Singapore’s central bank, Monetary Authority of Singapore (MAS) and The Swiss Financial Market Supervisory Authority (FINMA) have culminated their investigation around the involvement of Falcon Private Bank’s involvement in the 1MDB case. The former has ordered the Swiss bank to terminate its operations in Singapore for alleged money laundering activities linked to Malaysian state-run fund 1Malaysia Development Berhad (1MDB).
Commenting on the verdict, MAS in a statement said,
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.
It is also withdrawing the merchant bank status of the bank’s Singapore branch for “serious failures in anti-money laundering (AML) controls”. MAS has fined Falcon Bank S$4.3 million for 14 breaches including “failures to adequately assess irregularities in activities pertaining to customer accounts, and file suspicious transaction reports”.
It has accused Falcon’s senior management in Switzerland and Singapore of “improper conduct” and local branch manager, Jens Sturzenegger, had been arrested a week before. While in Zurich, FINMA has directed Falcon to turn over 2.5 million Swiss francs ($2.56 million), referring them as illegal profits. Falcon Bank, which has been operating in Singapore since August 2008, is owned by the International Petroleum Investment Company from Abu Dhabi, one of the world’s leading sovereign wealth funds.
MAS stated clients are assured that Falcon Bank, a branch of Falcon Private Bank Ltd in Switzerland “has the full support of its head office which is financially sound”.
According to a press statement, Falcon Private Bank said “the withdrawal of the Singapore banking license is regrettable and disappointing” but the decision “will not impact the strategic development of the Bank”.
1MDB – World’s biggest financial scandal
1MDB was set up by Malaysian Prime Minister Najib Razak in 2009 to turn Kuala Lumpur into a financial hub and bolster the economic growth through strategic investments. But in early 2015 it missed payments for about $11Bn it owed to banks and bondholders, and began to attract negative attention.
Reports emerged that investigators discovered a US$700 million wired in Prime Minister Najib Razor’s private bank accounts. Both the fund and the PM denied the allegations, Najib and Malaysia’s attorney general have said the money in his bank accounts was a legal gift from the Saudi royal family.
The attorney general cleared Najib of wrongdoing and stated most of the money was returned, while Saudi Arabia’s foreign ministry acknowledged a donation to Malaysia but declined to comment further. Though, later the attorney general launched an investigation into alleged graft. 1MDB was 42 billion ringgit (HK$86 billion) in debt at the time of the scandal.
Malaysia’s insistence that no wrongdoing occurred at 1MDB clashes with the accounts of regulators around the world, who have closed in on related institutions in recent months. While, Global investigators believed that the amount that had been credited in Najib’s account were from the 1MDB fund.
Since then, 1MDD has been the subject of money-laundering investigations in at least six countries, including Switzerland, Singapore and the United States.
Slammed and fined: UBS and DBS
MAS has also fined local bank DBS and Swiss lender UBS for similar violations. It said that it did not find pervasive control weaknesses in these banks but has admonished the two banks and instructed their management to investigate the lapses, promptly address the control deficiencies, and take appropriate disciplinary measures against the staff involved. MAS said,
The control lapses observed in DBS and UBS relate to specific bank officers who failed to carry out their duties effectively.
DBS has been directed to pay S$1 million ($730,000) for ten violations, while UBS has been fined S$1.3 million for thirteen breaches. MAS also commented,
There were 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.
DBS said that MAS’ findings indicate that the bank’s control weaknesses are not pervasive, and added that it should have taken more rigorous action with respect to the questionable activity,
While UBS in a statement was quoted saying,
We are disappointed we did not do more to detect and report this earlier….UBS is determined not to be used as a platform for financial crime.
The regulator had in May had ceased operations of another Swiss bank BSI for similar violations, the first time it ordered a bank to shut in 32 years. While, yesterday Singapore charged two former BSI bankers with forgery and failing to report transactions in cases linked to a major money-laundering scandal involving 1MDB.
Ravi Menon, managing director of Singapore’s central bank commenting on the banks and their management,
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.
