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FCPA Blog Daily News

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Thursday
Jul212016

Singapore seizes $177 million linked to 1MDB, cites AML lapses at UBS, Stanchart, DBS and Falcon

Singapore said Thursday it has seized property and bank accounts linked to money allegedly diverted from Malaysia's sovereign wealth fund, 1Malaysia Development Berhad.

The seized property and accounts are worth about $177 million, Singapore authorities said.

About $88 million belonged to Low Taek Jho, a private businessman named Wednesday in the DOJ's civil forfeiture complaint.

The Monetary Authority of Singapore (MAS) said its investigation of money flows linked to 1MDB revealed anti-money laundering lapses at four banks.

It named DBS Bank Ltd, Standard Chartered Bank, Singapore Branch, and UBS AG, Singapore Branch.

"MAS’ supervisory examinations, which began in March 2015, found lapses and weaknesses in anti-money laundering (AML) controls in these Singapore-based [banks]. MAS will be taking actions against" them, the regulator said in a statement.

Also named was Falcon Private Bank Limited, Singapore Branch.

MAS said it "found substantial breaches of AML regulations [at Falcon], including failure to adequately assess irregularities in activities pertaining to customers’ accounts and to file suspicious transaction reports."

The "supervisory examination of Falcon PBS is still ongoing," MAS said.

Evidence from Singapore played a key role in the 144-page civil forfeiture complaint the DOJ filed Wednesday against about $1 billion in assets allegedly bought with money looted from 1MDB.

In May, Singapore shut down the local operations of Swiss-based BSI Bank and detained six bankers suspected of possible criminal conduct in connection with the handling of the Malaysian government fund.

At least one former BSI wealth manager has been arrested, Singapore said Thursday.

BSI Bank is a private bank based in Switzerland that maintained a branch in Singapore.

The DOJ complaint described how BSI accounts were used to move some of the $3.5 billion allegedly misappropriated from the Malaysia sovereign wealth fund.

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Authorities in Singapore released two statements Thursday about the 1MDB investigation.

Here are the statements:

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Joint Statement by Attorney-General’s Chambers, Singapore (AGC)
Commercial Affairs Department, Singapore Police Force (CAD)
Monetary Authority of Singapore (MAS)

Singapore, 21 July 2016 … The AGC, CAD, and MAS announced today in a joint statement that the Singapore authorities have been investigating various 1MDB-related fund flows through Singapore, for possible money laundering, securities fraud, cheating, and other offenses 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 offenses 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 ($177 million). Of these bank accounts and properties, about S$120 million ($88 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 offenses. Several other individuals are still being questioned or investigated.

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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 anti-money 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 finalizing 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.

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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.