The Monetary Authority of Singapore is withdrawing the merchant bank status of Falcon Private Bank, Singapore Branch. In addition the Singapore Branch Manager, Jens Sturzenegger, was arrested on 5 October.
Falcon Bank, which has been operating as a merchant bank in Singapore since August 2008, offers boutique private banking services. Falcon Bank was originally owned by American International Group (AIG) and known as AIG Private Bank.
In 2009, AIG Private Bank was acquired by Aabar Investments PJS and renamed as Falcon Bank. It is headquartered in Switzerland.
The Monetary Authority of Singapore (MAS) stated that it had conducted inspections on Falcon Bank in 2013 and 2015. The 2013 inspection found weaknesses in the bank’s controls for client acceptance and transaction surveillance that led to breaches of MAS’ AML requirements.
Numerous Failures and Improper Conduct
Falcon Bank paid a composition fine of S$300,000 for these breaches, and MAS instructed the merchant bank to strengthen its AML controls. The 2015 inspection uncovered an even larger number of regulatory breaches as well as serious failings on the part of Head Office senior management and the Singapore Branch Manager.
Serious failures in anti-money laundering controls and improper conduct by senior management led the MAS to withdraw Falcon Bank’s status as a merchant bank in Singapore.
Multiple Red Flags
Among the numerous violations stated included the merchant bank’s Head Office failure to guard against conflicts of interest when managing the account of a customer who was associated with the bank’s former Board Chairman Mohamed Ahmed Badawy Al-Husseiny.
MAS say the former Chairman misled and influenced the Singapore Branch into processing the customer’s unusually large transactions despite multiple red flags.
Falcon Branch Manager Arrested
As a result of the improper conduct of the Singapore Branch Manager and certain senior managers at the Head Office had impaired the effectiveness of the Singapore Branch’s compliance function in discharging its responsibilities.
Their interference was wrongful and egregious in nature, and contributed to substantial breaches of AML regulations. MAS has been informed that the Singapore Branch Manager, Jens Sturzenegger, has been arrested by the Commercial Affairs Department on 5 October 2016.
Financial Penalties Imposed
Falcon Bank has demonstrated a persistent and severe lack of understanding of MAS’ AML requirements and expectations. Taking into account the totality of Falcon Bank’s conduct, MAS’ assessment is that the merchant bank will be unable to comply with these requirements and expectations going forward.
MAS has imposed on Falcon Bank financial penalties amounting to S$4.3 million for 14 breaches of MAS Notice 1014 – Prevention of Money Laundering and Countering the Financing of Terrorism. The breaches include failures to adequately assess irregularities in activities pertaining to customer accounts, and file suspicious transaction reports.
MAS is working closely with the Swiss financial regulator Finma, the home regulator of Falcon Private Bank, to oversee an orderly closure of the merchant bank branch in Singapore.
