Singapore shuts second Swiss bank over 1MDB corruption scandal
Monetary authority orders closure of Falcon Private Bank and fines UBS and DBS
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| Licence withdrawn in Singapore: Switzerland's Falcon Private Bank © Reuters |
Authorities in Europe and Asia have cracked down on an Abu Dhabi-owned private bank that allegedly processed almost $4bn linked to Malaysia’s scandal-hit 1MDBstate investment fund and sent $681m to the country’s prime minister.
Switzerland on Tuesday accused Zurich-based Falcon Private Bank of serious anti-money laundering failings and Singapore withdrew its local banking licence over dealings related to alleged large-scale international corruption involving 1MDB. The city state’s monetary authority also separately fined UBS of Switzerland and Singapore’s DBS Bank for 1MDB-linked rule breaches.
The action is the latest thrust in an escalating regulatory clampdown against financial institutions over the 1MDB affair, as authorities in the US, Switzerland and elsewhere probe claims of multibillion-dollar looting from the fund. Singapore earlier this year ordered BSI, the Swiss private bank, to close its local operation over what regulators branded “the worst case of control lapses and gross misconduct” seen in the city-state’s financial sector.
Switzerland’s financial regulator Finma is investigating four other Swiss banks in addition to Falcon and BSI. Finma on Tuesday confirmed UBS was one of the banks under investigation. Royal Bank of Scotland is also being probed over transactions at its former Coutts International subsidiary.
The regulatory action is the latest sign of how the 1MDB case has pulled in leading banks, notably Goldman Sachs, which arranged bond issues totalling $6.5bn for 1MDB in 2012 and 2013. Goldman has denied any wrongdoing.
Mark Branson, Finma chief executive, said the global financial system had been “blatantly misused” in the 1MDB case. He said: “Suspect financial flows in the billions have been shifted through banks of multiple nationalities and financial centres on three continents, and warning signals ignored.”
Finma accused Falcon of serious anti-money laundering failings and said the bank had received about $3.8bn of 1MDB-linked funds that “were generally moved on quickly”. It alleged the bank had failed to verify why $1.2bn was transferred to the account of “a young Malaysian businessman with links to individuals in Malaysian government circles” — an apparent reference to Jho Low, who has been accused by US authorities of misappropriating 1MDB funds. Mr Low, who has not been charged with any offence, has previously denied any wrongdoing.
Finma said Falcon also failed to adequately investigate the commercial background of $681m of “pass-through transactions” that flowed from its accounts and the return six months later of $620m. The $681m figure is the exact amount of mysterious payments made in 2013 to Najib Razak, Malaysia’s prime minister, although the regulator did not name the recipient. Mr Najib has denied any wrongdoing, while Malaysia’s attorney-general has said the money was a gift from the Saudi Arabian royal family.
Finma ordered Falcon to disgorge profits of SFr2.5m allegedly generated illegally and banned the bank from doing business with foreign politically exposed persons for three years. The regulator has also launched enforcement action against two former Falcon executives. The Swiss attorney-general’s office said it was considering whether to launch criminal proceedings against the bank.
Singapore’s central bank ordered Falcon to shut down its local operation over alleged serious anti-money laundering failings and improper conduct by senior managers. It said it had been informed that Jens Sturzenegger, manager of Falcon’s Singapore branch, had been arrested by the government’s commercial affairs department last week. Mr Sturzenegger was not immediately available for comment.
The central bank said Falcon had processed “unusually large” transactions of a customer associated with Mohamed Badawy Al-Husseiny, the former Falcon board chairman, despite “multiple red flags”. Mr Husseiny, who was also the head of Aabar Investments, the Abu Dhabi state fund that owns Falcon, has been accused by US authorities of involvement in a plot to siphon about $1.37bn of 1MDB money into a British Virgin Islands company. He could not immediately be reached for comment.
Falcon welcomed the completion of the regulatory action but said the decision to scrap its Singapore licence was “regrettable and disappointing”. It said it had now put in place “additional measures to prevent future issues”.
Falcon appears to have avoided severer sanctions – which could have seen its licence revoked – by seeking to make a fresh start, including a new chief executive, Walter Berchtold, who took over in September.
The Singapore central bank also handed out fines of S$1.3m ($943,000) to UBS and S$1m to DBS for breaches of anti-money laundering rules. A Singapore investigation into Standard Chartered Bank has yet to be completed.
UBS said: “We are disappointed we did not do more to detect and report this earlier.” DBS said: “We should have taken more rigorous action with respect to the questionable activity, even if it was intentionally designed to conceal another purpose.”
StanChart said it would be “inappropriate” to comment ahead of the conclusion of the Singapore probe.
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