1MDB probe: BSI Bank told to stop operations in Singapore

After Switzerland's BSI bank was shut down in Singapore for breaking money laundering laws, regulators are now poised to investigate banks across the region.
The entrance of the BSI office at Suntec City.
The entrance of the BSI office at Suntec City. ST PHOTO: ALPHONSUS CHERN

MAS cites poor management oversight and orders first bank shutdown in 32 years

The Monetary Authority of Singapore (MAS) has ordered the closure of BSI Bank's operations here over anti-money laundering rule violations, as the bank's Swiss parent faces criminal proceedings in Europe in a deepening probe into scandal- hit Malaysian state fund 1Malaysia Development Berhad (1MDB).

"BSI Bank is the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector," MAS managing director Ravi Menon said yesterday.

The MAS condemned poor management oversight and gross misconduct by some bank staff as it effected the first such shutdown of a merchant bank here in 32 years.

The closure is also the most dramatic development in the 1MDB probe, which now spans at least seven jurisdictions, including Singapore, the United States and Hong Kong.

 
 
 

The MAS has also referred six individuals from BSI to the public prosecutor to evaluate if they have committed criminal offences.

The Office of the Attorney-General of Switzerland said it has opened criminal proceedings against BSI SA Bank, BSI Bank's Swiss parent, over suspected deficiencies resulting in it being "unable to prevent the commission of offences", including suspected money laundering.

The Swiss moves are based on information from criminal probes into 1MDB - and a decision issued on Monday by the Swiss Financial Market Supervisory Authority (Finma).

Finma said the bank was happy to accept the client's explanation in one case that US$20 million (S$28 million) of new funds were a "gift", while in another instance an account was credited with over US$98 million without any effort to clarify the money's commercial background.

"Through business relationships and transactions linked to the corruption scandals surrounding... 1MDB, BSI SA committed serious breaches of money-laundering regulations and 'fit and proper' requirements."

At least US$4.2 billion of irregular 1MDB transactions have been identified by a Malaysian parliamentary committee, which recommended an advisory board headed by Prime Minister Najib Razak be disbanded.

The Swiss authorities said they will seize 95 million Swiss francs (S$132 million) from BSI SA and begin enforcement procedures against two former BSI staff. BSI group chief executive Stefano Coduri has quit.

An MAS spokesman said: "MAS' regulatory actions... arose from serious lapses by (BSI Bank) in connection with suspicious transactions and relationships, including with 1MDB-related entities, and broader failings in management oversight."

BSI Bank wasfined $13.3 million for 41 regulatory breaches, including failure to monitor suspicious customer transactions. It said it has cooperated fully with the probe into 1MDB.

EFG International said the Swiss authorities yesterday approved its takeover of BSI. The MAS said it will allow the transfer of the BSI Singapore unit's assets and liabilities to the Singapore branch of EFG.

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A version of this article appeared in the print edition of The Straits Times on May 25, 2016, with the headline '1MDB probe: BSI Bank told to stop operations in S'pore'. Print Edition | Subscribe