MAS withdraws second merchant bank status in AML push

In line with its increased commitment to combat money laundering and terrorist financing in Singapore, the Monetary Authority of Singapore (MAS) has ordered the closure of Falcon Private Bank Ltd, Singapore Branch (Falcon Bank).

On 11 October 2016, the MAS stated that it was withdrawing the merchant bank status of Falcon Bank for serious failures in anti-money laundering (AML) controls and improper conduct by senior management both at Falcon Bank’s Head Office in Switzerland and its Singapore Branch. This was further to the closure of the Singapore branch of an international bank for serious breaches of AML requirements earlier this year (see our e-bulletin of 25 May 2016), and the MAS’s announcement in July 2016 that it was investigating numerous other banks for lapses in AML controls.

The MAS also imposed financial penalties on Falcon Bank amounting to S$4.3 million for 14 breaches of MAS Notice 1014: Prevention of Money Laundering and Countering the Financing of Terrorism – Merchant Banks. The breaches include failure to adequately assess irregularity in activities pertaining to customer accounts and failure to file suspicious transaction reports.

Smaller financial penalties were given to two other banks involved. These banks were deemed not to have pervasive institutional control weaknesses and the control lapses identified were attributable to specific individuals’ failure to carry out their duties effectively.

This recent robust enforcement action against a foreign bank takes place against the backdrop of the Financial Action Task Force’s Mutual Evaluation Report relating to AML and counter-terrorist financing measures in Singapore, which was released last month. We have also previously discussed the MAS’s increased focus on AML with the establishment of dedicated AML supervision and enforcement teams (see our e-bulletin of 2 August 2016).

Enforcement actions for breach of AML regulations are only likely to increase in Singapore as it continues to grow to be a global financial centre. Such actions are also likely to extend to non-financial businesses and professions in Singapore in time.

If you would like to discuss the above further, please contact Siddhartha Sivaramakrishnan, William Hallatt, Pamela Kiesselbach, Yosuke Homma, Grace Chong, or your usual Herbert Smith Freehills contact.