Singapore authority fines banks over 1MDB-related deal

Standard Chartered Bank and Coutts & Co Ltd and their Singapore branches were fined S$5.2 million and S$2.4 million respectively for breaching anti-money laundering (AML) requirements, announced the Monetary Authority of Singapore (MAS).

The breaches occurred in the context of 1MDB-related fund flows through these banks, said MAS in a statement today.

Both the banks' Singapore branches, Singapore Branch (SCB) and Singapore Branch (Coutts), were also named in the incidents.

Coutts was fined partly due to lack of due diligence measures for politically exposed persons (PEPs), revealed MAS.

MAS also proposed to bar Tim Leissner, a former director and representative of Goldman Sachs (Singapore) Pte (GS S'pore) from taking part in the capital market management in the state for 10 years.

MAS alleged that Leissner made false statements on Penang-born billionaire Jho Low on behalf of Goldman Sachs (Asia) LLC, without the latter's knowledge or consent.

"Leissner had overall responsibility for managing the relationship with 1MDB when Goldman Sachs was engaged by 1MDB to arrange three bond issuances from 2012 to 2013," said MAS.

"Leissner was found to have issued an unauthorised reference letter to a financial institution based in Luxembourg in June 2015, using the letterhead of Goldman Sachs (Asia).

"The letter stated that Goldman Sachs had conducted due diligence on Low Taek Jho and his family, and had not detected any money laundering concerns with respect to Low or his family.

"These statements were untrue and were made by Mr Leissner without Goldman Sachs’ knowledge or consent.

"MAS has served notice of its intention to issue a prohibition order against Mr Tim Leissner, a former director and representative of GS S’pore

"The proposed order will prohibit Mr Leissner for a period of 10 years from: (i) performing any regulated activity under the Securities and Futures Act; or (ii) taking part, directly or indirectly, in the management of any capital market services firm in Singapore," said MAS.

Last month, MAS had closed Falcon Private Bank Ltd (Falcon Bank) for its links with the 1MDB-related funds flow. It also fined DBS Bank Ltd (DBS) and UBS AG, Singapore branch (UBS) for breaches of MAS’ AML requirements.

On May 24, MAS closed Swiss bank BSI's operations in the city-state over its dealings with the troubled Malaysian investment fund.

MAS said its inspection against SCB in relation to its 1MDB-related fund flows, had revealed significant lapses in the bank’s customer due diligence measures and controls for ongoing monitoring, which resulted in numerous breaches of MAS’ AML regulations.

"While the regulatory breaches were serious, MAS’ inspection did not find pervasive control weaknesses or wilful misconduct at SCB," it said.

"MAS has instructed SCB’s management to take disciplinary action against those officers who failed to perform their duties effectively.

"MAS has imposed on SCB financial penalties amounting to S$5.2 million for 28 breaches of MAS Notice 626 - Prevention of Money Laundering and Countering the Financing of Terrorism," it said.

In the statement, MAS had linked Coutts' weakness to lack of due diligence against the politically exposed person.

MAS, however did not reveal the identity of the mentioned PEP.

"The relationship for these PEP customer accounts were established between 2003 and 2009.

"The failure to exercise the necessary enhanced due diligence on these accounts was the result of actions or omissions of certain officers who have since left the bank.

"These officers include Mr Yak Yew Chee and Ms Yvonne Seah, who had left Coutts to join BSI Bank Limited in late 2009.

"MAS has imposed on Coutts financial penalties amounting to S$2.4 million for 24 breaches of MAS Notice 1014 - Prevention of Money Laundering and Countering the Financing of Terrorism," it said.

Coutts International was sold by Royal Bank of Scotland to Union Bancaire Privee in March 2015 and is in the process of winding down its Singapore operations.

MAS said it is nearing completion of its supervisory examinations of financial institution through which 1MDB-related fund flows took place and will provide a final update in early 2017.

"MAS has taken tough regulatory actions against various financial institutions this year for AML control lapses. These action send a strong signal that we will not tolerate abuse of Singapore's financial system for illicit purposes," said MAS managing director Ravi Menon.

"The supervisory investigations into the intricate web of international fund flows has been a learning experience for financial institutions as well as for MAS," he said.

"Our financial sector will emerge cleaner and stronger from the lessons learnt," he stressed.-Mkini