The Monetary Authority of Singapore is yanking Falcon Private Bank license to operate in the city-state over its dealings with 1MDB, a Malaysian state fund which is at the center of a billion-dollar graft probe. The Swiss private bank's Singapore branch manager was arrested last week, it has emerged.
Zurich-based Falcon Private Bank has the dubious honor of being the second bank forced to shut down in Singapore because of ties to alleged corruption and money-laundering, after Banca della Svizzera, or BSI, in May.
The Monetary Authority of Singapore, or MAS, ordered Falcon to stop operating due to «serious failures in anti-money laundering controls and improper conduct by senior management at the head office in Switzerland as well as the Singapore Branch.»
Falcon Executive Arrested
MAS said Falcon's branch manager in Singapore, Jens Sturzenegger, as well as unnamed senior executives in Zurich were found to have hampered effective compliance at the branch, after the regulator ordered improvements related to an earlier investigation.
«Their interference was wrongful and egregious in nature, and contributed to substantial breaches of anti-money laundering regulations,» MAS said.
Sturzenegger was arrested last Wednesday, it emerged in MAS' statement; he is the latest of several former BSI bankers who have been arrested in Singapore over 1MDB.
Numerous Failures, Improper Conduct
MAS conducted inspections at the bank in 2013 and again last year. In the first round, the regulator found weaknesses in the bank’s controls for taking on clients and for tracking transactions, breaching MAS' anti-money laundering rules.
Falcon Bank paid a S$300,000 fine for these breaches, and MAS instructed the merchant bank to strengthen its money-laundering controls.
The opposite happened: an inspection two years later uncovered even more regulatory violations, as well as serious failings on the part of head office senior management and Sturzenegger, MAS said.
Multiple Red Flags
Among the numerous Falcon violations MAS listed include failing to guard against conflicts of interest when managing the account of a client who was associated with the bank’s former chairman, Mohamed Ahmed Badawy Al-Husseiny.
MAS says al-Husseiny «misled and influenced» the Singapore Branch into processing unusually large transactions from the client, «despite multiple red flags».
Falcon is to pay S$4.3 million for 14 breaches in total of money-laundering and terrorism rules before it shuts.
Asia Exit
«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.»
The regulator said it is working closely with Swiss financial regulator Finma, Falcon's the home regulator, to oversee an orderly closure in Singapore.
The move marks a total exit from Asia for Falcon, which sold Hong Kong activities to rival EFG International nearly three years ago.
