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Singapore shuts down second bank for alleged link to Malaysian money laundering scam

The Monetary Authority of Singapore (MAS) has fined Falcon Bank $3.1 million. Photograph: (AFP)

AFP Singapore Oct 11, 2016, 10.15 AM (IST)

Singapore's central bank on Tuesday shut down a second Swiss bank under investigation for alleged money-laundering activities linked to Malaysian state fund 1Malaysia Development Berhad (1MDB) as it vowed strong action against potential violators.

1MDB was set up in 2009 by Malaysian Prime Minister Najib Razak for turning Kuala Lumpur into a destination for investors. It started to attract negative attention in early 2015 after it missed payments for some of the $11bn it owed to banks and bondholders.

The Monetary Authority of Singapore (MAS) said it had ordered Falcon Bank to cease operations in the city-state because of "serious failures in anti-money-laundering (AML) controls and improper conduct" by senior management both at the head office in Switzerland and the local branch.

"Falcon Bank has demonstrated a persistent and severe lack of understanding of MAS AML requirements and expectations," it said in a statement.

"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 central bank said it fined Falcon Bank Sg$4.3 million (US$3.1 million) for 14 breaches of a law on preventing money laundering and countering the financing of terrorism.

MAS also said it received information that Falcon Bank's Singapore branch manager, Jens Sturzenegger, had been arrested on October 5 by the Commercial Affairs Department (CAD), the Singapore government's main white-collar crime investigation agency.

The bank's parent firm Falcon Private Bank said in a statement from Zurich that it welcomed the completion of investigations by Singaporean and Swiss regulators of its involvement in 1MDB. However, it said that while the withdrawal of its Singapore banking license is "regrettable and disappointing, the decision will not impact the strategic development of the bank".

The central bank said it fined Falcon Bank Sg$4.3 million (US$3.1 million) for 14 breaches of a law on preventing money laundering and countering the financing of terrorism.


It pledged an orderly winding down of its Singapore operations. Singapore, a regional financial hub, last year launched a probe into alleged illicit fund flows linked to a 1MDB.

Allegations of misappropriations of millions of dollars from 1MDB have triggered a corruption scandal in neighbouring Malaysia that has embroiled Prime Minister Najib Razak. Both Najib and 1MDB have strongly denied any wrongdoing. Switzerland and the United States are also conducting their own investigations into 1MDB.

MAS announced that it has also fined local bank DBS and Swiss lender UBS for several breaches of anti-money laundering requirements.


Aggressive action

It said the "control lapses observed in DBS and UBS relate to specific bank officers who failed to carry out their duties effectively" and that it did not find "pervasive control weaknesses" in these banks.

DBS, Singapore's biggest lender, was ordered to pay Sg$1 million for 10 violations while UBS was ordered to pay Sg$1.3 million for 13 breaches. A DBS spokesman said the bank takes its anti-money laundering obligations seriously and will take action to punish those staff responsible, including senior executives.

DBS will donate profits from its lapses to a "worthy cause," the spokesman said.

Singapore's regulator in May kicked out Swiss bank BSI for similar violations linked to the 1MDB probe, the first time it ordered a bank to shut in 32 years. At least three former BSI private bankers have been charged in Singapore in relation to the investigations.

In July, Singapore authorities said they had seized nearly $180 million in assets through investigations into the 1MDB scandal.

Singapore closely guards its reputation for financial integrity and has admitted that money laundering hurts its image.

The Paris-based financial watchdog Financial Action Task Force last month urged Singapore to take more aggressive action against complex cross-border money laundering. MAS chief Ravi Menon said on Tuesday that "keeping Singapore a clean and trusted financial centre is a shared responsibility" and urged bank senior management to play a crucial role.

"They must set the tone from the top --- that profits do not come before right conduct," he said, warning that the MAS "will take strong deterrent actions against institutions that fall short".

The MAS also said it is in the final stages of assessment for the Singapore branch of Standard Chartered Bank and has referred Raffles Money Change, a local financial company, for investigation by the CAD.

Falcon Private Bank is owned by the International Petroleum Investment Company from Abu Dhabi, one of the  world's leading sovereign wealth funds.


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