Singapore Puts 1MDB-Linked Banks on Notice: We’re Not Done

Singapore Warns Banks in 1MDB Investigation
  • Regulator says it’s still examining other financial firms
  • Lapses found at UBS, DBS, Standard Chartered and Falcon

Singapore’s central bank, which on Thursday singled out banks including UBS Group AG for lapses related to Malaysia’s scandal-riven investment fund, also put other financial firms on notice that it isn’t done probing the sector.

In a statement Thursday, the Monetary Authority of Singapore rebuked UBS, DBS Group Holdings Ltd. and two other banks for weaknesses in anti-money laundering controls related to transactions tied to 1Malaysia Development Bhd. MAS is still examining “certain other” financial institutions, it said without naming them, adding that details will be provided as it continues investigations that began in March 2015.

The statement is the latest twist in an evolving scandal centered on a fund set up in 2009 to bolster the Malaysian economy, and comes two months after MAS revoked BSI Bank Ltd.’s license for breaching money-laundering rules. Allegations that billions of dollars have been improperly siphoned out of 1MDB have led to investigations across the globe -- spanning from Abu Dhabi, Switzerland, and the Caribbean to Hong Kong and the U.S. 

Decisive Action

“MAS will take decisive regulatory actions against any FI that has breached regulations or failed to meet the expected AML standards,” the regulator said in its statement.

Singaporean authorities have also seized S$240 million ($177 million) in assets linked to 1MDB, MAS said. On Wednesday, the U.S. Justice Department launched legal proceedings to seize about $1 billion of assets linked to 1MDB that it claims was laundered through the U.S. banking system. More than $3.5 billion was misappropriated from the Malaysian fund, the department said.

Swiss authorities seized several paintings by Claude Monet and Vincent Van Gogh following a request by the U.S. to confiscate the artworks, a spokeswoman for Switzerland’s Federal Office of Justice said in an e-mail on Thursday.

For a QuickTake Q&A on 1MDB, click here.

In Singapore, the central bank said that “supervisory examinations of financial institutions with 1MDB-related fund flows have revealed a complex international web of transactions involving multiple entities and individuals operating in several jurisdictions.”

MAS said preliminary findings from its inspections had uncovered “instances of control failings” in UBS’s Singapore branch, Standard Chartered Plc’s local unit and at DBS, as well as “substantial breaches” of anti-money laundering regulations at Falcon Private Bank Ltd. The regulator vowed to take action against the four banks for the lapses, though the statement didn’t specify what they might be.

Suspicious Transactions

The central bank said its “supervisory examination” of Falcon is still ongoing: the oversight and management of “certain key client relationships” were done out of the bank’s head office in Switzerland, and MAS had asked for further details, it said.

The four banks said in separate statements on Thursday that they were cooperating with authorities. DBS, UBS and Standard Chartered said that they had reported suspicious transactions to the relevant agencies. Standard Chartered had “strengthened its anti-money laundering controls,” a spokesperson said.

For a Gadfly piece on the risk of being associated with 1MDB, click here.

There were cases of weakness at DBS and at the Singapore branches of Standard Chartered and UBS in the processes for accepting clients and transaction monitoring, as well as “undue delay” in detecting and reporting suspicious transactions, MAS said.

The regulator said in May that it’s closing the Singapore unit of Lugano-based BSI SA for breaches of money-laundering rules in relation to its 1MDB probe. The lapses at the other three banks were in specific processes and by individual officers, and not “pervasive control weaknesses” nor staff misconduct as was the case with BSI, MAS said.

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