MAS name and shame banks following 1MDB-related investigations

Singapore's central bank has vowed to get tougher on financial institutions that breach its regulations after a probe into transactions linked to the Malaysian state fund 1Malaysia Development Berhad (1MDB) uncovered money-laundering lapses within the island city.

The Monetary Authority of Singapore's Managing Director, Ravi Menon, told reporters at a press briefing on Monday (25 July) that the shortcomings uncovered - following its probe into fund flows linked to 1MDB - are "simply unacceptable". He acknowledged that Singapore's reputation had "taken a dent" as a result of the lapses, The Edge Markets reports



Recent investigations into 1MDB-related fund flows through Singapore demonstrate that the Monetary Authority of Singapore (MAS) and the relevant authorities are prepared to name and shame financial institutions operating in the city-state for serious regulatory breaches. 

The perception that MAS has been less than prominent in carrying out strong enforcement actions against financial institutions for breaches is longstanding but that no longer stands following its recent enforcement action taken against BSI Bank and other financial institutions for possible money laundering, securities fraud, and other offences in relation to the troubled 1MDB. 

A joint 
press release issued on July 21 by MAS, the Attorney-General's Chambers, the Commercial Affairs Department (CAD) and the Singapore Police Force said investigations into 1MDB-related fund flows through Singapore began in March 2015. 

The fund flows being investigated were connected with Good Star Limited (Seychelles), Aabar Investments PJS Limited (BVI), Aabar Investments PJS Limited (Seychelles), and Tanore Finance Corp. (BVI).

MAS is examining a number of financial institutions which were used as conduits for the fund flows for possible regulatory breaches and control lapses in relation to 1MDB. The CAD is investigating individuals suspected of committing offences in Singapore related to these flows. 

Naming and shaming

Rebecca Thorpe, head of boutique consultancy Bovill Asia in Singapore, said MAS has put a strong focus on increasing its enforcement powers in recent years and along with that a range of options it can use against financial institutions for breaches, which act as deterrence. These include criminal sanction, civil penalties, prohibition order which seeks to prevent financial institutions and individuals from carrying out regulated activities, and reprimands and warning. 

Thorpe said the list above started with the most severe enforcement action but all constituted a threat. She said it would be interesting to see the next course of action from MAS, the CAD, the Singapore Police Force and the Attorney-General's Chambers following their investigations into the 1MDB-related fund flows. 

"The naming of financial institutions and people is a strong signal from the regulators, that they mean business and that the threat of enforcement is to be taken seriously. BSI Bank is not a one-off; my prediction is that we can expect that other financial institutions will be taken through the enforcement process, and it will be interesting to see which specific deterrents will be used," she said.

Reputation risk

Nizam Ismail, partner at RHTLaw Taylor Wessing in Singapore, said the naming and shaming approach has major implications, chief of which is reputation risk.

"Having their [financial institutions'] name mentioned in MAS press releases and on its website constitutes a big reputation risk. For financial institutions, reputation is everything," he said.

While investigations into 1MDB-related fund flows in the city-state remain in progress, MAS has named a few banks in its press statement released on July 21 for regulatory breaches, weaknesses in AML controls, client onboarding and transaction monitoring, among others. The financial institutions named were
Falcon Private Bank, DBS Bank, Standard Chartered Bank, Singapore branch, UBS AG, Singapore branch, and BSI Bank, Singapore branch.

Nizam said the fact MAS has named Falcon Bank despite continuing investigations was unprecedented and that AML/CFT was mentioned extensively in its latest annual reports was also significant. The MAS annual reports mentioned extensively its recent AML enforcement actions against financial institutions involved in carrying out transactions for 1MDB; its increased intensity in inspecting Singapore-based financial institutions, and its reliance on sophisticated surveillance tools to detect suspicious transactions.

In its press release also issued on July 21, MAS said the supervisory examination of Falcon Private Bank Singapore branch is in progress and it has asked its head office for further details. Inspections of DBS, Standard Chartered Bank and UBS have been completed and MAS is in the process of finalising its assessments.

Six-fold increase in AML/CFT inspections

The annual report also talked about the six-fold increase in MAS' inspections of AML/CFT process at financial institutions from 108 inspections between 2010 and 2013 to 608 inspections between 2013 and 2016. Nizam expects to see MAS carries out more intensive supervision in future.

"We can see more intensive supervision going forward. The message [from MAS] is that 'we have enough of regulations but compliance seems to be lacking'. Ravi Menon said in the annual report that Singapore's AML law is already quite stringent. He was disappointed with the insufficient compliance on AML/CFT obligations," he said. 

Thorpe does not think changes to Singapore's legislation in relation to AML are needed; it is more important that financial institutions follow the legislation already in place. She expects to see MAS continue to carry out more frequent supervision and enforcement actions, and in some cases an increase in scrutiny during the licensing applications, in particular, for new entrants to Singapore's financial services sector. 

"There will be an increase in expectations from a supervisory perspective [that require financial institutions] to place even more time and focus on the whole range of AML processes, not just KYC but also ongoing monitoring of customer relationships and reassessing the financial crime risk posed by ongoing customers, as well as transaction monitoring and screening," she said.

Compliance culture, values and ethics

Nizam said those banks which were taken to task by MAS including BSI Bank, and those recently named such as DBS, Standard Chartered Bank and UBS should be well-resourced with the necessary processes and controls in place. The breaches were largely a result of human lapses, and in the case of BSI Bank, egregious behaviour of employees and weak 
compliance culture

"This point towards the need for AML compliance programmes to be backed by a strong compliance culture and a strong sense of values and ethics; it's about doing the right thing

Singapore, 21 July 2016 …


The AGC, CAD, and MAS announced today in a joint statement that the Singapore authorities have been investigating various 1MDBrelated fund flows through Singapore, for possible money laundering, securities fraud, cheating, and other offences committed in Singapore.


We note the statement by the US Attorney General on 20 July 2016, seeking the forfeiture and recovery of more than US$1 billion in assets associated with an international conspiracy to launder funds related to 1MDB. Singapore’s investigations began in March 2015 and are still in progress.


The fund flows being investigated include those connected with Good Star Limited (Seychelles), Aabar Investments PJS Limited (BVI), Aabar Investments PJS Limited (Seychelles), and Tanore Finance Corp. (BVI).


The criminal investigations by CAD are targeted at individuals suspected of committing offences in Singapore related to these flows, while MAS has been examining the financial institutions through which the funds flowed for possible regulatory breaches and control lapses.


In the course of the investigations, bank accounts belonging to various individuals have been seized and dealings in properties belonging to some of these individuals have been curtailed. The assets amount in total to S$240 million.


Of these bank accounts and properties, about S$120 million belong to Mr Low Taek Jho and his immediate family.


Singapore has made a number of requests for information to countries where these funds originated from or were subsequently sent to. Some of these requests are still being processed. Several countries have likewise requested Singapore’s assistance in relation to questionable fund flows pertaining to monies suspected to have originated from 1MDB. Singapore has promptly acceded to all such requests, in compliance with our international obligations.


Appropriate actions will be brought against those who have broken Singapore’s laws.


To-date, two individuals – Mr Yeo Jiawei and Mr Kelvin Ang – have been charged for various offences. Several other individuals are still being questioned or investigated. Statement by Monetary Authority of Singapore Actions to be taken against Financial Institutions


Singapore, 21 July 2016 …


The MAS announced today that its supervisory examinations of financial institutions (FIs) with 1MDB-related fund flows have revealed a complex international web of transactions involving multiple entities and individuals operating in several jurisdictions. Certain FIs in Singapore were among those used as conduits for these transactions. MAS’ supervisory examinations, which began in March 2015, found lapses and weaknesses in antimoney laundering (AML) controls in these Singapore-based FIs. MAS will be taking actions against these FIs. MAS’ supervisory examinations included detailed onsite inspections, and analysis of information obtained from regulators abroad. They revealed extensive layering of transactions and subterfuge aimed at disguising the nature of certain activities and fund flows. In some instances, shell or unauthorised companies domiciled in various jurisdictions were used to conceal the true beneficiaries of the funds. MAS’ findings to-date on the lapses and weaknesses in Singapore-based FIs in managing 1MDB-related flows are summarised below.


The FIs include banks, capital market intermediaries, and a remittance agent.



BSI Bank Limited Singapore (BSI Bank)


MAS completed its examination of BSI Bank in May 2016. MAS decided to withdraw its status as a merchant bank in view of its serious breaches of AML requirements and poor management oversight, and gross misconduct by some of the bank’s staff. DBS Bank Ltd (DBS),


Standard Chartered Bank, Singapore Branch (SCB), and UBS AG, Singapore Branch (UBS)


MAS has completed its inspections of DBS, SCB, and UBS, and is now finalising its assessments. The preliminary findings are that there were instances of control failings in all three banks and, in some cases, weaknesses in the processes for accepting clients and monitoring transactions. There was also undue delay in detecting and reporting suspicious transactions. The deficiencies observed in DBS, SCB and UBS related to lapses in specific processes and by individual officers. The lapses were serious in their own right, and will be met by firm regulatory actions against the banks. However, the MAS’ inspections did not reveal pervasive control weaknesses or staff misconduct within these banks, unlike in the case of BSI Bank.


Falcon Private Bank Limited, Singapore Branch (Falcon PBS)


MAS completed its onsite inspection of Falcon PBS in April 2016, and found substantial breaches of AML regulations, including failure to adequately assess irregularities in activities pertaining to customers’ accounts and to file suspicious transaction reports. However, the supervisory examination of Falcon PBS is still ongoing as the oversight and management of certain key client relationships were done out of the bank’s head office in Switzerland. MAS is examining information obtained from Falcon PBS’ head office and has asked for further details.


Raffles Money Change (RMC)


MAS has completed its examination of RMC, a licensed money changer and remittance agent. The examination revealed weak management oversight, inadequate risk management practices and internal controls. Specific findings include failure to identify beneficial owners, verify authenticity of remittance instructions, and assess if a customer’s remittance activities are consistent with the profile of the customer. MAS is finalising regulatory actions against RMC. MAS’ examination of certain other FIs are ongoing. More details will be provided when these examinations are completed. MAS will take decisive regulatory actions against any FI that has breached regulations or failed to meet the expected AML standards.