IN a decisive move that stunned private banking circles here, and one that could turn the spotlight on other private banks in Singapore, the Monetary Authority of Singapore ordered the local branch of Swiss bank BSI SA to shut its 11-year operations due to suspicious transactions and relationships. The bank has been embroiled in probes in different jurisdictions into scandal-hit 1Malaysia Development Bhd (1MDB).
MAS also slapped financial penalties of S$13.3 million on the bank for 41 breaches of anti-money laundering rules including failure to conduct enhanced customer due diligence on "high risk accounts" and to monitor suspicious customer transactions.
"BSI Bank is the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector," said MAS managing director Ravi Menon.
BSI Bank, which employs 200 people, was the custodian bank for some US$4 billion of funds invested by Malaysia's troubled state-backed firm -- BSI's clients include 1MDB, related entities and Malaysian tycoon Low Taek Jho - while assets of several of its former staff have been frozen as a result of the Commercial Affairs Department's probe into the beleaguered firm, deemed the most complex ever undertaken by the white-collar crime buster.
The 1MDB money trail is being investigated in at least seven other jurisdictions including Switzerland and the United States, with the clearest and serious outcome so far unfolding right here in Singapore. It also serves, in MAS's own words, as a "stark reminder" to all financial institutions to take their anti-money laundering responsibilities seriously.
MAS's statement was quickly followed by statements from the attorney-general offices of Singapore and Switzerland, also centred on the Swiss bank. The decision by Singapore's financial regulator was a culmination of three checks carried out on the bank since 2011, the latest involving an "intrusive inspection" in 2015 which found multiple breaches of anti-money laundering rules.
The last time that MAS took the severe step of withdrawing its approval for a merchant bank was in 1984, when Jardine Fleming (Singapore) Pte Ltd was shut down for serious lapses in advisory work.
"This is a strong and clear message from the Singapore regulator, and one which seems to go much farther than many market practitioners probably thought likely," said Michael Stanhope, founder and chief executive officer of Hubbis, a wealth management consultant.
Rarer still was the disclosure by MAS that six people whom it named - most were formerly with RBS Coutts in Singapore before joining BSI about five years ago - have been referred to the public prosecutor for criminal offence assessment.
The lapses and failings at the bank led by actions and omissions of these people and senior management's "gross dereliction of duty" and oversight failure had led to the decision to withdraw the bank's status as a merchant bank, said the regulator.
Those named are former CEO Hans Peter Brunner, former deputy CEO Raj Sriram, wealth management services head, who has been suspended, Kevin Michael Swampillai, and senior private bankers Yak Yew Chee and Yvonne Seah Yew Foong.
Yeo Jiawei is the only one who was named that has been charged. He is accused of nine offences, ranging from money laundering, forgery, cheating and obstruction of justice.
According to MAS, several of the bank's staff committed wilful acts of misconduct such as material misrepresentations to auditors, abetting improper asset valuations and taking instructions from persons other than customers' authorised representatives on matters relating to customers' accounts.
According to MAS, several of the bank's staff committed wilful acts of misconduct such as material misrepresentations to auditors, abetting improper asset valuations and taking instructions from persons other than customers' authorised representatives on matters relating to customers' accounts. It said that it was also reviewing other financial institutions and bank accounts through which suspicious and unusual transactions have taken place.
Singapore's Attorney-General Chambers, in acknowledging MAS's findings from its check on BSI Bank, said that it was working with CAD to review the facts before assessing the next course of action on the named individuals. But not everyone seemed satisfied with the pace of the probe, chiefly because thus far, only the alleged facilitators of the scandal appear to have been brought to task. "What about those who committed the crimes? The principals?" asked an impatient 1MDB watcher.
Switzerland's Office of the Attorney General (OAG), meanwhile, revealed that it has opened criminal proceedings against BSI SA based on findings of criminal proceedings in the 1MDB case and issues raised by its Financial Market Supervisory Authority (Finma). "The information suggests that the offences of money laundering and bribery of foreign public officials currently under investigation in the context of the 1MDB case could have been prevented had BSI SA been adequately organised."
The series of announcements by regulators here and in Switzerland was no doubt shattering for Lugano-based BSI SA, which managed 84 billion Swiss francs (S$117 billion) of client money as at end 2015.
The bank has issued a statement that group chief executive officer Stefano Coduri, who has helmed the bank since January 2012 and has spent his entire career at BSI (since 1989), has stepped down with immediate effect and is succeeded by BSI board member Roberto Isolani.
It also took pains to reiterate that the acquisition of BSI by EFG International, a Zurich-based private bank, that has been approved by Finma, is on track, adding that it has cooperated fully with the authorities in Switzerland and Singapore.
Finma also warned that the risk of money laundering has risen in recent years and that it was preparing to penalise six Swiss banks over their ties to alleged corruption in Malaysia and Brazil, reported Bloomberg.
BSI is a good example of the global reach of these kinds of scandals. "You have transactions that have run chiefly over Singapore, partly over Switzerland and also other financial centers . . . so this is an issue for the financial industry worldwide," said Finma chief executive Mark Branson.