBT) October 11, 2016
Earlier, the Attorney-General’s Chambers had also charged Yeo Jiawei as the first BSI Singapore employee who faced 11 charges for various offences.
MAS in its statement Tuesday noted that after uncovering several weaknesses in Falcon Bank’s controls for client acceptance and transaction surveillance in 2013 – for which the bank paid a SGD300,000 (US$217,000) fine and MAS urged it to strengthen AML controls – another inspection in 2015 discovered more and even larger regulatory breaches and “serious failings” by the bank’s Swiss head office and its Singapore branch manager.
It said it withdrew Falcon Bank’s merchant bank status after taking several factors into account, namely that its head office failed to guard against conflict of interest when handling the accounts of a customer associated with former board chairman Mohamed Ahmed Badawy Al-Husseiny; the improper conduct of its Singapore branch manager and several senior managers at the head office, which contributed to the breaches; and that the bank has demonstrated “a persistent and severe lack of understanding” of Singapore’s AML requirements and expectations.
SEE ALSO: Singapore: BSI Bank to be shut down due to ‘gross misconduct’ amid 1MDB scandal
“Taking into account the totality of Falcon Bank’s conduct, MAS’ assessment is that the merchant bank will be unable to comply with these requirements and expectations going forward,” the statement said.
On DBS and UBS, MAS said its inspections related to the 1MDB scandal uncovered deficiencies in the on-boarding of new accounts, weaknesses in corroborating the source of funds, inadequate scrutiny of customers’ transactions and activities, and failure to file timely suspicious transaction reports.
These lapses, it said, relate to specific bank officers who failed to carry out their duties effectively and were not due to control weaknesses within the two institutions.
It said it has admonished the two banks and called for probes on the lapses, as well as directed both institutions to appoint an independent party to confirm that rectification measures have been effectively implemented and to report to MAS once this is done.
In the statement, MAS managing director Ravi Menon said: “Keeping Singapore a clean and trusted financial centre is a shared responsibility. The board and senior management of each financial institution play a pivotal role.
“They must put in place robust mechanisms to detect suspicious activities, promote strong risk awareness among their staff, and empower their compliance and risk management people. Most of all, they must set the tone from the top – that profits do not come before right conduct.
“MAS will work closely with the industry to ensure that standards are kept high and will take strong deterrent actions against institutions that fall short.”
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