On 24 May 2016, the Monetary Authority of Singapore (MAS) announced that it had served on BSI Bank Limited (BSI) a notice of intention to withdraw its status as a merchant bank in Singapore and will impose financial penalties of SGD 13.3 million for 41 breaches of MAS Notice 1014 – Prevention of Money Laundering and Countering the Financing of Terrorism, including failure to monitor suspicious transactions and perform enhanced due diligence on high risk accounts. The last time MAS withdrew merchant bank approval was in 1984.
Grounds for withdrawing BSI’s licence were serious breaches of anti-money laundering requirements, poor management oversight of the bank’s operations, unacceptable risk culture and gross misconduct by some of the bank’s staff. The regulatory lapses cited by the MAS include the processing of multiple unusual transactions which were essentially pass-through trades often without economic substance. According to the MAS, approvals of such transactions were based purely on faith of client representations despite deficient documentation and concerns raised by BSI’s compliance officers. The MAS also announced that it had referred to the Public Prosecutor six members of BSI’s senior management and staff to evaluate whether they had committed criminal offences, including Mr Yeo Jiawei (Yeo).
As part of its announcement, the MAS highlighted its expectations that financial institutions strictly comply with anti-money laundering and terrorism financing regulations, stating that “[c]ontrols need to be robust, surveillance vigilant and the management culture must emphasise professional integrity and risk consciousness.” The seriousness with which the MAS takes these obligations was reinforced on 13 June 2016 when it announced the setting up of dedicated departments to combat money laundering and strengthen enforcement respectively. The new departments would start on 1 August 2016.
The withdrawal of BSI’s licence comes on the heels of charges brought by the Singapore Public Prosecutor against Yeo, a former BSI employee. Yeo was first charged in April 2016, and a total of nine charges so far have been brought against him. According to news reports, the charges are for crimes related to transactions involving a 1Malaysia Development Bhd (1MDB) subsidiary. The transactions are allegedly related to the purchase of units in a Cayman Islands fund (the Fund) by the 1MDB subsidiary. The Fund is managed by Bridge Partners Investment Management (Cayman) Ltd (Bridge Partners) and the units in the fund are held through BSI in Singapore as custodian.
News reports have stated that Yeo has been charged with criminal cheating under the Singapore Penal Code because he allegedly concealed from BSI that an entity he beneficially owned called Bridgerock Investment Inc. (Bridgerock) received USD1.6 million in annual payments from the 1MDB subsidiary. The USD1.6m in annual payments represented part of the annual management fee due from the 1MDB subsidiary to Bridge Partners.
News reports also indicate that Yeo was charged with perverting the course of justice because he allegedly asked Mr Samuel Goh Sze-Wei to tell police that money transferred to Bridgerock was Goh’s investment.
Yeo was also charged with money laundering under the Singapore Corruption, Drug Trafficking and Serious Crimes (Confiscation of Benefits) Act. It is reported that he received SGD200,000 in his account, which is alleged to be the “benefits of criminal conduct,” and used it to purchase property in Singapore.
While Yeo’s case is not the first money laundering case brought in Singapore, it is certainly the most high profile. If convicted, Yeo faces a possible fine of up to SGD500,000 and/or a jail term of up to 10 years for the money laundering charge. The MAS is also reportedly investigating some 40 other banks for transactions related to its probe into money laundering involving 1MDB.
The MAS announcement on its actions against BSI is available at this link.
http://mail.allenovery.com/rv/ff002815cbb1299a4b82823dbc41b465218b1693/p=9445655
