Singapore shuts second Swiss bank as 1MDB probe widens

Singapore's central bank shut down a second Swiss bank Tuesday and fined private banking giant UBS and a local lender in a widening crackdown on money-laundering linked to Malaysian state fund 1MDB.

Zurich-based Falcon Private Bank was ordered to cease operations in the city-state because of "serious failures in anti-money-laundering controls and improper conduct" by senior management both at the head office in Switzerland and the local branch, the Monetary Authority of Singapore (MAS) said in a statement.

Separately in Switzerland, financial regulators ordered Falcon to hand over some 2.5 million Swiss francs ($2.54 million) of what they described as illegal profits, and launched "enforcement proceedings" against two unnamed former executives with the bank.

Singaporean authorities arrested the bank's Singapore branch manager, Jens Sturzenegger, October 5, MAS said, adding that Falcon has been fined Sg$4.3 million (US$3.1 million) for 14 anti-money laundering breaches.

MAS also fined local bank DBS and Swiss lender UBS for breaches of anti-money laundering requirements.

Allegations of misappropriations of billions of dollars from 1MDB have triggered a corruption scandal in neighbouring Malaysia that has embroiled Prime Minister Najib Razak. Both Najib and 1MDB have strongly denied any wrongdoing.

Singapore, a regional financial hub, last year launched a probe into alleged illicit fund flows linked to a 1MDB.

Switzerland and the United States are also conducting their own investigations into 1MDB, with US Justice Department filing lawsuits to recover billions in assets it said were purchased by Najib relatives and associates with money stolen from 1MDB.

-- Banks 'blatantly misused' --

"The issues surrounding 1MDB form one of the largest cases of suspected corruption in recent times," Mark Branson, chief executive of the Swiss Financial Market Supervisory Authority FINMA, said in a statement.

"The global financial system has been blatantly misused. Suspect financial flows in the billions have been shifted through banks of multiple nationalities and financial centres on three continents, and warning signals ignored."

Singapore's regulator in May kicked out Swiss bank BSI for similar violations linked to the 1MDB probe, the first time it ordered a bank to shut in 32 years.

Swiss financial regulators later dissolved the Lugano-based BSI Bank.

At least three former BSI private bankers have been charged in Singapore in relation to the investigations.

In July, Singapore authorities said they had seized nearly $180 million in assets in their 1MDB probe -- half of which is linked to Low Taek Jho, a jet-setting Malaysian financier.

Better known as Jho Low, the 34-year-old -- a close Najib family friend, who has denied any wrongdoing -- helped set up 1MDB and played a key role in its financial decisions.

Swiss financial regulator FINMA said Falcon had not checked how one of its clients, described as a "young Malaysian businessman with links to individuals in Malaysian government circles," managed to acquire assets of $135 million "in an extremely short period of time".

FINMA also said Falcon had not verified why $1.2 billion was later transferred to the account of the same client -- who they did not name.

-- 'High level of risk' --

Singapore and Zurich are key global centres for wealth management for the world's super-rich.

During its investigation from 2012 to 2015, FINMA said it found that "assets amounting to approximately $3.8 billion were transferred to accounts at Falcon and associated with the 1MDB Group".

"The business relationships and transactions booked in Switzerland and at Falcon’s Singapore and Hong Kong branches were unusual and involved a high level of risk for the bank both through their nature and the amounts transacted," it said.

FINMA banned Falcon from having business relations with "foreign politically exposed persons" for three years and threatened to terminate Falcon Private Bank's license if it repeated the offence.

Falcon Private Bank, which is owned by Abu Dhabi's sovereign wealth fund, said although the withdrawal of its Singapore banking license was "regrettable and disappointing, the decision will not impact the strategic development of the bank."

Last month, the Paris-based watchdog Financial Action Task Force urged Singapore to take more aggressive action against complex cross-border money laundering.

Source: AFP