Crime Pays Royally – LEAKED: UBS, other Banks “Scrutinized” by Singapore over Money Laundering in 1MDB Scandal

It just doesn’t let up with these banks….

“Three people with knowledge of the matter” told Reuters that Singapore’s central bank, the Monetary Authority of Singapore (MAS), is “scrutinizing,” as Reuters put it, several banks over suspicions that they broke anti-money-laundering rules in processing transactions of the scandal-infested Malaysian state-owned fund 1MDB.

The banks include UBS, DBS Group Holdings, Falcon Private Bank, and Coutts International. DBS is based in Singapore. The other three are based in Switzerland.

The 1MDB scandal revolves around $4.2 billion that, according to a Malaysian parliamentary investigation earlier this year, went missing or ended up in overseas accounts whose owners couldn’t be determined. These transactions were all processed by banks. In 2013, $681 million appeared in the personal account of Malaysian Prime Minister Najib Razak, who also served as chairman of 1MDB until recently. Najib has denied any wrongdoing – it was a gift from a member of the Saudi royal family, he’d claimed. And Malaysia’s Attorney-General Mohamed Apandi Ali cleared him in January of corruption or criminal offences.

So, according to Reuters:

The Monetary Authority of Singapore (MAS) is looking at several aspects of the banks’ operations including whether they were diligent enough in knowing who their customers were and what the source of their funds was, and whether they were particularly careful in screening politically-exposed persons such as government officials, banking and legal sources aware of the review said.

The MAS is in talks with several banks and will make an announcement on any punitive action against them after the review is completed, sources said. The full details are not known at this stage.

UBS has been embroiled in all kinds of banking scandals around the world, including with the FBI, the SEC, and the IRS in the US starting in 2005, based on an informant, alleging that the bank was providing tax-evasion services to citizens of various countries. UBS eventually settled some of those charges. Other scandals broke to the surface, one after the other, including forex and Libor scandals, and UBS has been busy settling those too.

So a new scandal is just what the doctor ordered, particularly since these transactions likely happened fairly recently, after many of the other scandals had already become public.

Falcon Private Bank is owned by Abu Dhabi’s sovereign wealth fund, International Petroleum Investment Company (IPIC). Coutts International is owned by Swiss-based Union Bancaire Privée.

DBS Group Holdings, formerly known as Development Bank of Singapore, is a multinational bank with US$330 billion in assets, or about 75% of Singapore’s GDP! If this bank collapses, Singapore’s finances are toast.

UBS, Coutts, and DBS refused to comment. Falcon, which had previously said that it was in contact with the MAS and cooperating, told Reuters: “We have transparently shared our view and have nothing to add.”

Singapore, long one of the most opaque financial centers in the world, is under international pressure – and just from the US – to crack down on these obscure money-flows.

For example, back in 2013, French Budget Minister Jerome Cahuzac was forced to resign after media reports alleged – and he later confessed after furiously denying it – that he’d hidden €600,000 in income from French tax authorities via an account in Switzerland, and when its bank-secrecy laws began to crack, by transferring this money to Singapore. He was supposed to face criminal trial in February this year (which has since been moved to September).

These transactions were all processed by banks. But the scandal of 1MBD is so huge that it just keeps digging a bigger hole. Reuters:

The latest probes follow MAS’s decision in late May to close down the operations of Swiss private bank BSI AG in Singapore for serious breaches of anti-money laundering rules, the first time in 32 years it has taken such action against a bank. MAS said then that there had been gross misconduct by some of BSI’s staff and poor management oversight of the bank’s operations.

At the time, the Swiss Financial Market Supervisory Authority said that, according to Reuters, “BSI had committed serious breaches of money laundering regulations through business relationships and transactions linked to the corruption scandal surrounding 1MDB.”

Singapore’s authorities must have known for years that these sorts of things were standard private-banking practice in their bailiwick. But now they’re under pressure to crack down on transactions related to money laundering, tax evasion, and international sanctions. And they’re under pressure to slap global banks like UBS on the wrist, and maybe even on both wrists, so that these banks, in the future, would try a little harder not to get caught so easily.

Not that the US Department of Justice is a model when it comes to punishing banks for even the most egregious violations of money-laundering and sanctions laws. HSBC was up to its neck into them, and outside of a fine – just another cost of doing business – nothing happened. So here are the results of a 3-year investigation by the US House of Representatives into why the Justice Department failed to hold HSBC and its executives accountable. Read…  Congress: “Too Big to Jail: Inside the Obama Justice Department’s Decision Not to Hold Wall Street Accountable”

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.