2 June, 2016
A bank responsible for failing to meet its obligations to combat money laundering has been ordered to close its operations in Singapore by the country's financial regulator.
The Monetary Authority of Singapore (MAS) said BSI Bank's Singapore subsidiary was responsible for 41 breaches of anti-money laundering regulations, for which the bank has been fined SIN$13.3 million ($9.62m), and that its investigations have revealed "a pervasive pattern of non-compliance" by the company.
It is the first time that MAS has withdrawn its approval for a merchant bank since 1984, it said
"MAS’ decision to withdraw BSI Bank’s status as a merchant bank takes into account the repetitive lapses as well as the 2015 inspection findings which revealed: widespread control failures which led to numerous serious breaches of various anti-money laundering regulations; poor and ineffective oversight by the senior management of BSI Bank; unacceptable risk culture, with blatant disregard for compliance and control requirements as well as MAS’ regulations; numerous acts of gross misconduct by certain staff," MAS said.
"Specific regulatory lapses include the processing of multiple unusual transactions which were essentially pass-through trades often without economic substance. Approvals of such transactions were based purely on faith of client representations despite deficient documentation and concerns raised by the bank’s compliance officers," it said.
MAS said that it had identified failings in oversight by senior management at the bank.
"Their ineffective governance led to a poor risk culture, which prioritised questionable customer demands ahead of compliance with anti-money laundering regulations and the bank’s own internal controls," MAS said.
Six former staff members at the bank, including former chief executive Hans Peter Brunner and former deputy chief executive Raj Sriram, have been referred to Singapore's public prosecutor by MAS. The prosecutor will "evaluate whether they have committed criminal offences", the regulator said.
Criminal proceedings have already been launched against BSI Bank in Switzerland by Swiss prosecutors. Those proceedings relate to ongoing investigations into alleged corruption relating to the Malaysian state fund 1Malaysia Development Berhad (1MDB).
Swiss law "allows the prosecution of a company that is suspected of not taking all the reasonable organisational measures that are required to prevent third parties from committing offences, and in particular money laundering or corruption offences", the Office of the Attorney General of Switzerland said.
Ravi Menon, managing director of MAS, said the BSI Bank case is "the worst case of control lapses and gross misconduct" ever seen in Singapore's financial services sector.
Menon said: "It is a stark reminder to all financial institutions to take their anti-money laundering responsibilities seriously. Controls need to be robust, surveillance vigilant, and the management culture must emphasise professional integrity and risk consciousness. MAS is absolutely committed to safeguarding the integrity and reputation of Singapore’s financial centre. On this, there can be no compromise."
The assets and liabilities of BSI Bank in Singapore will be transferred to EFG International, a Swiss based bank with a branch in Singapore, after the Swiss Financial Market Supervisory Authority (FINMA) sanctioned EFG's takeover of BSI.
For further information, please contact:
Mohan Pillay, Partner, Pinsent Masons
mohan.pillay@pinsentmasons.com
