Singapore Shuts Falcon Bank, Fines DBS, UBS Amid 1MDB Probe

Singapores central bank is shuttering Falcon Private Bank in the city-state on anti-money laundering breaches, the second bank to lose its license amid a probe on fund flows linked to 1Malaysia Development Bhd. or 1MDB.

The Monetary Authority of Singapore is withdrawing the merchant bank status of the Swiss private bank and said the local branch manager, Jens Sturzenegger, was arrested by the city-states Commercial Affairs Department on Oct. 5. The central bank also fined UBS Group AG and DBS Group Holdings Ltd.

The decision on Falcon follows “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 MAS said.

Singapore has vowed stronger action after the central bank found anti-money laundering lapses at financial-services companies linked to 1MDB. The city-state said in May it would revoke the license of the local unit of BSI SA and in July rebuked four banks — including Falcon, UBS and DBS — for lapses in controls, and announced the seizure of S$240 million ($175 million) in assets linked to the alleged fraud. Swiss prosecutors and U.S. authorities are also digging into how billions of dollars may have been diverted from 1MDB, which was intended to fund development projects across Malaysia.

The MAS has imposed financial penalties amounting to S$4.3 million on 14 breaches relating to its anti-money laundering rules. DBS was fined S$1 million and UBS S$1.3 million on lapses by specific bank officers, the regulator said, adding that it has completed its inspections of the two banks relating to 1MDB fund flows.

UBS and DBS said they will strengthen controls and take actions against employees responsible for the lapses. A person answering the phone at Falcons office in Singapore declined to comment. The bank said in March it has nothing to hide from regulators probing possible financial irregularities at the Malaysian state fund.

The boards and senior management at banks “must set the tone from the top that profits do not come before right conduct,” MAS Managing Director Ravi Menon said in the statement.
“MAS will work closely with the industry to ensure that standards are kept high and will take strong deterrent actions against institutions that fall short.

1MDB has consistently denied wrongdoing and Malaysias government has said it will cooperate with lawful investigations of local companies or its citizens in relation to the fund. Singapore has criminally charged four people, including three former BSI bankers for their roles in transactions and money flows linked to 1MDB.

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