Three major banks in Singapore have been rebuked by the Monetary Authority of Singapore (MAS) over serious lapses of anti-money laundering controls, as the 1MDB scandal deepens.
The Singapore authorities also seized about $240 million worth of assets in relation to various 1MDB-related fund flows.
The rare reprimand comes ahead of yet to be specified "firm regulatory actions" against DBS Bank and the Singapore branches of UBS and Standard Chartered Bank.
The moves follow a dramatic lawsuit launched by the United States Department of Justice (DOJ) to recover over US$1 billion (S$1.35 billion) in assets related to the global money laundering probe of the Malaysian state fund.
In Malaysia, however, Prime Minister Najib Razak and his government downplayed the significance of the DOJ's move. He told reporters: "This is a civil action, this is not a criminal action. It is limited to the names mentioned in the DOJ report."
The MAS yesterday said its probe found that certain financial institutions were used as "conduits" for a complex international web of transactions involving multiple entities and individuals operating in jurisdictions including Singapore, the US and Hong Kong.
The regulator also said $120 million seized belonged to Malaysian billionaire Low Taek Jho and his immediate family. These are believed to include two units at luxury condo TwentyOne Angullia Park.
Mr Low is a confidant of Mr Najib's family who has been dogged by the scandal for months.
DBS, StanChart and UBS had "instances of control failings and in some cases, weaknesses in the processes for accepting clients and monitoring transactions," MAS said yesterday. The regulator's preliminary findings also showed undue delays in detecting and reporting suspicious transactions.
"The deficiencies in DBS, StanChart and UBS related to lapses in specific processes and by individual officers," MAS said.
While the lapses were "serious in their own right, and will be met by firm regulatory actions against the banks", the MAS probe did not reveal "pervasive control weaknesses or staff misconduct" such as that found in the case of BSI Bank.
BSI's status as a merchant bank here was withdrawn by MAS in May after breaches of anti-money laundering rules and findings of poor management oversight and gross misconduct by its staff.
Falcon Private Bank's branch here and a remittance agent, Raffles Money Change (RMC), were also reprimanded. For RMC, MAS found weak management oversight and inadequate risk management practices and internal controls. MAS is also looking into several other financial institutions.
CIMB Private Bank economist Song Seng Wun is confident that the ongoing probe will have minimal impact on Singapore's reputation as a financial hub.
In its suit, the DOJ had alleged that funds diverted from 1MDB were used to buy luxury US real estate, pay gambling debts at the Venetian casino and Caesars Palace in Las Vegas, and fund Hollywood movie The Wolf Of Wall Street starring Leonardo DiCaprio. Funds originating from 1MDB also allegedly went to Red Granite Capital, a company owned by Mr Riza Aziz, a stepson of Mr Najib.
Some of those funds were transferred to an account at StanChart here held by an entity called Alsen Chance, and were allegedly used to pay gambling expenses for Mr Low and Mr Riza at the Venetian in Las Vegas in July 2012, the suit said.