Singapore's regulators have shut down a private bank implicated in investigations of Malaysia's troubled development fund 1MDB, with prosecutors in the city-state and Switzerland weighing criminal charges.
The Monetary Authority of Singapore (MAS) said Switzerland-based BSI Bank would lose its status as a merchant bank in Singapore due to "serious breaches of anti-money laundering requirements, poor management oversight of the bank's operations, and gross misconduct by some of the bank's staff."
"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," Ravi Menon, managing director of MAS, said in the statement.
This is the first time since 1984 that MAS has withdrawn a merchant bank's approval.
The central bank's criticism of BSI was harsh and wide-ranging. In its statement, MAS said the bank had an "unacceptable risk culture, with blatant disregard for compliance and control requirements as well as MAS regulations."
MAS accused several bank staff of making material misrepresentations to auditors and abetting improper valuations of assets. The central bank said it had referred six members of BSI's senior management to the public prosecutor in order to evaluate whether they had committed criminal offences.
"MAS found considerable evidence of gross dereliction of duty and failure to discharge oversight responsibilities on the part of BSI Bank's senior management. Their ineffective governance led to a poor risk culture, which prioritized questionable customer demands ahead of compliance with anti-money laundering regulations and the bank's own internal controls," MAS said.
At the same time, Switzerland's Office of the Attorney General said it had opened criminal proceedings against BSI SA Bank, based on information uncovered by a Swiss criminal investigation into 1 Malaysia Development Berhad, adding that the bank's governance deficiencies had made rendered BSI unable to prevent the offenses under investigation related to the debt-ridden Malaysian development fund.