Standard Chartered and UBS assets seized in Singapore fraud case after ‘control failings’

More than $3.5 billion was misappropriated and about $1 billion laundered through the US, the US Justice Department said as it launched what could be its biggest ever seizure of ill-gotten gains

UBS are one of four banks to have had a total of £133m in assets seized by authorities (Getty)

Singapore vowed to take action against four banks for failures in anti-money laundering controls and said it seized S$240 million (£133 million) in assets linked to alleged fraud at the Malaysian state investment company known as 1MDB.

Preliminary findings uncovered “instances of control failings” at UBS Group’s Singapore branch, Standard Chartered’s local unit and DBS Group, as well as “substantial breaches” of anti-money laundering regulations at Falcon Private Bank in the city-state, the Monetary Authority of Singapore said in a statement Thursday.

The regulator’s probe, which started in March 2015, is part of global investigations into 1Malaysia Development Bhd. that stretch across Abu Dhabi, Switzerland, the Caribbean, Hong Kong and the US.

More than $3.5 billion (£2.64 billion) was misappropriated from the Malaysian firm, and about $1 billion (£755 million) laundered through the US banking system, the US Justice Department said on Wednesday as it launched what could potentially be its biggest ever seizure for such ill-gotten gains.

“Supervisory examinations of financial institutions with 1MDB-related fund flows have revealed a complex international web of transactions involving multiple entities and individuals operating in several jurisdictions,” the Singapore central bank said.

“Certain financial institutions in Singapore were among those used as conduits for these transactions” and the Money Authority of Singapore will be taking action against them, it said.

Singapore authorities have been investigating various 1MDB-related fund flows through the island nation for possible money laundering, securities fraud, cheating, and other offenses committed in the city.

Bank accounts belonging to various people were seized and dealings in properties belonging to them curtailed, it said. About S$120 million (£67 million) in the accounts and properties belonged to Malaysian financier Low Taek Jho and his immediate family, it said.

Low has said he provided consulting to the fund that didn’t break any laws. Efforts to reach him for comment on Thursday via his Hong Kong-based company Jynwel Capital were unsuccessful, and the firm didn’t immediately reply to an e-mailed query on the asset seizure.

“The law enforcement agency or regulators can only seize assets when there’s suspicion of an offence, meaning that the investigation has probably crystallised and they have identified some culpability,” said Nizam Ismail, head of regulatory practice at RHTLaw Taylor Wessing LLP in Singapore.

“It’s definitely a step forward in the investigations, given the complex circumstances involved in asset tracing. They have to be sure of their legal basis.”

DBS and Standard Chartered spokesmen said in separate statements that the banks were cooperating with authorities, noting that both lenders had reported the suspicious transactions to the relevant agencies.

Standard Chartered had “strengthened its anti-money laundering controls,” a spokesperson said. Representatives for UBS and Falcon didn’t immediately respond to requests for comment.

There were cases of weakness at DBS and at the Singapore branches of Standard Chartered and UBS in the processes for accepting clients and transaction monitoring, as well as “undue delay” in detecting and reporting suspicious transactions, MAS said.

The regulator said in May that it is closing the Singapore unit of Lugano-based BSI for breaches of money-laundering rules in relation to its 1MDB probe.

The lapses at the other three banks were in specific processes and by individual officers, and not “pervasive control weaknesses” nor staff misconduct as was the case with BSI, the MAS said.

In its statement on Wednesday, the regulator also said:

It had completed its inspections of DBS, Standard Chartered and UBS and is finalizing its assessment. Its “supervisory examination” of Falcon is still ongoing.

The oversight and management of certain key client relationships were done out of the bank’s head office in Switzerland, and MAS has asked for further details.

It’s finalizing regulatory action against Raffles Money Change after an examination of the money changer and remittance agent revealed “weak management oversight, inadequate risk management practices and internal controls.”

It’s still examining “certain other” financial institutions, the details of which will be provided when the inspections are completed. MAS didn’t name the firms.

The alleged scheme of money laundering and misappropriation tied to the Malaysian investment firm stretched from 2009 to 2015, the US Justice Department said Wednesday. Malaysia’s government said on Thursday that it will cooperate with lawful investigations of local companies or its citizens.

© Bloomberg