The Monetary Authority of Singapore (MAS) said it had ordered Falcon Bank to cease operations in the city-state because of “serious failures in anti-money-laundering (AML) controls and improper conduct” by senior management both at the head office in Switzerland and the local branch.
“Falcon Bank has demonstrated a persistent and severe lack of understanding of MAS AML requirements and expectations,” it said in a statement.
“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.”
The central bank said it imposed financial penalties totalling Sg$4.3 million (US$3.1 million) on Falcon Bank for 14 breaches of a law on preventing money laundering and countering the financing of terrorism.
MAS also said it received information that Falcon Bank's Singapore branch manager, Jens Sturzenegger, had been arrested on October 5th by the Commercial Affairs Department (CAD), the Singapore government's main white-collar crime investigation agency.
Singapore, a regional financial hub, last year launched a probe into alleged illicit fund flows linked to 1MDB.
Allegations of misappropriations of millions of dollars from 1MDB have triggered a corruption scandal in neighbouring Malaysia that has embroiled Prime Minister Najib Razak. Both Najib and 1MDB have strongly denied any wrongdoing.
Switzerland and the United States are also conducting their own investigations into 1MDB.
MAS announced that it has also fined local bank DBS and Swiss lender UBS for several breaches of anti-money laundering requirements.
It said the “control lapses observed in DBS and UBS relate to specific bank officers who failed to carry out their duties effectively” and that it did not find “pervasive control weaknesses” in these banks.
DBS was ordered to pay Sg$1 million for 10 violations while UBS was ordered to pay Sg$1.3 million for 13 breaches.
The regulator in May kicked out Swiss bank BSI for similar violations linked to the 1MDB probe, the first time it ordered a bank to shut in 32 years.
At least three former BSI private bankers have been charged in Singapore in relation to the investigations.
In July, Singapore authorities said they had seized nearly $180 million in assets through investigations into the 1MDB scandal.
Singapore closely guards its reputation for financial integrity and has admitted that money laundering hurts its image.
The Paris-based financial watchdog Financial Action Task Force last month urged Singapore to take more aggressive action against complex cross-border money laundering.
MAS chief Ravi Menon said on Tuesday that “keeping Singapore a clean and trusted financial centre is a shared responsibility” and urged bank senior management to play a crucial role.
“They must set the tone from the top — that profits do not come before right conduct,” he said, warning that the MAS “will take strong deterrent actions against institutions that fall short”.
The MAS also said it is in the final stages of assessment for the Singapore branch of Standard Chartered Bank and has referred Raffles Money Change, a local financial company, for investigation by the CAD.
The MAS said clients are assured that Falcon Bank, which is a branch of Falcon Private Bank Ltd in Switzerland, “has the full support of its head office, which is financially sound”.
Falcon Private Bank is owned by the International Petroleum Investment Company from Abu Dhabi, one of the world's leading sovereign wealth funds.