The Monetary Authority of Singapore has imposed penalties of $5.2 million on Standard Chartered Bank, Singapore Branch (SCBS) and $1.2 million on Standard Chartered Trust (Singapore) (SCTS) for breaching its anti-money laundering and countering of financing terrorism requirements.
These breaches occurred when trust accounts of SCBS' customers were transferred from Standard Chartered Trust (Guernsey) to SCTS from December 2015 to January 2016, said MAS yesterday.
MAS said it found SCBS' and SCTS' risk management and controls in relation to the transfers to be unsatisfactory.
The transfers occurred shortly before the Common Reporting Standard (CRS) for the automatic exchange of financial account information in tax matters were implemented in the English Channel island of Guernsey.
"The timing of the transfers raised questions of whether the clients were attempting to avoid their CRS reporting obligations," said MAS.
"However, SCBS and SCTS did not adequately assess and mitigate against this risk factor, and also failed to file suspicious transaction reports in a timely manner," it said.
Last October, reports said Indonesia was investigating news that US$1.4 billion (S$1.8 billion) held by StanChart in Guernsey, mainly on behalf of Indonesian clients, was transferred to Singapore in 2015, just before the Channel island implemented tax transparency rules.
Under these rules, countries automatically share annual reports on accounts belonging to people subject to taxes in each nation.
Britain, Guernsey and Singapore are signatories, but Guernsey, a known tax haven, implemented the rules ahead of Singapore.
Endorsed by the Organisation for Economic Cooperation and Development and the Global Forum for Transparency and Exchange of Information for Tax Purposes in 2014, the CRS sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, as well as the customer due diligence procedures to be followed by the financial institutions.
To date, more than 100 jurisdictions, including Singapore, have committed to implementing the CRS. Singapore will begin automatically sharing financial account information in tax matters this year.
MAS said that in determining the regulatory action, it took into consideration mitigating factors. It said SCBS had proactively notified the regulator of its internal review on the trust accounts, and SCBS and SCTS management "showed strong commitment" to address the deficiencies identified by MAS.
It added that both SCBS and SCTS have taken prompt and substantive remedial measures to strengthen their risk management and controls in anti-money laundering/combating the financing of terrorism.
MAS deputy managing director Ong Chong Tee said that MAS requires financial institutions to adequately assess money laundering risks when deciding whether to accept customers. "They should also have in place good systems and processes to monitor customer transactions. We expect financial institutions to remain vigilant by instilling a strong risk culture."
Said a StanChart spokesman: "We regret that we fell short of our own standards in adequately mitigating the risks involving some clients who might have attempted to avoid reporting obligations under the Common Reporting Standard by transferring their trusteeships...
"We proactively reported it to the authorities, conducted a thorough review of the relevant trust structures, and made structural and procedural changes to ensure that our employees are better equipped to identify, assess, and mitigate potential risks."
The spokesman declined to identify the clients and would not say if they remain clients of the bank. But she said that neither assets nor money was involved in the trusts transfer.
"The clients requested for the transfer of the administration of their trusts - trusteeships - from Guernsey to Singapore," she said.
On whether the clients were trying to evade taxes, she said: "Standard Chartered Bank takes a strong position against tax evasion. We do not provide clients with tax advice... and we do not assist or facilitate clients in hiding from their tax-reporting obligations."
She added: "We are committed to our ongoing programme of further strengthening our financial crime controls."
The spokesman said that StanChart has an ongoing training programme to strengthen internal controls and culture, including timely training to stay updated with the latest developments.
"We will continue to monitor, review and strengthen these measures to bolster our overall defence against potential financial crime risks."