SINGAPORE: The Monetary Authority of Singapore (MAS) announced on Tuesday (Oct 11) that it has ordered the Singapore branch of Falcon Private Bank to cease operations for serious failures in anti-money laundering (AML) controls and improper conduct by senior management.
In a press statement, MAS said it will be withdrawing the merchant bank status of Falcon Private Bank Ltd, Singapore Branch (Falcon Bank) for failures at the Head Office in Switzerland as well as the Singapore branch.
MAS will also impose fines on DBS and UBS banks for breaches of MAS’ AML requirements.
"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 said.
MAS said they decided to withdraw Falcon Bank's status as a merchant bank in Singapore taking into account three factors.
Firstly, 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 Al-Husseiny.
"The former chairman misled and influenced the Singapore Branch into processing the customer’s unusually large transactions despite multiple red flags," MAS said.
Secondly, the improper conduct of the Singapore branch manager and certain senior managers at the head office had impaired the effectiveness of the Singapore Branch’s compliance function in discharging its responsibilities.
Their interference was wrongful and egregious in nature, and contributed to substantial breaches of AML regulations. MAS has been informed that the Singapore branch manager, Jens Sturzenegger, was arrested by the Commercial Affairs Department on Oct 5.
"Falcon Bank has demonstrated a persistent and severe lack of understanding of MAS’ AML requirements and expectations.
"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," MAS said.
MAS added that it is working closely with FINMA, the home regulator of Falcon Private Bank, to oversee an orderly closure of the merchant bank branch in Singapore.
FINES FOR DBS AND UBS
The central bank also said it has fined DBS S$1 million for 10 breaches of MAS Notice 626 - Prevention of Money Laundering and Countering the Financing of Terrorism. UBS has been fined S$1.3 million for 13 breaches.
MAS imposed these fines after inspections of DBS and UBS banks in relation to their 1MDB-related fund flows revealed several breaches of AML requirements and control lapses.
"The control lapses observed in DBS and UBS relate to specific bank officers who failed to carry out their duties effectively," MAS said.
Although MAS did not find pervasive control weaknesses within these banks, it 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.
"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," MAS said.
MAS has also directed DBS and UBS to appoint an independent party to confirm that rectification measures have been effectively implemented and to report its findings to MAS.
MAS said it is finalising its assessment of the Singapore branch of Standard Chartered Bank and will make an announcement in due course.