SINGAPORE - The Monetary Authority of Singapore (MAS) on Tuesday (Oct 11) ordered that Falcon Private Bank cease its operations here.
In a statement, MAS said it is "withdrawing the merchant bank status of Falcon Private Bank Ltd, Singapore Branch (Falcon Bank) for serious failures in anti-money laundering (AML) controls and improper conduct by senior management at the Head Office in Switzerland as well as the Singapore Branch."
Falcon Bank's local branch manager, Jens Sturzenegger, was arrested by the Commercial Affairs Department on Oct 5, 2016.
MAS also imposed financial penalties amounting to $1 million on DBS for 10 breaches and $1.3 million on UBS for 13 breaches of MAS Notice 626 - Prevention of Money Laundering and Countering the Financing of Terrorism.
MAS said the actions on the three banks follow examinations into 1MDB-related fund flows that took place through these banks from March 2013 to May 2015.
Falcon Bank is the second Swiss bank, following BSI Singapore, that the monetary authority has shut down in Singapore.
This also comes a day after two former BSI bankers were charged in court with forgery.
MAS said it imposed a fine of $4.3 million on Falcon Bank for 14 breaches of MAS Notice 1014 - Prevention of Money Laundering and Countering the Financing of Terrorism. The breaches include failures to adequately assess irregularities in activities pertaining to customer accounts, and file suspicious transaction reports.
MAS said the clients of Falcon Bank are assured that the merchant bank, which is a branch of Falcon Private Bank Ltd in Switzerland, has the full support of its Head Office which is financially sound. MAS is working closely with FINMA, the home regulator of Falcon Private Bank Ltd, to oversee an orderly closure of the merchant bank branch in Singapore.
Headquartered in Switzerland, Falcon Bank has been operating as a merchant bank in Singapore since August 2008, offering boutique private banking services. MAS conducted inspections on Falcon Bank in 2013 and 2015. The 2013 inspection found weaknesses in the bank's controls for client acceptance and transaction surveillance that led to breaches of MAS' AML requirements, said MAS.
Falcon Bank paid a composition fine of $300,000 for these breaches then, and MAS had instructed the merchant bank to strengthen its AML controls. The 2015 inspection uncovered an even larger number of regulatory breaches, as well as serious failings on the part of Head Office senior management and the Singapore Branch Manager.
MAS said it decided to withdraw Falcon Bank's status as a merchant bank in Singapore, taking into account the following factors:
- The merchant bank's Head Office failed to guard against conflicts of interest when managing the account of a customer who was associated with the bank's former Board Chairman Mohamed Ahmed Badawy Al-Husseiny. The former Chairman misled and influenced the Singapore Branch into processing the customer's unusually large transactions despite multiple red flags.
- The improper conduct of the Singapore Branch Manager and certain senior managers at the Head Office had impaired the effectiveness of the Singapore Branch's compliance function in discharging its responsibilities. Their interference was wrongful and egregious in nature, and contributed to substantial breaches of AML regulations.
- Falcon Bank has demonstrated a persistent and severe lack of understanding of MAS' AML requirements and expectations. Taking into account the totality of Falcon Bank's conduct, MAS' assessment is that the merchant bank will be unable to comply with these requirements and expectations going forward.
In response to MAS' action, Falcon Bank said: "Although the withdrawal of the Singapore banking license is regrettable and disappointing, the decision will not impact the strategic development of the Bank.
"Falcon Private Bank is currently in close contact with employees, clients and partners and is committed to finding optimal solutions for all parties involved and guaranteeing an orderly wind down of the Singapore operation."
DBS said on Tuesday (Oct 11) that it will be taking appropriate action against staff - including senior executives - responsible for 1MDB-related lapses, local media reported.
It added that while the "control weaknesses" at the bank was not pervasive, it "should have taken more rigorous action with respect to the questionable activity, even if it was intentionally to conceal another purpose."