No tolerance of financial breach

The looming ignominious demise of 143-year-old Swiss private bank BSI after it became embroiled in state fund 1Malaysia Development Berhad's (1MDB) scandal signals that money laundering will not be tolerated by the world's top financial centres.

The related shutdown of the bank's unit, BSI Bank, here over a "serious breach" of money-laundering regulations shows how well regulators in Singapore and Switzerland have cooperated.

Switzerland's Financial Market Supervisory Authority (Finma) on Monday noted that cooperation with the Monetary Authority of Singapore (MAS) was "particularly intensive". It said the MAS' "onsite investigations at the BSI unit in Singapore in parallel to Finma's proceedings identified comparable control failures".

In what appears to be a coordinated effort on Tuesday, the MAS moved to yank BSI Bank's licence to operate here and fined the bank $13.3 million for 41 regulatory breaches. Swiss officials opened criminal proceedings against BSI, while Finma ordered it to disgorge 95 million Swiss francs (S$132 million) in illegally generated profits. Finma also approved BSI's takeover by EFG International so long as BSI is integrated and dissolved within 12 months, and none of its top management responsible for the misconduct takes up leadership positions at EFG.

All this shows critics of Singapore's banking secrecy laws that the Republic has zero tolerance for those trying to hide criminal activity.

The MAS' drastic action is the first shutdown of a merchant bank here in 32 years. Its probes found a history of money-laundering breaches and weak financial controls at BSI Bank. Some breaches prompted MAS warnings but the bank did little to rectify the faults.The MAS is doing supervisory reviews of other financial institutions and bank accounts where suspicious transactions have taken place. It is ready to pounce if any are found to have breached regulations or fallen short of expectations.

As the 1MDB probe, spanning at least seven jurisdictions, intensifies, the question most are asking is: Who will the regulators' axe fall on next?

A version of this article appeared in the print edition of The Straits Times on May 27, 2016, with the headline 'No tolerance of financial breach'. Print Edition | Subscribe