Investigations by the Monetary Authority of Singapore (MAS) uncovered a history of money-laundering breaches and weak financial controls at BSI Bank that go back several years.
Some of these breaches prompted warnings from the MAS, but it appears the bank did little to rectify the faults, culminating in the MAS decision to yank the bank's licence to operate in Singapore.
In 2011, the MAS found policy and process lapses at the front office, as well as weak enforcement. The lapses were rectified, but inspections three years later uncovered serious shortcomings in the due diligence checks on assets underlying the investment funds that were structured for the bank's customers.
The MAS told the BSI Bank management to increase scrutiny of its risk management processes and internal controls. Another inspection last year revealed multiple breaches of anti-money laundering regulations and a pervasive pattern of non-compliance.
The MAS said that in rescinding the bank's licence, it took into account the repetitive lapses as well as last year's findings. It found "poor and ineffective oversight by the senior management of BSI Bank and (an) unacceptable risk culture, with blatant disregard for compliance and control requirements as well as MAS' regulations".
Specific lapses included "processing of multiple unusual transactions, which were essentially pass- through trades often without economic substance", it added.
Pass-through trades involve cash moving from one account to others, often as part of a money-laundering operation.
The Swiss Financial Market Supervisory Authority (Finma) stated on Monday that it found many cases of "clear indications of pass- through transactions".
"In one case, US$20 million (S$27.7 million) was routed through a variety of accounts within the bank on the same day before eventually being transferred to another bank. Transactions of this kind are often a clear indication of money laundering," it said.
"Nevertheless, the bank failed to properly document or carry out plausibility checks on these transactions, or was happy to accept the explanation that the beneficial owner of all the accounts was the same person, or that the transactions were being executed for 'accounting purposes'."
Finma also found serious shortcomings in identifying transactions that involved increased risk.
"These failures related in particular to business relationships with politically exposed persons, the origin of whose assets was not sufficiently clarified, and whose dubious transactions involving hundreds of millions of US dollars were not satisfactorily scrutinised," it said.
Finma also noted that, in the context of the probe into Malaysian state fund 1Malaysia Development Berhad, the bank had business relationships with a range of sovereign wealth funds whose accounts were booked in both Singapore and Switzerland.
"The fees charged were above average and out of line with normal market rates. Senior management at the bank did not question why the sovereign wealth funds should use a private bank to provide institutional services and pay excessive out-of-market fees for doing so," Finma said.
