The Monetary of Singapore fine of J. Safra Sarasin again highlights chronic weaknesses in the Swiss private banking sector abroad.

You can almost picture the scene after reading the Monetary Authority of Singapore (MAS) announcement on Swiss-Brazilian Bank J. Safra Sarasin last week. Rows of fresh-faced external consultants pulling late-night rounds in darkened offices where the air conditioning has been turned off, trying to cobble together plausible sources of wealth for clients after days hounding private bankers whose main response was usually that «none of the other banks ask for this».

They clearly did not go to the same kindergarten that I did, given the lectures I always got for blindly following another kid’s behavior.

Faded PDFs

During the day, endless squabbling between management, operations, and the consultant’s partners. Do cross-booked accounts for the same client count? Is the faded, lopsided PDF of a barely legible passport from around 2002 good enough? If it is not, the client is traveling on business – usually for months.

The question that must be asked is why Swiss private banks are still getting caught up in these kinds of issues.

AML regulation in Singapore and Hong Kong has been in place for any number of years now – but still, we can add J. Safra Sarasin to a list of Swiss private banks that includes Credit Suisse, BSI, Falcon (1MDB), and Coutts (fined in 2017 in Hong Kong) – full disclosure: I used to be employed in the Asian business, which was a branch of the Swiss business.

Antiquated Infrastructure

You can speculate about the reasons these things are happening. In my day, it was attributed to the antiquated computer infrastructure many of them had, particularly compared to large retail banks, and their unwillingness to pay for anything remotely modern. But the truth is you probably could manage it all well on paper if you really had to.

Even if management has become attuned to the risks of non-compliance in the meantime, most private bankers still aren’t. Sometimes, on those long days trying to get work done on sources of wealth, on documentation, on sources of funds, you got the impression they expected all of this to simply disappear.

Pain Not Over

Let’s get back to J. Safra Sarasin. The pain is not over. It has to pay an independent party, usually one of the big four accounting firms, to go bank and audit all the work that has been done and report back to the MAS.

You also have to raise very deep questions about a private bank being fined for such lapses in Singapore while getting a little over HK$3.2 million from the Hong Kong government under the COVID-19 employee wage subsidy program last year.

A Bit Too Comfortable

There is a larger point here. Whatever their marketing departments might say about their commitment to this or that region or city, Swiss banks are essentially guests abroad. But once again they have been caught behaving a bit too comfortably outside their home country.

And we all know what happened to UBS in the U.S. when it thought it could do what it wanted to.