Singapore shuts Falcon Bank branch, fines DBS, UBS
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.