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    May 25, 2016

    BSI Bank ordered to close over money-laundering violations

    THE Monetary Authority of Singapore (MAS) has ordered the closure of BSI Bank's operations here over anti-money laundering rule violations as its Swiss parent faced criminal proceedings in Europe in a deepening probe into scandal-hit Malaysian state fund 1MDB.

    "BSI Bank is the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector," MAS managing director Ravi Menon said yesterday.

    The MAS condemned poor management oversight and gross misconduct by some bank staff as it effected the first such shutdown of a merchant bank here in 32 years.

    The closure is also the most dramatic development in the 1MDB probe which now spans at least seven nations - including Singapore, the United States and Hong Kong.

    The Office of the Attorney General of Switzerland (OAG) said it has opened criminal proceedings against BSI SA Bank, the Swiss parent of BSI Bank, over suspected deficiencies in its internal organisation that resulted in it being "unable to prevent the commission of offences", including suspected money laundering.

    The Swiss moves are based on information revealed by the criminal probes into 1MDB and on issues raised in a decision issued on Monday by the Swiss Financial Market Supervisory Authority (Finma).

    Finma said the bank was happy to accept the client's explanation that US$20 million (S$27.7 million) of new funds were a "gift", while in another case, an account was credited with more than US$98 million without any effort to clarify the money's background.

    At least US$4.2 billion of irregular 1MDB transactions have been identified by a Malaysian parliamentary committee which recommended an advisory board headed by Prime Minister Najib Razak be disbanded.

    Swiss authorities said they will seize 95 million Swiss francs (S$132 million) from BSI SA and start enforcement procedures against two former staff. BSI group chief executive Stefano Coduri has resigned.

    "MAS' regulatory actions on BSI Bank arose from serious lapses by the bank in connection with suspicious transactions and relationships, including with 1MDB-related entities, and broader failings in management oversight," an MAS spokesman added.

    BSI Bank was fined $13.3 million for 41 regulatory breaches, including failure to monitor suspicious customer transactions. It said it has cooperated fully with the probe into 1MDB.

    EFG International said the Swiss authorities yesterday approved its takeover of BSI. The MAS said it will allow the transfer of the BSI Singapore unit's assets and liabilities to the Singapore branch of EFG.