Lessons to learn from BSI Bank closure

In anti-money laundering terms, the shutting down of BSI Bank by the Monetary Authority of Singapore (MAS) is equivalent to a "death penalty" - the ultimate punishment ("1MDB probe: BSI Bank told to stop operations in S'pore"; last Wednesday).

What can we learn from this?

First, MAS is sending a clear and powerful message to all banks in Singapore that it has zero tolerance for money laundering.

Money laundering is a form of "cancer" to banking. So, all banks must take their anti-money laundering responsibilities seriously.

MAS is also sending an indirect message to bank customers not to launder their "dirty" money here.

Second, banks must not pursue business at the expense of their anti-money laundering duties.

No matter how important a client is to a bank, its priority must not be just to please the client. This vulnerability is more pronounced in the private banking industry.

Third, the senior management of a bank is responsible for setting the compliance culture of the bank. It must start from the top.

MAS accused BSI's senior management of "gross dereliction of duty and failure to discharge oversight responsibilities".

This is a damning indictment of any senior management of a bank.

When senior management compromises its duty, do not expect front-line employees to be compliant.

Fourth, mismanagement of a bank can lead to the misconduct of its front-line employees, in their pursuit of more lucrative bonuses and commissions, for example.

Fifth, there is personal criminal liability for gross misconduct. Bank employees often operate under the misconception that if they breach compliance rules, they simply lose their jobs.

But MAS took the unprecedented step of referring six of BSI's senior management staff to the public prosecutor. This means that these employees may eventually be prosecuted for money laundering offences.

Bankers must learn that they are not immune from prosecution when it comes to money laundering.

Finally, when a bank loses its banking licence, innocent employees get punished as well. They lose their jobs. Why should innocent employees lose their jobs because of the greed of some colleagues?

Tan Sin Liang

A version of this article appeared in the print edition of The Straits Times on June 01, 2016, with the headline 'Lessons to learn from BSI Bank closure'. Print Edition | Subscribe