Singapore’s regulators have shut down a private bank implicated in investigations of Malaysia’s troubled development fund 1MDB, with prosecutors in the city-state and Switzerland weighing criminal charges.
The Monetary Authority of Singapore (MAS) said Switzerland-based BSI Bank would lose its status as a merchant bank in Singapore due to “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.”
“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,” Ravi Menon, managing director of MAS, said in the statement.
This is the first time since 1984 that MAS has withdrawn a merchant bank’s approval.
The central bank’s criticism of BSI was harsh and wide-ranging. In its statement, MAS said the bank had an “unacceptable risk culture, with blatant disregard for compliance and control requirements as well as MAS regulations.”
MAS accused several bank staff of making material misrepresentations to auditors and abetting improper valuations of assets. The central bank said it had referred six members of BSI’s senior management to the public prosecutor in order to evaluate whether they had committed criminal offences.
“MAS found considerable evidence of gross dereliction of duty and failure to discharge oversight responsibilities on the part of BSI Bank’s senior management. Their ineffective governance led to a poor risk culture, which prioritized questionable customer demands ahead of compliance with anti-money laundering regulations and the bank’s own internal controls,” MAS said.
At the same time, Switzerland’s Office of the Attorney General said it had opened criminal proceedings against BSI SA Bank, based on information uncovered by a Swiss criminal investigation into 1 Malaysia Development Berhad, adding that the bank’s governance deficiencies had made rendered BSI unable to prevent the offenses under investigation related to the debt-ridden Malaysian development fund.
Former employees at BSI in Singapore have been named in various reports as having handled transactions for 1MDB, and although the Singaporean regulator did not refer directly to 1MDB in its statement, BSI Bank in Switzerland issued a statement in which it said it had ooperated with both Swiss and Singapore regulators in their investigations into the troubled wealth fund.
BSI also said its Group CEO Stefano Coduri had stepped down with immediate effect. Coduri had been in the role since 2012.
“The board of directors thanks Stefano Coduri’s for his sense of responsibility and accepts his resignation,” the statement said.
One of the BSI bankers named in the MAS statement, Yak Yew Chee, a former senior private banker, already faces a criminal probe in Singapore.
Yak, who left the bank in March, filed an affidavit with the Singapore High Court earlier this year denying any wrongdoing or receiving unlawful benefits from managing 1MDB accounts, according to a Reuters report.
Another of the names the MAS said on Tuesday it had referred to prosecutors, former BSI Bank wealth planner Yeo Jiawei, has reportedly been served with seven charges related to the 1MDB probe, including receiving benefits from criminal conduct, forgery and money laundering.
The forgery charge was related to Yeo allegedly signing a reference letter to another bank’s compliance chief in order to help faciliatate a fund transfer.
Yeo has also been accused of asking another person named in the MAS statement on Tuesday, Kevin Michael Swampillai, BSI’s head of wealth management services, to lie to police about a fund transfer.
A lawyer for Swampillai declined to comment. A lawyer for Yeo did not immediately return an emailed request for comment.
Two others named in the MAS statement, Hans Peter Brunner, the Singapore unit’s former CEO, and Raj Sriram, the former deputy CEO, did not immediately return LinkedIn messages sent requesting comment.
No contact details could be found for Seah Yew Foong Yvonne, a former senior private banker at BIS, who was the sixth person named in the MAS statement as having been referred for potential prosecution.
Questions about movement of funds from 1MDB gained attention in July, when the Wall Street Journal reported that in 2013 nearly $700 million had flowed from the fund to Malaysian Prime Minister Najib Razak’s personal bank account.
Najib has repeatedly denied wrongdoing and, under pressure from the outcry caused by the WSJ report, said the funds were a private donation from a Middle Eastern country he declined to name. He has denied benefiting personally from any of the funds.
In January, Malaysia’s Attorney General Mohamed Apandi Ali said that Saudi Arabia’s royal family gave Najib a $681 million gift, of which Apandi said about $600 million was later returned.
Apandi said that no criminal offense had been committed. But globally, investigations into 1MDB in locales as varied as U.S., Switzerland, Singapore and the Seychelles have continued.
The WSJ has reported that funds filtered from 1MDB financed Red Granite Pictures, a film production company co-founded by Najib’s stepson Riza Aziz, which produced the film the Wolf of Wall Street.
The WSJ has also reported tha Riza used at least $50 million from 1MDB to purchase luxury properties in London, Los Angeles and New York. The WSJ said Riza had denied any wrongdoing.
Red Granite Pictures did not immediately return an emailed request for comment sent outside regular office hours.