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Monetary Authority of Singapore orders closure of BSI Bank for money laundering weaknesses.

FCRO Subsection: 
Editorial Staff

The Monetary Authority of Singapore (MAS) announced today that it has served BSI Bank Limited (BSI Bank) notice of intention to withdraw its status as a merchant bank in Singapore for serious breaches of anti-money laundering requirements, poor management supervision of the bank’s operations and gross misconduct by some of the bank’s staff.

MAS has referred to the Public Prosecutor cases involving six of the bank's senior management and staff for further investigation.

MAS has assured customers that the bank is solvent and has assets that exceed liabilities and commitments and that it has "the full support of its parent bank, BSI SA in Switzerland. MAS says " MAS is working closely with the Swiss Financial Market Supervisory Authority (FINMA), the home regulator of BSI SA, to [ensure] an orderly closure of BSI Bank in Singapore."

The history is given in statement by MAS during the late evening of 24th May, SIngapore time. The statement says

In 2011, MAS inspected BSI Bank and found policy and process lapses at the front office and weak enforcement by control functions. The lapses were rectified. In 2014, MAS inspected the bank again and uncovered serious shortcomings in its due diligence checks on assets underlying the investment funds structured for the bank’s customers. Given repeated findings of weaknesses in its control regime, MAS instructed BSI Bank’s management to increase scrutiny of the bank’s risk management processes and internal controls. A more intrusive third inspection by MAS in 2015 revealed multiple breaches of anti-money laundering regulations and a pervasive pattern of non-compliance.

MAS’ decision to withdraw BSI Bank’s status as a merchant bank takes into account the repetitive lapses as well as the 2015 inspection findings which revealed:

- widespread control failures which led to numerous serious breaches of various anti-money laundering regulations
- poor and ineffective supervision by the senior management of BSI Bank
- unacceptable risk culture, with blatant disregard for compliance and control requirements as well as MAS’ regulations
numerous acts of gross misconduct by certain staff

Specific regulatory lapses include the processing of multiple unusual transactions which were essentially pass-through trades often without economic substance. Approvals of such transactions were based purely on faith of client representations despite deficient documentation and concerns raised by the bank’s compliance officers.

This is the first time that MAS is withdrawing its approval for a merchant bank since 1984, when Jardine Fleming (Singapore) Pte Ltd was shut down for serious lapses in its advisory work.

Mr Ravi Menon, Managing Director, MAS, said, “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. Controls need to be robust, surveillance vigilant, and the management culture must emphasise professional integrity and risk consciousness.”

hahagotcha