MAS orders Falcon Bank to shut operations in Singapore; imposes fines on DBS, UBS

The Monetary Authority of Singapore (MAS) announced on Tuesday (Oct 11) that it has ordered the Singapore branch of Falcon Private Bank to cease operations for serious failures in anti-money laundering (AML) controls and improper conduct by senior management.

In a press statement, MAS said it will be withdrawing the merchant bank status of Falcon Private Bank Ltd, Singapore Branch (Falcon Bank) for failures at the Head Office in Switzerland as well as the Singapore branch.

MAS will also impose fines on DBS and UBS banks for breaches of MAS’ AML requirements.

"The actions on the three banks follow supervisory examinations by MAS into 1MDB-related fund flows that took place through these banks from March 2013 to May 2015," MAS said. 

MAS said they decided to withdraw Falcon Bank's status as a merchant bank in Singapore taking into account three factors. 

Firstly, Falcon Bank’s Head Office failed to guard against conflicts of interest when managing the account of a customer who was associated with the bank’s former Board Chairman Mohamed Ahmed Badawy Al-Husseiny.

"The former Chairman misled and influenced the Singapore Branch into processing the customer’s unusually large transactions despite multiple red flags," MAS said. 

Secondly, the improper conduct of the Singapore Branch Manager and certain senior managers at the Head Office had impaired the effectiveness of the Singapore Branch’s compliance function in discharging its responsibilities.

Their interference was wrongful and egregious in nature, and contributed to substantial breaches of AML regulations. MAS has been informed that the Singapore Branch Manager, Mr Jens Sturzenegger, was arrested by the Commercial Affairs Department on Oct 5.

"Falcon Bank has demonstrated a persistent and severe lack of understanding of MAS’ AML requirements and expectations.

"Taking into account the totality of Falcon Bank’s conduct, MAS’ assessment is that the merchant bank will be unable to comply with these requirements and expectations going forward," MAS said. 

MAS added that it is working closely with FINMA, the home regulator of Falcon Private Bank, to oversee an orderly closure of the merchant bank branch in Singapore.