Singapore shuts down second Swiss bank, fines DBS and UBS

Added 12th October 2016

The Monetary Authority of Singapore (MAS) has ordered that Falcon Private Bank in Singapore be shut down for serious failures in anti-money laundering (AML) controls and improper conduct by senior management at the Singapore branch, as well as the head office in Switzerland.

Singapore shuts down second Swiss bank, fines DBS and UBS

The cessation order is the second such move by the Singapore regulator after it ordered BSI Bank to be shut down in May for similar reasons.

The regulator also imposed fines against DBS Bank and UBS AG Singapore for AML breaches.

The sanctions against the three banks follow investigation by MAS into 1MDB-related fund flows that took place through these banks from March 2013 to May 2015. 

Falcon Private Bank

Headquartered in Switzerland, Falcon has operated as a merchant bank in Singapore since August 2008, offering boutique private banking services.

A 2013 inspection found weaknesses in the bank’s controls for client acceptance and transaction surveillance that led to breaches of MAS’ AML requirements.

“The bank will now focus again on growing our businesses in the core locations Switzerland, Middle East and London."

Falcon Bank paid a fine of S$0.3m (£176,051, $218,309) for these breaches, and MAS instructed the merchant bank to strengthen its AML controls.

However, a 2015 inspection uncovered an even larger number of regulatory breaches as well as serious failings on the part of head office senior management and the Singapore branch manager.

Loss of status

MAS decided to withdraw Falcon Bank’s status as a merchant bank in Singapore and impose a fine of S$4.3m for 14 breaches of AML and countering the financing of terrorism (CFT), taking into account the following factors:

  • The bank’s head office failed to guard against conflicts of interest when managing the account of a customer who was associated with the bank’s former board chairman Mohamed Ahmed Badawy Al-Husseiny. The former chairman misled and influenced the Singapore branch into processing the customer’s unusually large transactions despite multiple red flags.
  • The improper conduct of the Singapore branch manager and certain senior managers at the head office impaired the effectiveness of the Singapore branch’s compliance function in discharging its responsibilities. Their interference was wrongful and egregious in nature, and contributed to substantial breaches of AML regulations. MAS has been informed that the Singapore branch manager, Jens Sturzenegger, has been arrested by the Commercial Affairs Department on 5 October 2016.
  • Falcon Bank has demonstrated a persistent and severe lack of understanding of MAS’ AML requirements and expectations. 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.

Falcon Private Bank responds

The Swiss bank welcomed the completion of the investigations, which it says finally resolved the 1MDB issue for the bank with the regulators.

Falcon Private Bank said although the withdrawal of the Singapore banking license was regrettable and disappointing, the decision would not impact the strategic development of the bank.

The bank advised that it is currently in close contact with employees, clients and partners and is committed to finding optimal solutions for all parties involved and guaranteeing an orderly wind down of the Singapore operation. 

Focus on core locations

Walter Berchtold, chief executive of Falcon Private Bank, said: "We have been in close collaboration with the regulators and welcome that the 1MDB case has been closed with the regulators. Falcon Private Bank adheres to all rules and regulations, is well capitalised, enjoys a strong balance sheet and the full support of our shareholder Aabar.

“The bank will now focus again on growing our businesses in the core locations Switzerland, Middle East and London."

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About Author

Kirsten Hastings

Senior Reporter

Kirsten is a senior reporter for International Adviser, covering global news stories about the financial services industry. She joined Last Word Media in October 2015 after two years working as a reporter covering the staffing and recruitment industry. Kirsten has a Masters in Financial Journalism from the University of Stirling. 


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