Monetary Authority of Singapore (MAS) has closed Falcon Private Bank’s Singapore branch and imposed a S$4.3m ($3.1m) fine after finding the Swiss bank guilty of misconduct in its dealings with scandal-ridden 1 Malaysia Development Bhd (1MDB).
Falcon was responsible for “serious failures in anti-money laundering controls and improper conduct by senior management at the head office in Switzerland as well as the Singapore branch,” the country’s central bank and financial regulator said in a statement on Tuesday.
Falcon’s closure follows MAS’s decision to shut down the Singapore operations of BSI Bank in May for alleged money laundering. Two former BSI employees were arrested on Monday on charges related to the 1MDB investigation.
MAS confirmed that the authorities arrested Jens Sturzenegger, Falcon’s Singapore branch manager on 6 October.
Falcon’s Switzerland 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,” who asked the Singapore branch to process “unusually large transactions despite multiple red flags,” said MAS.
Assets amounting to approximately $3.8bn were transferred to accounts at Falcon and associated with the 1MDB Group during the period between 2012 and the summer of 2015, according to a separate statement from the Swiss Financial Market Supervisory Authority (FINMA).
FINMA highlighted a particular instance of Falcon’s behaviour, describing its dealings with a young Malaysian businessman with links to individuals in Malaysian government circles.
“The bank did not verify how this individual had been able to acquire assets of $135m in an extremely short period of time or why a total of $1.2bn was transferred to his accounts at a later date.”
“Falcon also failed to adequately investigate the commercial background to pass-through transactions amounting to $681m and the repayment six months later of $620m via these accounts despite conflicting evidence. In this context, an internal Falcon email states: ‘We started this six months ago and now we have to go through with it – somehow’,” noted FINMA.
The bank also apparently ignored internal warnings about its 1MDB-related transactions.
FINMA identified around $3.8bn associated with the 1MDB Group that was transferred to accounts at Falcon between 2012 and mid-2015 and then subsequently diverted.
“The business relationships and transactions booked in Switzerland and at Falcon’s Singapore and Hong Kong branches were unusual and involved a high level of risk for the bank both through their nature and the amounts transacted,” it said.
MAS called the actions of the Singapore branch manager and certain senior managers at the head office as “wrongful and egregious in nature.”
FINMA ordered the surrender of CHF2.5m ($2.54m) in illegally generated profits, and banned the Falcon from entering into new business relationships with foreign politically exposed persons for three years. It also launched enforcement proceedings against two of the bank’s former executives.
Zurich-based Falcon is owned by one of the world’s leading sovereign wealth funds, Abu Dhabi’s International Petroleum Investment Company.
It said in a statement that it welcomed “the completion of the investigations, which finally resolves the 1MDB topic for the bank with the regulators”.
The forced closure of its Singapore branch is “regrettable and disappointing”, it added, while “Falcon Private Bank will now concentrate on further growing its franchise.”
Meanwhile, MAS also slapped DBS and UBS with S$1m and S$1.3m fines respectively, and a ruling on Standard Chartered Bank will be announced later.
DBS and UBS were found to have anti-money laundering breaches and control lapses, but “MAS’ inspections did not find pervasive control weaknesses within these banks,” the regulator noted.
