Sin­ga­pore shuts Fal­con Bank branch, fines DBS, UBS

The Sun (Malaysia) - - SPEAK UP -

PETALING JAYA: The Mone­tary Au­thor­ity of Sin­ga­pore (MAS) has or­dered the clo­sure of the Sin­ga­pore branch of Fal­con Pri­vate Bank Ltd and Switzer­land’s Fi­nan­cial Mar­ket Su­per­vi­sory Au­thor­ity (Finma) banned the bank from en­ter­ing into busi­ness re­la­tion­ships with for­eign po­lit­i­cally ex­posed per­sons for a pe­riod of three years fol­low­ing in­ves­ti­ga­tions into fund flows re­lated to 1Malaysia De­vel­op­ment Bhd (1MDB).

Finma said Fal­con Bank has se­ri­ously breached money laun­der­ing reg­u­la­tions by fail­ing to carry out ad­e­quate back­ground checks into trans­ac­tions and busi­ness re­la­tion­ships as­so­ci­ated with sovereign wealth fund 1MDB which were booked in Switzer­land, Sin­ga­pore and Hong Kong.

Finma also or­dered the dis­gorge­ment of il­le­gally gen­er­ated prof­its amount­ing to Sfr2.5 mil­lion (RM10.6 mil­lion) and launched en­force­ment pro­ceed­ings against two of the bank’s former ex­ec­u­tives.

Closer to home, MAS yes­ter­day or­dered the clo­sure of Fal­con Bank’s branch for se­ri­ous fail­ures in anti-money laun­der­ing (AML) con­trols and im­proper con­duct by Fal­con Bank’s se­nior man­age­ment at the head of­fice in Switzer­land and the Sin­ga­pore branch.

The Sin­ga­pore cen­tral bank also im­posed fi­nan­cial penal­ties on DBS Bank Ltd and UBS AG, Sin­ga­pore branch, for breaches of the AML re­quire­ments.

Fal­con Bank is the sec­ond bank forced to shut down in Sin­ga­pore af­ter BSI Bank Ltd, which was or­dered to cease op­er­a­tions in May this year for breaches of anti-money laun­der­ing re­quire­ments, poor man­age­ment over­sight of the bank’s op­er­a­tions, and gross mis­con­duct by some of the bank’s staff.

MAS said in a state­ment that the ac­tions on the three banks follow su­per­vi­sory ex­am­i­na­tions by MAS into 1MDB-re­lated fund flows that took place through these banks from March 2013 to May 2015.

“MAS’s in­ves­ti­ga­tions ben­e­fited from close co­op­er­a­tion with var­i­ous overseas reg­u­la­tory coun­ter­parts, in par­tic­u­lar the Swiss Finma,” it said.

Fal­con Bank had been op­er­at­ing as a mer­chant bank in Sin­ga­pore since Au­gust 2008, of­fer­ing bou­tique pri­vate bank­ing ser­vices.

MAS high­lighted that the lat­est ac­tion fol­lowed a S$300,000 com­po­si­tion fine im­posed on the bank in 2013 for weak­nesses in its con­trols for client ac­cep­tance and trans­ac­tion sur­veil­lance and in­struc­tions to strengthen to strengthen its AML con­trols.

In 2015, how­ever, MAS’s in­spec­tion un­cov­ered an even larger num­ber of reg­u­la­tory breaches.

Fal­con Bank Sin­ga­pore branch man­ager Jens Sturzeneg­ger was ar­rested by the Sin­ga­pore Com­mer­cial Af­fairs Depart­ment on Oct 5.

MAS said Fal­con Bank’s head of­fice failed to guard against con­flicts of in­ter­est when man­ag­ing the ac­count of a cus­tomer who was as­so­ci­ated with the bank’s former board chair­man Mo­hamed Ahmed Badawy AlHus­seiny. Ahmed Badawy was for­merly Aabar In­vest­ments CEO.

“The former chair­man mis­led and in­flu­enced the Sin­ga­pore branch into pro­cess­ing the cus­tomer’s unusu­ally large trans­ac­tions de­spite mul­ti­ple red flags,” it ex­plained.

MAS said tak­ing into ac­count the to­tal­ity of Fal­con Bank’s con­duct, its as­sess­ment is that the mer­chant bank will be un­able to com­ply with these re­quire­ments and ex­pec­ta­tions go­ing for­ward.

MAS has im­posed on Fal­con Bank fi­nan­cial penal­ties amount­ing to S$4.3 mil­lion (RM12.95 mil­lion) for 14 breaches of MAS No­tice 1014 – Pre­ven­tion of Money Laun­der­ing and Coun­ter­ing the Fi­nanc­ing of Ter­ror­ism. The breaches in­clude fail­ure to ad­e­quately as­sess ir­reg­u­lar­i­ties in ac­tiv­i­ties per­tain­ing to cus­tomer ac­counts, and file sus­pi­cious trans­ac­tion re­ports.

Mean­while, MAS said the probe into DBS and UBS re­vealed sev­eral breaches of AML re­quire­ments and con­trol lapses.

“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,” it noted.

MAS has im­posed fi­nan­cial penal­ties amount­ing to S$1 mil­lion (RM3.01 mil­lion) on DBS for 10 breaches and S$1.3 mil­lion (RM3.92 mil­lion) on UBS for 13 breaches of MAS No­tice 626 – Pre­ven­tion of Money Laun­der­ing and Coun­ter­ing the Fi­nanc­ing of Ter­ror­ism.

DBS and UBS have been directed to ap­point an in­de­pen­dent party to con­firm that rec­ti­fi­ca­tion mea­sures have been im­ple­mented and to re­port its find­ings to MAS.

MAS said is fi­nal­is­ing its as­sess­ment of the Sin­ga­pore branch of Stan­dard Char­tered Bank and will make an an­nounce­ment in due course.

“MAS has re­ferred the 1MDBre­lated trans­ac­tions pro­cessed by Raf­fles Money Change to the Com­mer­cial Af­fairs Depart­ment for their follow-up in­ves­ti­ga­tion,” it said.

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