The central bank of Singapore cracked the whip on three banks operating in the city-state in connection with the 1MDB scandal, holding them responsible for failures in anti-money laundering (AML) controls and breach of AML requirments. It also hinted at action against Standard Chartered Bank in connection with the scandal.
The Monetary Authority of Singapore (MAS) ordered closure of the Swiss lender Falcon Private Bank's Singapore branch and imposed financial penalties amounting to S$1 million on DBS for 10 breaches and S$1.3 million on UBS for 13 breaches.
"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," the central bank said in a statement.
Falcon Private Bank, operating in Singapore since August 2008, saw its merchant banking status withdrawn by the MAS for "serious failures in anti-money laundering (AML) controls and improper conduct by senior management at the Head Office in Switzerland as well as the Singapore branch."
Falcon Private Bank had paid a fine of S$300,000 for breach of AML controls arising out of "weaknesses in the bank's controls for client acceptance and transaction surveillance" as revealed during an inspection in 2013.
"The 2015 inspection uncovered an even larger number of regulatory breaches as well as serious failings on the part of Head Office senior management and the Singapore Branch Manager," MAS said.
Citing conflict of interest prevailing at the bank while handling the account of a customer who had links with the bank's former Chairman Mohamed Ahmed Badawy Al-Husseiny, the central bank said, "The former Chairman misled and influenced the Singapore Branch into processing the customer's unusually large transactions despite multiple red flags."
On DBS and USBS, the central bank said the two entities were found to be in breach of AML requirements.
"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," the MAS said.
The central bank also said an announcement on the role of Standard Chartered Bank's Singapore branch will be made "in due course."
"MAS is finalising its assessment of Standard Chartered Bank, Singapore Branch, and will make an announcement in due course. MAS has referred the 1MDB-related transactions processed by Raffles Money Change to the Commercial Affairs Department for their follow-up investigation," it said.