The Monetary Authority of Singapore (MAS) has imposed composition penalties amounting to $3.8 million on Citibank Singapore, DBS Bank D05 and OCBC O39 Singapore, as well as insurer Swiss Life (Singapore), for breaches of the central bank’s anti-money laundering (AML) requirements.
The breaches were identified during MAS’ investigation of the alleged involvement of Singapore-based individuals and entities in the Wirecard scandal. MAS says it is unable to comment on whether its investigations into control deficiencies present in financial institutions named in the media in relation to Wirecard's fraud revealed any illicit fund flows, which remains within the remit of the Singapore Police Force's Commercial Affairs Department (CAD).
Wirecard, a Germany-based payments processing firm that is now insolvent, had significant operations in Singapore. Its former CEO Markus Braun is now on trial in Germany for offences including fraud, market manipulation and false accounting.
According to MAS, the financial institutions, which have accepted the penalties, were found to have had inadequate AML controls in place when dealing with individuals who were involved in transactions with or had links to Wirecard or its related parties.
In its media statement, MAS says that although the breaches were serious, it did not find “wilful misconduct” by any staff of the penalised financial institutions. “The financial institutions have taken prompt remedial actions to address the deficiencies identified by MAS,” it adds.
These actions include enhancements to their procedures and processes, as well as training to improve staff vigilance in detecting and escalating risk concerns.
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DBS, which received the majority of the total penalty amount, was issued a composition penalty of $2.6 million for breaches between July 2015 to February 2020 relating to accounts maintained by 11 corporate customers.
According to MAS, DBS had failed to maintain relevant and up-to-date customer due diligence information relating to customers’ beneficial ownership, or to update customers’ money laundering/terrorism financing risk ratings, which resulted in the bank’s failure to perform timely enhanced due diligence measures on the customers
DBS also failed to adequately establish the source of wealth of higher risk customers and their beneficial owners, relying instead on customers’ representations of their wealth without adequate corroboration. The bank also did not adequately inquire into the background and purpose of unusually large transactions that were not consistent with its knowledge of the customers or had no apparent economic purpose, says MAS.
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In response, DBS says that it takes its AML obligations "seriously" and accepts the regulator's decision. DBS explains that the transactions were part of an elaborately orchestrated scheme.
"While we detected and acted upon some of these activities through transaction monitoring and customer due diligence - and ultimately exited all relevant entities - we were unable to unravel the scheme in its entirety.
"We acknowledge that we could have done better," adds DBS.
Meanwhile, OCBC was imposed a $600,000 composition penalty for breaches between June 2015 and January 2016 relating to accounts maintained by one corporate customer.
MAS says that OCBC failed to inquire into the background and purpose of transactions even though they were not consistent with OCBC’s knowledge of the customer and its business, or were unusually large and exhibited an unusual pattern that had no apparent economic purpose. OCBC also failed to probe into the customer’s ownership and control structure when the customer’s declared beneficial owner was not a party named in the customer’s corporate registration documents.
An OCBC spokesperson says that the implication of one of its banking customers in the Wirecard case, which involved an "intricate web of entities and transactions" spanning multiple jurisdictions, has been taken seriously.
"Over the past few years, we have devoted significant resources to a strategic uplift of our AML and combating the financing of terrorism (CFT) standards and capabilities. Our transaction monitoring, due diligence and know-your-customer processes have been further enhanced. We have also deployed data analytics which has yielded positive outcomes in money laundering and financing terrorism risk detection and mitigation," says the OCBC spokesperson. "While the historical issues in relation to this case have been addressed, we continue to prioritise AML and CFT measures. This involves working constructively with regulators and our peers on industry initiatives like the digital platform COSMIC, to optimise information sharing.”
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Citibank was handed a $400,000 composition penalty for breaches between September 2019 and June 2020 relating to accounts maintained by two corporate customers.
According to MAS, Citibank failed to adequately understand the control structure of the customers and failed to correctly identify the customers’ beneficial owner, despite having information which suggested that the control structure and beneficial owners declared by the customers were incorrect.
Citibank also failed to inquire into unusually large transactions that had significantly exceeded one customer’s past transaction amounts and that had no apparent economic purpose. This included an outflow to a party allegedly involved in fraud.
“The case dates back to before June 2020 and since then we have taken steps to strengthen our know your customer (KYC) process," says a Citi Singapore spokesperson.
As for Swiss Life, a composition penalty of $200,000 was imposed for breaches in May 2017 relating to an investment-linked life insurance policy underwritten by the insurance company. MAS says it failed to sufficiently understand the reasons behind the higher risk customer’s complex ownership and control structure and failed to adequately corroborate the source of wealth of the customer’s beneficial owner.
The central bank’s investigation into Citadelle Corporate Services for its suspected contravention of the Trust Companies Act (TCA) by carrying on a trust business without a licence did not reveal any breaches committed by Citadelle. MAS will therefore be taking no further action against Citadelle.
Ho Hern Shin, MAS deputy managing director of financial supervision, says: “As Singapore grows in importance as an international financial centre, MAS expects our financial institutions to step up their controls against facilitating illicit financial flows.”
“They must implement robust measures to know their customers, monitor on-going transactions to ensure that these are consistent with their understanding of their customers and their businesses, and exercise greater vigilance when customers use complex structures,” she adds.
On June 20, two former employees of Wirecard Asia were jailed in Singapore for their involvement with embezzling funds from the subsidiary of the German-registered international payment services company — the first Wirecard-related conviction globally.
Singapore, a key financial hub, has seen its share of money-laundering episodes, with one of the most notable incidents related to the 1MDB scandal. Two Swiss private banks, BSI and Falcon Bank, were shut down after its key executives were found to have helped alleged mastermind Low Taek Jho move his funds. Several other bigger banks, such as DBS, Standard Chartered, UBS, Credit Suisse, United Overseas Bank U11 and Coutts were given varying financial penalties for related breaches.
Heaviest action was taken against Goldman Sachs, which helped to underwrite bonds issued by 1MDB premised on inflated values of underlying assets. The US investment bank paid US$122 million to the Singapore government.
