SINGAPORE – Singaporean and Swiss regulators said Tuesday that investigations showed Falcon Private Bank breached money laundering regulations in its dealings with the indebted Malaysian state fund 1MDB.
The Monetary Authority of Singapore ordered the private bank to close down in the city-state and pay a fine of 4.3 million Singapore dollars ($3.12 million) for violations that included not filing suspicious transaction reports and failing to alert authorities about irregular activity in customers' accounts.
The Singapore branch manager of Falcon Private Bank, Jens Sturzenegger, was arrested on Oct 6, it said in a statement.
The regulator cited "serious failures in anti-money laundering controls and improper conduct by senior management" in Switzerland and Singapore.
The Swiss financial watchdog likewise said it found Falcon Private Bank had failed to carry out adequate background checks into transactions and business relationships. It fined Falcon 2.5 million Swiss francs ($2.5 million) and banned it from dealing with "foreign, politically exposed persons" for three years. Any further breaches would cause its license to be withdrawn, the Swiss Financial Market Supervisory Authority, or Finma, said in a statement.
Two former Falcon board members are facing enforcement proceedings in Switzerland, it said.
"The issues surrounding 1MDB form one of the largest cases of suspected corruption in recent times," Finma CEO Mark Branson said in the statement. "The global financial system has been blatantly misused."
Finma said Falcon handled $3.8 million in assets associated with 1MDB Group, funds that were quickly transferred and were high risk.
"Although management's attention was drawn to these matters, it repeatedly failed to properly investigate the business relationships," the statement said.
Falcon is the second bank to lose its license in Singapore in connection with investigations into Malaysia's 1MDB fund that have led Singapore to seize many bank accounts, fine banks and charge private bankers. Another Swiss bank, BSI, which is based in Lugano, Switzerland, was shut in May due to serious breaches in anti-money laundering requirements, poor management oversight and gross misconduct by some staff.
Falcon was fined 300,000 Singapore dollars ($217,612) in 2013 for poor controls for client acceptance and insufficient scrutiny on transactions. The Monetary Authority said it found further, larger breaches and unprofessional conduct by its senior management two years later.
"Falcon Bank has demonstrated a persistent and severe lack of understanding of ... requirements and expectations," the Singapore Monetary Authority statement said.
Falcon Private Bank said in a statement that it viewed Singapore's decision as "regrettable and disappointing." It said it was working toward an orderly winding down of its business in the city-state.
Founded in Zurich, Falcon Private Bank was known as AIG Private Bank when it started its Singapore operations in 2008. Its name changed to Falcon Private Bank in 2009. It is owned by the International Petroleum Investment Company, a sovereign wealth fund of Abu Dhabi.
The bank said it welcomed an end to investigations into its dealings with 1MDB.
"With its committed staff, strong capital base and high liquidity ratio, Falcon Private Bank will now concentrate on further growing its franchise," it said.
Swiss prosecutors investigating suspected embezzlement at the Malaysian state investment fund have said a Ponzi scheme appears to have been used to hide the embezzlement of $800 million from investments in natural resources by a former 1MDB subsidiary.
The Swiss attorney general opened an investigation last year of two former 1MDB officials and other unnamed people on suspicion of bribery and money laundering, among other offenses.