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MAS fines Standard Chartered and Coutts for 1MDB transgressions

Chris Hamblin, Editor, London, 22 December 2016

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The Monetary Authority of Singapore has imposed financial penalties of S$5.2 million and S$2.4 million respectively on the Singapore branches of Standard Chartered Bank and Coutts & Co for breaking its anti-money laundering rules. Their infractions involved fund flows related to 1Malaysia Development Berhad, the controversial Malay governmental development fund.

MAS has also served notice of its intention to issue a prohibition order against Tim Leissner, a former director of Goldman Sachs in Singapore, for making false statements on behalf of Goldman Sachs (Asia) LLC without the latter’s knowledge or consent. Leissner had overarching responsibility for the relationship with 1MDB when that fund hired his firm to arrange three bond issuances in 2012-13.

Standard Chartered

MAS has completed its inspection of Standard Chartered in relation to its 1MDB-related fund flows which took place between 2010 and 2013. The inspection revealed significant lapses in the bank’s "customer due diligence" efforts and "ongoing monitoring," which resulted in numerous breaches of the MAS’s AML regulations. The problems stemmed from inadequacies in policies and procedures, not enough independent surveillance for front-office staff, and a lack of awareness of money laundering risks among some bank staff.

Although the regulatory infractions were serious, the MAS’s inspection did not find pervasive control weaknesses or signs of wilful misconduct at SCB. The MAS is pleased that the bank has taken measures under its own steam to fix the problems and strengthen its controls. It has instructed SCB’s management to take disciplinary action against those officers who failed to perform their duties effectively.

The MAS has hit SCB with financial penalties that amount to S$5.2 million for 28 breaches of MAS Notice 626 (on the subject of the prevention of money laundering and terrorist finance). The regulator has also told the bank to appoint an independent party that will, in time, assure it that rectification is underway.

Coutts

MAS’s supervisory visit to Coutts revealed breaches of AML rules in relation to 'know your customer' controls for politically exposed persons (PEPs). The relationships for these PEP customer accounts were established between 2003 and 2009. The failure to exercise the necessary 'enhanced due diligence' (EDD) on these accounts was the result of actions or omissions on the part of certain officers who have since left the bank. These officers include Mr Yak Yew Chee and Ms Yvonne Seah, who had left Coutts to join BSI Bank in late 2009.

MAS has saddled Coutts with financial penalties to the tune of S$2.4 million for 24 breaches of MAS Notice 1014 (also to do with the prevention of money laundering and terrorist finance). The Royal Bank of Scotland sold Coutts International to Union Bancaire Privee in March 2015 and Coutts is now in the process of winding down its operations in Singapore.

Goldman Sachs

The regulator's prohibition order against Leissner, when it comes, will prohibit him from performing any regulated activity under the Securities and Futures Act, or prohibit him from taking part, directly or indirectly, in the management of any capital market services firm in Singapore, for a period of ten years.

Leissner moved to Goldman Sachs (Asia) LLC in Hong Kong in November 2011 but maintained his representative status with GS S’pore till his resignation from Goldman Sachs in February this year, and was therefore subject to the MAS’s stipulation that he ought to be 'fit and proper' to carry out regulated activities.

Leissner was found to have issued an unauthorised reference letter to a financial institution based in Luxembourg in June 2015, using the letterhead of Goldman Sachs (Asia) LLC. This letter stated that Goldman Sachs had conducted 'due diligence' on Mr Low Taek Jho and his family and had not detected any money laundering concerns with respect to them. These statements were untrue and were made without Goldman Sachs’ knowledge or consent.

Leissner managed his firm's relationship with 1MDB in respect of all its three bond issues in 2012-13. A team comprising Goldman Sachs staff who hailed mainly from Hong Kong (but also from Singapore, Malaysia and the United Arab Emirates) arranged these bond issues and London-based Goldman Sachs International underwrote them in full. The regulator will be investigating Goldman Sachs’ part in the 1MDB bond transactions further in due course.

The state of play with 1MDB

The MAS is nearing the end of its supervisory examination of financial institutions in Singapore through which 1MDB-related fund flows took place, and will provide a final update in early 2017.

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