Singapore orders Swiss bank BSI to shut

SINGAPORE — In its first such move in more than three decades, Singapore’s central bank has ordered Swiss private bank BSI to shut down its operations here, citing serious breaches of anti-money-laundering rules.

The move comes as Switzerland announced it had started criminal proceedings against BSI’s parent bank, based on information revealed in a global probe into Malaysian state investment fund 1Malaysia Development Berhad (1MDB), with the Swiss attorney general’s office pointing to “deficiencies in the internal organisation”. 

1MDB said in a statement that it has not been contacted by any foreign authority.

Without referring to the 1MDB saga, the Monetary Authority of Singapore (MAS) said on Tuesday (May 24) it is withdrawing BSI’s status as a merchant bank in the Republic and imposing S$13.3 million in fines on the bank for 41 breaches, including its failure to conduct due diligence on high-risk accounts and to monitor for suspicious customer transactions on an on-going basis.

“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. Controls need to be robust, surveillance vigilant, and the management culture must emphasise professional integrity and risk consciousness,” said MAS managing director Ravi Menon.

BSI has been operating as a merchant bank in Singapore since November 2005 and offers private banking services. It is wholly owned by BSI SA, which is headquartered in Switzerland. In 2011, the MAS inspected BSI and found policy and process lapses at the front office and weak enforcement by control functions, the central bank said. The lapses were rectified.

In 2014, the MAS inspected the bank again and uncovered serious shortcomings in its due diligence checks on assets underlying the investment funds structured for customers. 

Given repeated findings of weaknesses in its control regime, the MAS instructed BSI’s management to increase scrutiny of the bank’s risk management processes and internal controls. 

A more intrusive third inspection by the MAS last year revealed multiple breaches of anti-money-laundering regulations and a pervasive pattern of non-compliance, it said.

Widespread control failures at BSI led to numerous serious breaches of various anti-money laundering regulations, the MAS said. BSI also had poor and ineffective oversight by the senior management; an unacceptable risk culture, with blatant disregard for compliance and control requirements as well as MAS’ regulations; and numerous acts of gross misconduct by certain staff, it said.

The central bank has referred the names of six BSI staff — including its former CEO and Deputy CEO — to the public prosecutor to evaluate if they have committed any criminal offences, it added. 

Nine charges have been brought against former BSI banker Yeo Jia Wei, including counts of money laundering and cheating allegedly linked to 1MDB. As for the five other individuals named by the MAS, the Attorney-General’s Chambers said it will be working with the Commercial Affairs Department to review the facts before assessing the next appropriate course of action.

This is the first time that the MAS is withdrawing a licence from a merchant bank since 1984, when Jardine Fleming (Singapore) was ordered to shut down for serious lapses in its advisory work. Jardine Fleming was taken to task particularly over its role as advisor to Keppel Shipyard, and for overvaluing Straits Steamship in the S$496 million takeover by Keppel. In another incident, Jardine Fleming was found to have failed minority shareholders of Singapore Land in 1981, when it overvalued a proposed purchase of five cargo vessels from Ocean Shipping Group. 

In its statement on BSI on Tuesday, the MAS added that it is reviewing suspicious and unusual transactions at several other financial institutions, and will not hesitate to take action against them if they are found to have breached regulations or fallen short of expectations. It did not name these institutions.

In a seemingly coordinated move on Tuesday, the Swiss Financial Market Supervisory Authority, or Finma, said in Zurich that parent company BSI SA had committed serious breaches of money-laundering regulations through business relationships and transactions linked to the corruption scandals surrounding 1MDB.

BSI’s Group CEO Stefano Coduri resigned as Finma said it will seize 95 million Swiss francs (S$132.2 million) from the firm and start enforcement procedures against two former bank employees.

BSI “ignored clear warning signals,” about the risk of some of its transactions as it pursued higher-margin returns, Finma CEO Mark Branson told reporters on a conference call on Tuesday.

The Swiss Attorney-General pointed to internal deficiencies at BSI and said the information suggests that the offences of money laundering and bribery of foreign public officials currently under investigation in the context of the 1MDB case could have been prevented if BSI had been adequately organised. “It is believed that due to these deficiencies, the bank was unable to prevent the commission of offences currently under investigation in the criminal proceedings relating to 1MDB,” said the Office of the Attorney General of Switzerland.

BSI SA said it has cooperated fully with the investigations into 1MDB by the Singapore and Swiss authorities, adding that it remains well capitalised.

The latest actions are part of the global money laundering and embezzlement investigations surrounding 1MDB. A Malaysian parliamentary committee in April identified at least US$4.2 billion (S$5.8 billion) in irregular transactions by the state fund, and recommended the advisory board headed by Prime Minister Najib Razak be disbanded. Both 1MDB and Mr Najib have denied any wrongdoing.

In February, Swiss bank EFG International agreed to buy BSI SA from Brazil-based BTG Pactual for 1.33 billion Swiss francs. Finma said on Tuesday the acquisition could still go ahead but on the condition that BSI SA be fully integrated and then dissolved. The MAS said it will allow the transfer of the BSI Singapore unit’s assets and liabilities to the Singapore branch of EFG or to the parent entity. WITH AGENCIES

THE SIX BSI STAFF WHO MAY BE PROSECUTED

Mr Hans Peter Brunner, 64, former CEO of BSI Bank

• Swiss national, became a Singapore permanent resident in 2005
• Joined BSI in 2009 after being fired from RBS Coutts, where he was Asia chief; embroiled in lawsuit with RBS Coutts over his bonus 
• Retired in March 2016
• Has worked in firms like Credit Suisse, and was voted Outstanding Private Banker Asia Pacific in 2008 by Private Banker International

Mr Raj Sriram, 49, former deputy CEO at BSI Bank

• Joined BSI in December 2009 as deputy CEO Asia and head of private banking South and South-east Asia
• Worked at RBS Coutts as the head of private banking for North Asia and at American Express; was among wave of bankers who left RBS Coutts for BSI in 2009
• Left BSI in April

Mr Yak Yew Chee, 58, 

• former senior private banker at BSI Bank
• Also among the 100-odd Asia-based bankers who left RBS Coutts in late 2009 for BSI
• Clients included Malaysian financier Jho Low, who has been linked to the 1MDB scandal, 1MDB, and one of its units, Brazen Sky
• Reportedly earned more than S$27 million in salary and bonuses from BSI from 2011 to 2015
• Left BSI in February

Yeo Jiawei, 33, former wealth planner at BSI Bank

• Currently faces nine charges, including for money laundering and cheating involving millions of dollars 
• Was part of a team managed by Kevin Michael Swampillai, who has also been referred to the AGC for investigation
• Reportedly left BSI in mid-2014

Ms Yvonne Seah Yew Foong, former senior private banker at BSI Bank

• Named in court documents showing that executives of 1MDB and a linked entity had authorised a transfer of US$11.95 million to a firm beneficially owned by a close business associate of Jho Low  

Mr Kevin Michael Swampillai, head of wealth management services at BSI Bank

• Suspended by the bank after it began investigating its employees amid the ongoing 1MDB probe
• Mentioned in one of the obstruction-of-justice charges against Yeo Jiawei