Finance

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Tidjane Thiam got away with a fine of half a million dollars, or just 0.009 percent of what he paid the Americans late last year. Yet the Credit Suisse Group AG CEO won't be fooled by Singapore's apparent leniency.

Tuesday's gentle rap concludes a two-year investigation by the city-state into banks that, knowingly or otherwise, helped facilitate an elaborate scheme in which billions of dollars were allegedly looted from a Malaysian state investment firm and laundered.

The Monetary Authority of Singapore's S$700,000 ($504,000) penalty levied on Credit Suisse is the lowest so far in the 1MDB scandal. Other lenders, including UBS Group AG, Standard Chartered Plc, Coutts & Co. and DBS Group Holdings Ltd., have been previously fined between S$1 million and S$5.2 million for their alleged involvement. Even United Overseas Bank Ltd., admonished alongside Credit Suisse, will pay S$200,000 more.

Fine Times
European banks' litigation expenses last year totaled $17.6 billion, a much larger sum than their North American counterparts at $2.3 billion
Source: Bloomberg Intelligence

A $504,000 bill might appear like a rounding error. Credit Suisse entered into a $5.3 billion settlement with the U.S. Department of Justice in December over its role in selling toxic mortgage securities that precipitated the 2008 subprime crisis.

Even by Singapore's own standards of cleanliness, Thiam escaped cheaply. If he were to drop one soiled tissue a day from the window of an apartment anywhere on the island, he would be paying a bigger penalty in three years and three months than his bank just did for "breaches of anti-money laundering requirements and control lapses."

Still, Thiam won't take the disciplining lightly. The MAS doesn't believe in punishing shareholders for acts of employees. At the same time, the reputation of the island's financial center is increasingly more important than being perceived as a friendly regulator one can drop in on for tea and counsel.

Times have changed. Jakarta got upset last year that Singapore banks were reporting to the city's police the details of Indonesian clients who had chosen to participate in their home country's tax amnesty program. As Gadfly noted then, banks don't have a choice. Such reporting is now required by Singapore's commitment to the Financial Action Task Force, an inter-governmental organization that in 2012 included serious tax offenses on its list of predicate violations for money laundering.

Forget the chump change of a fine. Behind the scenes, there is considerable regulatory pressure on Credit Suisse and others to beef up their processes and invest in cutting-edge client identity-management systems.

These investments are far more significant than the usual PR-speak that arrived soon after the penalty, announcing Credit Suisse would donate its profit from the questionable 1MDB transactions to a worthy cause.

Filthy Rich
Assets under management at Credit Suisse Private Banking totaled $163.8 billion in 2016
Source: Asian Private Banker
Note: Shows Asia (ex China onshore) assets under management. Figures for UOB Private Bank don't exist prior to 2015.

The compliance burden in Asia is such that private banks are now chasing assets to be able to defray the costs over a larger number of wealthier, more risk-loving clients. Unless a blockchain revolution cuts regulatory costs by, say, 80 percent, banks that don't already have scale won't survive.

That's not a worry for Thiam, though. Credit Suisse's third rank behind UBS and Citigroup Inc. in the Asia ex-China private banking market gives it a big enough pool of customer assets to invest, including in technology that would keep the regulator happy.

The light slap in public belies the heavy pressure in private. Make no mistake. Thiam knows the true price of littering in Singapore.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. The sharp end of the stick went to Falcon Private Bank Ltd. and BSI Bank Ltd., whose Singapore operations were shut down by the regulator last year. 

To contact the author of this story:
Andy Mukherjee in Singapore at amukherjee@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net