MAS fines, closes Falcon Private Bank

The MAS said yesterday that it was withdrawing the merchant-bank status of Falcon Private Bank, Singapore Branch, for serious failures in anti-money-laundering (AML) controls and improper conduct by senior management at the head office in Switzerland and the Singapore branch.
The MAS said Falcon Bank’s Singapore branch manager, Jens Sturzenegger, was arrested by the Commercial Affairs Department last Wednesday.
Falcon Bank is the second financial institution after BSI Singapore to be forced to cease operations in the city-state in its probe of 1Malaysia Development Berhad.
Before BSI, the last time the MAS shut down a financial institution was in 1984 when it ordered the closure of Jardine Fleming (Singapore) for serious lapses in its advisory work.
The MAS is also imposing penalties amounting to 1 million Singapore dollars (Bt25.5 million) on DBS for 10 breaches and S$1.3 million on UBS for 13 breaches of MAS Notice 626 – Prevention of Money Laundering and Countering the Financing of Terrorism.
The two banks must also appoint an independent party to confirm that the rectification measure has been “effectively implemented” and must report their findings to the MAS.
Singapore’s central bank said the actions on the three banks followed supervisory examinations into 1MDB-related fund flows that took place through these banks in 2013-15.
The MAS’s actions also come a day after two more former bankers at BSI Singapore were charged in court with 1MDB-related offences.
“Keeping Singapore a clean and trusted financial centre is a shared responsibility,” MAS managing director Ravi Menon said in a statement yesterday.
“The board and senior management of each financial institution play a pivotal role. They must put in place robust mechanisms to detect suspicious activities, promote strong risk awareness among their staff and empower their compliance and risk-management people.
“Most of all, they must set the tone from the top that profits do not come before right conduct,” he said.
“MAS will work closely with the industry to ensure that the standards are kept high and will take strong deterrent actions against institutions that fall short.”
The MAS said it had imposed penalties amounting to S$4.3 million on Falcon Bank for 14 breaches of MAS Notice 1014 – Prevention of Money Laundering and Countering the Financing of Terrorism.
The breaches include failures adequately to assess irregularities in activities pertaining to customer accounts and file suspicious-transaction reports. The MAS said its investigations benefited from close cooperation with various overseas regulatory counterparts, particularly the Swiss Financial Market Supervisory Authority (Finma).
It said clients and customers of Falcon Bank were assured that the merchant bank in Singapore had the full support of its head office, which is financially sound.
The MAS is also working closely with Finma to oversee an orderly closure of the merchant bank’s branch in Singapore.
Falcon Bank has been operating as a merchant bank in Singapore since August 2008.
The MAS conducted inspections on Falcon Bank in 2013 and 2015. The 2013 inspection found weaknesses in the bank’s controls for client acceptance and transaction surveillance that led to breaches of AML requirements, according to the authority.
Falcon Bank paid a composition fine of S$300,000 for these breaches, and the MAS instructed the merchant bank to strengthen its AML controls. However, the 2015 inspection uncovered an even larger number of regulatory breaches and serious shortcomings on the part of the head office’s senior management and the Singapore branch manager.
According to the MAS, Falcon Bank has demonstrated a persistent and severe lack of understanding of the Singapore authority’s AML requirements and expectations.