(Adds Swiss regulator probing UBS)
By Anshuman Daga and Joshua Franklin
SINGAPORE/ZURICH Oct 11 Singapore's central
bank on Tuesday shut down a second Swiss bank in the city-state
and fined banks DBS and UBS in its biggest
crackdown on alleged money-laundering activities connected with
Malaysia's scandal-tainted 1MDB fund.
The Monetary Authority of Singapore (MAS) said in a
statement it had ordered Zurich-based Falcon Private Bank's
Singapore branch to cease operating because of "a persistent and
severe lack of understanding" of Singapore's money-laundering
controls. It also accused Falcon's senior management in
Switzerland and Singapore of "improper conduct".
Falcon was fined S$4.3 million ($3.12 million) for 14
breaches of the money laundering prevention law, including not
filing suspicious transaction reports and failure to inform
authorities of irregular activities in their customers'
Falcon is the second bank to lose its licence in connection
with Singapore's probe into 1MDB, in which authorities have
frozen millions of dollars in bank accounts, fined banks and
charged several private bankers.
In May, Swiss-based BSI Bank's Singapore branch was ordered
to be closed for failing to control money-laundering activities
connected with 1MDB. That was the first time in 32 years
Singapore had shut down a bank.
DBS was fined S$1 million ($728,067) and UBS S$1.3 million
on Tuesday for breaches in Singapore's anti-money laundering
law. The two banks said in separate statements they would take
action against staff responsible for the lapses.
STANDARD CHARTERED ASSESSED
In Zurich, the Financial Market Supervisory Authority
(FINMA), ordered Falcon to turn over 2.5 million Swiss francs
($2.56 million) in what the watchdog said were illegal profits.
A FINMA spokesman said the watchdog still has an ongoing
investigation into UBS, Switzerland's biggest bank, in
connection with 1MDB.
FINMA also said it has opened enforcement proceedings
against two former Falcon executives, without citing them by
Singapore authorities arrested the Singapore branch manager
of Falcon Private Bank, Jens Sturzenegger, on Oct 6, MAS said.
The MAS said it is also finalising its assessment of the
Singapore branch of Standard Chartered Bank and would make an
announcement in due course.
Standard Chartered said it "would be inappropriate to
comment" while the assessment is taking place.
Falcon described the MAS decision as "regrettable and
disappointing", but said it would now focus on growing in "core
locations" in Switzerland, Middle East and London.
The bank expects to close the branch, which as around 35
employees, in the next few months, a Falcon spokesman said.
SIX COUNTRIES PROBING 1MDB
Malaysia's 1MDB, once a pet project of Prime Minister Najib
Razak who chaired its advisory board, is the subject of
money-laundering investigations in at least six countries,
including Switzerland, Singapore and the United States.
The U.S. Department of Justice filed lawsuits in July
seeking to seize dozens of properties tied to 1MDB, saying that
over $3.5 billion was misappropriated from the fund.
The lawsuits do not name Najib but say around $700 million
of misappropriated funds flowed into the accounts of "Malaysian
Official 1", who U.S. and Malaysian officials have identified as
The Wall Street Journal reported last year that
investigators had traced nearly $700 million that was sent in
from an account at Falcon in Singapore in 2013 to accounts in
Malaysia they believed belonged to the Malaysian prime minister.
Both Najib and 1MDB have denied any wrongdoing.
In January, Malaysia's Attorney General Mohamed Apandi Ali
said Saudi Arabia's royal family gave Najib a $681 million gift,
of which Apandi said about $600 million was later returned.
GLOBAL FINANCIAL CENTRES
FINMA said its review of Falcon had identified around $3.8
billion associated with the 1MDB Group that was transferred to
accounts at Falcon between 2012 and mid-2015.
"The business relationships and transactions booked in
Switzerland and at Falcon's Singapore and Hong Kong branches
were unusual and involved a high level of risk for the bank both
through their nature and the amounts transacted," it said.
It said Falcon had a number of business relationships with
1MDB group companies and executed transactions amounting to
around $2.5 billion via accounts of two offshore companies.
Falcon also had a client relationship with a young Malaysian
businessman with links to individuals in Malaysian government
circles, it said without naming him.
"The bank did not verify how this individual had been able
to acquire assets of $135 million in an extremely short period
of time or why a total of $1.2 billion was transferred to his
accounts at a later date - a transaction which was clearly at
variance with the information he had provided when opening the
account," it said.
Internal warnings from bank staff were ignored, it found.
FINMA banned Falcon from entering new business relationships
with foreign politically exposed persons for three years and
said Falcon would lose its licence if there is any repetition of
Falcon had $900 million in assets in Singapore, the bank's
Chief Executive Walter Berchtold told a media briefing. The 1MDB
case has not prevented the bank from attracting news assets, he
Falcon's owner, a subsidiary of Abu Dhabi's sovereign fund
International Petroleum Investment Company, said it views Falcon
as a strategic investment "and has no current intention" to sell
'CLEAN AND TRUSTED'
Ravi Menon, managing director of Singapore's central bank
said in the MAS statement the board and senior management of
financial institutions play a pivotal role in keeping Singapore
a clean and trusted financial centre.
"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,"
said Menon. "Most of all, they must set the tone from the top -
that profits do not come before right conduct."
The crackdown also sends a message that banks have to adopt
a compliance culture and the need for compliance staff "to be
able to take decisions independent of management," said Nizam
Ismail, partner at RHTLaw Taylor Wessing LLP, where he advises
clients on financial services regulation.
(Reporting by Anshuman Daga in Singapore and Joshua Franklin in
Zurich.; Additional reporting by Saeed Azhar and Marius Zaharia
in Singapore.; Editing by Bill Tarrant)