SINGAPORE – Three lenders – DBS Bank, OCBC Bank and Citibank Singapore – and insurer Swiss Life Singapore have been fined $3.8 million for breaching anti-money laundering and anti-terrorism financing rules, in a matter related to the Wirecard scandal.

The Monetary Authority of Singapore (MAS) on Wednesday said the breaches were identified when it examined the four entities following news of irregularities in Wirecard’s financial statements, as well as the alleged involvement of Singapore-based individuals and entities in the matter.

The four financial institutions were found to have inadequate controls in place.

Breaches included failure to inquire into the background and purpose of transactions, failure to maintain relevant and up-to-date customer due diligence information relating to customers’ beneficial ownership, and failure to adequately establish the source of wealth of higher-risk customers and their beneficial owners.

“Although the breaches were serious, MAS did not find wilful misconduct by any staff of these financial institutions,” the regulator said.

MAS said its checks were focused on assessing the adequacy of the financial institutions’ anti-money laundering and anti-terrorism financing policies and controls. 

It added that the police’s Commercial Affairs Department is in charge of investigations into whether the funds that flowed into or through the financial institutions were illicit monies.

Of the four entities, DBS was fined $2.6 million for breaches between July 2015 and February 2020 relating to accounts maintained by 11 corporate customers.

OCBC was fined $600,000 for breaches between June 2015 and January 2016 relating to accounts maintained by one corporate customer.

Citibank was fined $400,000 for breaches between September 2019 and June 2020 relating to accounts maintained by two corporate customers, while Swiss Life was fined $200,000 for breaches in May 2017 relating to an investment-linked life insurance policy it had underwritten.

MAS said the financial institutions have taken “prompt remedial actions” to address the deficiencies that were identified. These included enhancements to their procedures and processes, and training to improve staff vigilance in detecting and escalating risk concerns.

MAS also said it has completed its investigation into business administration firm Citadelle for suspected contravention of the Trust Companies Act (TCA) by carrying on a trust business without a licence.

The investigation did not reveal any breaches of the TCA by Citadelle and no further action against the firm will be taken, MAS added.

In response to media queries, DBS and OCBC noted that the Wirecard case involved an intricate web of entities, and the transactions were part of an elaborately orchestrated scheme that involved a network of complex corporate structures and arrangements to conceal the actual control and the beneficial ownership.

DBS said it “could have done better”, adding: “While we detected and acted upon some of these activities through transaction monitoring and customer due diligence – and ultimately exited all relevant entities – we were unable to unravel the scheme in its entirety.”

DBS said it is now in a materially better position to respond faster and more robustly if faced with similar circumstances.

OCBC said it takes such matters seriously, adding that over the past few years, it has devoted significant resources to uplift such standards and capabilities.

“Our transaction monitoring, due diligence and know-your-customer processes have been further enhanced.

“We have also deployed data analytics, which has yielded positive outcomes in money laundering and financing terrorism risk detection and mitigation,” OCBC said.

When asked, Citibank Singapore said this is the first time it has been fined for such breaches.

“The case dates back to before June 2020, and since then we have taken steps to strengthen our know-your-customer process.”

Swiss Life Singapore said it cooperated closely with the authorities and additional measures have been implemented to detect client misconduct more effectively.

The highest penalty meted out for such breaches was to BSI Bank in May 2016.

MAS had ordered it to shut down and imposed a fine of $13.3 million for 41 counts of anti-money laundering breaches relating to the 1Malaysia Development Berhad (1MDB) scandal.

In December 2016, Standard Chartered Singapore was fined $5.2 million for breaching anti-money laundering rules in relation to the 1MDB scandal.

The penalty comes a day after two former employees of Wirecard Asia were jailed on Tuesday for helping their superior embezzle funds from the subsidiary of the German-registered international payment services company.

This makes it the first Wirecard-related conviction in the world.

The alleged mastermind, Wirecard Asia vice-president of controlling and international finance Edo Kurniawan, escaped Singapore before he could be arrested. There is an Interpol red notice issued against him.

The payments firm was a darling of Germany’s tech industry until it collapsed spectacularly in 2020 after acknowledging that billions in assets it listed on its books did not exist.

The accounting scandal shocked the world and prosecutors are still pursuing those involved in the fraud scheme.