UBS is among Swiss banks to be scrutinized by Singapore’s regulator for financial dealings with Malaysian state fund 1MDB, two sources familiar with the matter told finews.ch and finews.asia. There may be a critical difference between the Swiss banking giant and Banca della Svizzera Italiana, or BSI, a far smaller Swiss rival which was effectively put out of business by its involvement with 1MDB.
Singapore’s ability to run a clean financial center is being undermined by a growing scandal surrounding 1MDB. The Malaysian state fund is suspected of funneling hundreds of millions of state money into private coffers and funding luxury goods, a reelection campaign, and Hollywood blockbuster «The Wolf of Wall Street.»
The Monetary Authority of Singapore, the banking regulator, is expected to disclose that is is looking into a handful of further banks over how they handled business with 1MDB, according to two people familiar with the situation. MAS is expected to ask a number of banks, among them UBS, for further information about their dealings with the fund, these people said.
The disclosure could come as soon as Wednesday, they said.
BSI Shutdown
The move could mark the beginning of a second wave of a regulatory action against banks in Singapore and 1MDB, after the Monetary Authority of Singapore, or MAS, effectively shut down Banca della Svizzera Italiana in May for its involvement in money-laundering and corruption in connection with 1MDB.
Earlier this week, British-based investigative blog «Sarawak Report» posted what it claims are excerpts of bank statements illustrating that payments of $2 billion from 1MDB flowed through an account with UBS in Singapore en route to an account held by Aabar Investment. Aabar is allegedly a sham entity set up by associates of Malaysian Prime Minister Najib Razak.
finews.ch couldn't independently verify the reporting done by «Sarawak Report».
UBS Raised Alarm
One critical difference in the regulator's approach to UBS may well be that the bank itself raised alarm over 1MDB to regulators.
UBS lodged a so-called Suspicious Transaction Report, or STR, to Singapore authorities early in its dealings with 1MDB, one of the sources said. This sparked MAS’ investigation into it and possibly other involved banks, according to this person.
Reached for comment, a spokesman for UBS declined to comment. A spokeswoman for MAS, Singapore’s financial regulator, also declined comment.
Singapore at Crossroads
1MDB marks a defining point for Singapore: the reputation of its relatively young financial center is at stake. The city-state is expected to deal forcefully with firms which have dealt in ill-gotten funds or used Singapore as a hub for their own illicit dealings.
For Singapore, effectively disposing of a modestly-sized bank like BSI is a calculated regulatory move, since the bank was set to disappear anyway as part of a previously-agreed acquisition by EFG International. Potentially sanctioning a bank as large as UBS, with roots in Singapore going back decades and thousands of employees, is another matter entirely.
Politically Delicate
More notably, UBS is actually a political matter for Singapore, which is a UBS’ second-largest shareholder, with nearly 6.4 percent in the Swiss bank.
Singapore’s sovereign wealth fund, GIC, plowed billions into UBS during the financial crisis of 2008-09, and have held onto a considerable stake in the Swiss bank since then. A conflict of interest over the city state’s role – shareholder versus regulator – in dealing with UBS is unavoidable.
Besides UBS, several other banks including Zurich's Falcon Private Bank, Luxembourg's branch of Banque Edmond de Rothschild and Coutts International, now owned by Union Bancaire Privee, or UBP, are reportedly also caught up in the scandal.