In more tough action over the deepening Malaysian 1MDB state fund scandal, the Singapore authorities closed a second Swiss bank, and fined DBS and UBS, for anti-money laundering breaches.
The million-dollar penalties for DBS and UBS were for breaches of money laundering rules and centred on lapses by specific bank officers, including executives.
The biggest sanction came with the Monetary Authority of Singapore (MAS) ruling that Falcon Private Bank's Singapore branch must cease operations because of "serious failures" in anti-money laundering controls and "improper conduct" by senior management in Switzerland and Singapore. The breaches were in relation to 1Malaysia Development Berhad (1MDB) fund flows from March 2013 to May last year.
Falcon, which employs 35 people here at its Centennial Tower office, was also hit with $4.3 million in penalties for failing to adequately assess and file reports on irregularities in customer account activities.
The Swiss-based bank demonstrated "a persistent and severe lack of understanding" of these controls, the MAS said yesterday.
Falcon's Singapore branch manager Jens Sturzenegger was arrested on Oct 5 over alleged improper conduct by him and other senior managers.
The authorities in Switzerland also took action yesterday, ordering Falcon to turn over illegal profits amounting to 2.5 million Swiss francs (S$3.5 million). Criminal proceedings against two former executives were also launched.
Falcon is the second Swiss bank to be shut down here. BSI Bank's Singapore branch was ordered to close in May for similar reasons.
Falcon is owned by Abu Dhabi's sovereign wealth fund International Petroleum Investment Company, which has been involved with 1MDB bonds since 2012. The MAS said it is working with the Swiss authorities to oversee an orderly closure.
It also fined DBS $1 million and Swiss-based UBS $1.3 million for breaches in relation to 1MDB fund flows. These included weaknesses in corroborating the source of funds and inadequate scrutiny of customer transactions.
DBS and the Singapore branches of UBS and Standard Chartered Bank were used as "conduits" for a complex global web of transactions involving entities and individuals in Singapore, the United States and Hong Kong, the MAS said.
While the lapses at DBS and UBS were due to specific bank officers who failed to carry out their duties effectively, the MAS did not find pervasive control weaknesses.
A DBS spokesman said: "DBS will be taking actions to hold responsible staff accountable, which will include our senior executives."
Meanwhile, the MAS is finalising its assessment of StanChart's Singapore branch and has referred the 1MDB-related transactions processed by remittance agent Raffles Money Change to the Commercial Affairs Department.
Said MAS managing director Ravi Menon yesterday: "(Financial institutions) must put in place robust mechanisms to detect suspicious activities, promote strong risk awareness... and empower their compliance and risk management people."