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Wednesday
May252016

1MDB Scandal: Singapore closes BSI Bank for ‘serious AML breaches and gross mismanagement’

Singapore shut down the local operations of Swiss-based BSI Bank Tuesday and named six bankers suspected of possible criminal conduct in connection with the handling of a Malaysian government fund.

The Monetary Authority of Singapore (MAS) said it withdrew BSI Bank's status as a merchant bank in Singapore.

It was the first time MAS closed a bank since 1984.

The Singapore regulator didn't name 1Malaysia Development Bhd (1MDB) in its statement.

But in February, Singapore police and MAS seized a large number of bank accounts linked to a money laundering investigation involving the Malaysia state investment fund.

1MDB is chaired by Malaysia Prime Minister Najib Razak.

MAS Tuesday also fined BSI Bank $9.7 million for 41 breaches of the Prevention of Money Laundering and Countering the Financing of Terrorism law.

"The breaches include failure to perform enhanced customer due diligence on high risk accounts, and to monitor for suspicious customer transactions on an ongoing basis," MAS said.

Switzerland’s Office of the Attorney General Tuesday opened criminal proceedings against Lugano-based BSI.

Swiss prosecutors said earlier a criminal investigation produced “serious indications” that about $4 billion may have been misappropriated from 1MBD.

The AG's office said "a small portion" of the $4 billion was "transferred to accounts held in Switzerland by various former Malaysian public officials and both former and current public officials from the United [Arab] Emirates."

In Singapore, MAS said Tuesday it served BSI Bank a "notice of intention to withdraw its status as a merchant bank in Singapore for serious breaches of anti-money laundering requirements, poor management oversight of the bank’s operations, and gross misconduct by some of the bank’s staff."

MAS gave the Public Prosecutor the names of six members of BSI Bank’s senior management and staff "to evaluate whether they have committed criminal offenses."

They six are:

  • Hans Peter Brunner, former CEO
  • Raj Sriram, former Deputy CEO
  • Kevin Michael Swampillai, Head of Wealth Management Services
  • Yak Yew Chee, former Senior Private Banker
  • Yeo Jiawei, former Wealth Planner, and
  • Seah Yew Foong Yvonne, former Senior Private Banker

Swampillai is currently suspended by the bank, MAS said. Yeo is in custody and facing criminal charges for "various offenses."

BSI Bank had operated as a merchant bank in Singapore since November 2005.

It's a wholly-owned subsidiary of BSI SA, founded in Switzerland in 1873.

MAS said it is "working closely with the Swiss Financial Market Supervisory Authority (FINMA), the home regulator of BSI SA, to oversee an orderly closure of BSI Bank in Singapore."

In 2014, MAS inspected BSI and uncovered "serious shortcomings" in its due diligence checks on assets underlying the investment funds structured for the bank’s customers.

Another inspection in 2015 "revealed multiple breaches of anti-money laundering regulations and a pervasive pattern of non-compliance," MAS said.

Swiss authorities have already approved the acquisition of the entire BSI Group by EFG International, a bank headquartered in Switzerland.

MAS said it will allow the transfer of BSI's assets and liabilities to the Singapore branch of EFG Bank AG.

The Monetary Authority of Singapore's full statement of May 24, 2016 is here.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He'll be the keynote speaker at the FCPA Blog NYC Conference 2016