- U.S. seeking to seize assets tied to Malaysia investment fund
- Lapses found at UBS, DBS, Standard Chartered, and Falcon
The global hunt for ill-gotten gains linked to a politically connected Malaysian state investment company widened on Thursday, as Singapore vowed to take action against four banks for what it called serious lapses in their anti-money laundering controls and seized S$240 million ($177 million) in assets linked to the financial institution known as 1MDB.
The move by the Monetary Authority of Singapore is the latest twist in an evolving scandal centered on 1Malaysia Development Bhd., a fund set up by Prime Minister Najib Razak in 2009 to bolster the Malaysian economy, that continues to reverberate across the global banking system.
The Singapore central bank’s preliminary findings uncovered “instances of control failings” in UBS Group AG’s Singapore branch, Standard Chartered Plc’s local unit and DBS Group Holdings Ltd., as well as “substantial breaches” of anti-money laundering regulations at Falcon Private Bank Ltd. in the city-state, it said in a statement Thursday. The regulator vowed to take action against the four banks for the lapses.
Allegations that billions of dollars have been improperly siphoned out of 1MDB has led to investigations across the globe -- spanning from Abu Dhabi, Switzerland, and the Caribbean to Hong Kong and the U.S. On Wednesday, the U.S. Justice Department said that more than $3.5 billion was misappropriated from the Malaysian fund, and the agency is seeking to seize about $1 billion of assets it claims was laundered through the U.S. banking system.
“Unfortunately and tragically, a number of corrupt officials treated this public trust as a personal bank account,” Attorney General Loretta Lynch said at a news conference in Washington. The civil action and asset seizures represent the “largest single action ever brought” by the Justice Department’s six-year-old Kleptocracy Asset Recovery Initiative, she said.
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.”
“Certain financial institutions in Singapore were among those used as conduits for these transactions” and MAS will be taking action against them, it said.
Singapore authorities have been investigating various 1MDB-related fund flows through the island nation for possible money laundering, securities fraud, cheating, and other offenses committed in the city. Bank accounts belonging to various people were seized and dealings in properties belonging to them curtailed, it said. About S$120 million in the accounts and properties belonged to Malaysian financier Low Taek Jho and his immediate family, it said.
Low has said he provided consulting to the fund that didn’t break any laws. Efforts to reach him for comment on Thursday via his Hong Kong-based company Jynwel Capital were unsuccessful, and the firm didn’t immediately reply to an e-mailed query on the asset seizure.
“These enforcement actions by enforcement authorities and regulators in the US and Singapore relating to the seizure of assets relating to 1MDB are, in all probability, coordinated internationally, showing a common front to fight laundering of proceeds of crime,” said Nizam Ismail, head of regulatory practice at RHTLaw Taylor Wessing LLP in Singapore.
The four banks named by MAS said in separate statements that they were cooperating with authorities, with DBS, UBS and Standard Chartered noting that they had reported suspicious transactions to the relevant agencies. Standard Chartered had “strengthened its anti-money laundering controls,” a spokesperson said.
In the case of UBS, the bank had earlier flagged suspicious transactions linked to 1MDB to Singapore regulators, prompting an investigation of the accounts involved, according to a person familiar with the matter. The transactions, however, were not immediately recognized by UBS as suspicious, said the person, who asked not to be identified because the matter is private.
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, the MAS said.
In its statement on Wednesday, the regulator also said:
- It had completed its inspections of DBS, Standard Chartered and UBS and is finalizing its assessment.
- 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 has asked for further details.
- It’s finalizing regulatory action against Raffles Money Change after an examination of the money changer and remittance agent revealed “weak management oversight, inadequate risk management practices and internal controls.”
- It’s still examining “certain other” financial institutions, the details of which will be provided when the inspections are completed. MAS didn’t name the firms.
The alleged scheme of money laundering and misappropriation tied to the Malaysian investment firm stretched from 2009 to 2015, the U.S. Justice Department said Wednesday. Malaysia’s government said Thursday it will cooperate with lawful investigations of local companies or its citizens.
The evolving scandal has also created negative publicity for Goldman Sachs Group Inc., which handled more than $6 billion in bond sales for 1MDB. The U.S. Justice Department, Federal Reserve, the Securities and Exchange Commission and New York’s Department of Financial Services are examining Goldman’s dealings with the fund. The bank hasn’t been accused of any wrongdoing.