SINGAPORE: The Monetary Authority of Singapore (MAS) has served notice on BSI Bank Ltd (BSI Bank) of the intention to withdraw its
status as a merchant bank 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.
In addition, MAS has referred to the Public Prosecutor the names of six of BSI Bank’s senior management and staff, to evaluate whether they have committed criminal offences.
“BSI Bank is the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector. It is a stark reminder to all financial institutions to take their anti-money laundering responsibilities seriously,” MAS’ Managing Director, Ravi Menon said in a statement here.
“Controls need to be robust, surveillance vigilant, and the management culture must emphasise professional integrity and risk consciousness.
“MAS is absolutely committed to safeguarding the integrity and reputation of Singapore’s financial centre. On this, there can be no
compromise,” he added.
BSI Bank has been operating as a merchant bank in Singapore since November 2005 where it offers private banking services.
It is a wholly-owned subsidiary of BSI SA, a bank founded in 1873 and headquartered in Switzerland.
MAS said that clients and customers of BSI Bank are assured that the Bank is solvent and has assets in excess of its liabilities and commitments.
It also has the full support of its parent bank, BSI SA, in Switzerland, the authority said.
MAS is working closely with the Swiss Financial Market Supervisory Authority (FINMA), the home regulator of BSI SA, to oversee an orderly closure in Singapore.
MAS noted that FINMA has approved the acquisition of the entire BSI Group by EFG International, a bank authorised by FINMA and headquartered in Switzerland.
In the interest of the customers of BSI Bank, the MAS will allow the transfer of the Singapore subsidiary’s assets and liabilities to the Singapore branch of EFG Bank AG or to the parent entity, BSI SA.
In 2011, MAS inspected BSI Bank and found policy and process lapses at the front office and weak enforcement by control functions.
The lapses were rectified, it said.
In 2014, MAS reinspected the bank and uncovered serious shortcomings in its due diligence checks on assets, underlying the investment funds structured for the bank’s customers.
Given the repeated findings of weaknesses in its control regime, MAS instructed BSI Bank’s management to increase scrutiny of its risk management processes and internal controls.
A more intrusive third inspection by MAS in 2015 revealed multiple breaches of anti-money laundering regulations and a pervasive pattern of non-compliance. MAS’ decision to withdraw BSI Bank’s status as a merchant bank takes into account the repetitive lapses as well as the 2015 inspection findings.
Specific regulatory lapses include the processing of multiple unusual transactions which were essentially pass-through trades often without economic substance.
Approvals of such transactions were based purely on faith of client representations despite deficient documentation and concerns raised by the bank’s compliance officers.
This is the first time that MAS is withdrawing its approval for a merchant bank since 1984, when Jardine Fleming (Singapore) Pte Ltd was shut down for serious lapses in its advisory work.
MAS found considerable evidence of gross dereliction of duty and failure to discharge oversight responsibilities on the part of BSI Bank’s senior management.
The six BSI Bank senior management and staff being evaluated for possible criminal offences are Hans Peter Brunner, former Chief Executive Officer (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.
MAS has also served BSI Bank a notice to impose financial penalties of S$13.3 million (S$1=RM2.95) for 41 breaches of MAS Notice 1014 – Prevention of Money Laundering and Countering the Financing of Terrorism.
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 requires financial institutions in Singapore to comply strictly with its regulations on anti-money laundering and countering the financing of terrorism. Like all major international financial and business centres, Singapore faces an inherent risk of being used as a conduit for illicit financial flows.
MAS is conducting supervisory reviews of several other financial institutions and bank accounts through which suspicious and unusual transactions have taken place. -BERNAMA