If the rest of the world stops doing business with 1MDB ...

If the rest of the world stops doing business with 1MDB ...

With the closing down of a second bank in Singapore today, (Oct 11, 2016) due to its financial dealings with 1Malaysia Development Berhad (1MDB) -linked transactions, has a damning domino effect started?

Will the rest of the world start avoiding doing any further business with Prime Minister Najib Razak’s 1MDB?

That’s a very real scenario that will surely strangle 1MDB’s business operations overseas.

How would Najib even launch any initial public offer (IPOs) overseas with the 1MDB stigma attached to Malaysia? (Read this No News Is Bad News earlier posting for context: http://victorlim2016.blogspot.my/2016/10/as-1mdb-pm-najib-again-eyes-ipo-for.html)

Read the details of 1MDB’s deepening financial woes here:

"DON’T DO ANY MORE DEALS WITH NAJIB & CO: ‘HEAD OFFICE IS WATCHING YOU’ – HOW FALCON IGNORED 1MDB RED FLAGS

Politics | October 11, 2016 by | 0 Comments


The message to employees at Falcon Private Bank’s Singapore branch was clear: process the transactions, and get them done on time.

“Head Office is watching you,” one of the bank’s senior managers warned.

The correspondence is part of what Swiss authorities alleged on Tuesday were “serious” breaches of anti-money laundering rules in Falcon’s dealings with 1Malaysia Development Bhd. — the country’s troubled state investment company — and a “young Malaysian businessman” with ties to the government.

Managers at Zurich-based Falcon brushed aside concerns raised by a number of bank employees, the Swiss regulator said. Under pressure from two board members with 1MDB ties, the bank’s managers approved $3.8 billion of asset transfers linked to the fund from 2012 to mid-2015, the regulator said.

“Although management’s attention was drawn to these matters, it repeatedly failed to properly investigate the business relationships, specifically those with politically exposed persons, and high-risk transactions,” the Swiss regulator, known as Finma, said in a statement.

The allegations — the latest to emerge from a series of investigations by officials in the U.S., Singapore and Malaysia — shed further light on how international banks allegedly aided in the misuse of 1MDB funds meant for economic development. The scandal has dented investor confidence in Malaysia and cast an unflattering spotlight on the administration of Prime Minister Najib Razak, who led 1MDB’s advisory board until the end of May.

Falcon and its main shareholder, Aabar Investments PJS, said in a statement that they welcomed the completion of investigations by Finma and the Monetary Authority of Singapore, which also released results of an investigation into Falcon on Tuesday.

“Following a constructive dialogue, this completion finally resolves the 1MDB topic for the Bank with the regulators,” Falcon said, without disputing the regulators’ findings or indicating that the firm will challenge them. “Safeguarding the Bank’s reputation and the adherence to all laws, regulations and rules is of highest importance to Falcon Private Bank and its employees.”

1MDB has consistently denied wrongdoing and Malaysia’s government has said it will cooperate with lawful investigations of local companies or its citizens in relation to the fund. 1MDB didn’t respond to an e-mail seeking comment on Tuesday.

$681 Million


Among the questionable Falcon dealings highlighted by Swiss authorities was a $681 million “pass through” transaction in the unnamed Malaysian businessman’s accounts.

While the Swiss statement didn’t provide details on where the $681 million ended up, the figure matches what Najib has acknowledged receiving in his own accounts before the country’s 2013 general election. Najib has said the money was a private donation from the Saudi royal family and that $620 million was later returned. The premier has consistently denied wrongdoing and has been cleared by a Malaysian investigation. Najib’s office didn’t immediately reply to an e-mail seeking comment on Finma’s statement.

Falcon, which also handled a repayment of $620 million through the Malaysian businessman’s accounts six months later, failed to adequately investigate the commercial background for the transactions despite “conflicting evidence,” the Swiss regulator said.

“We started this six months ago and now we have to go through with it — somehow,” an unidentified author wrote in an internal Falcon e-mail, according to Finma.

Falcon’s managers were focused on making sure 1MDB’s transactions went smoothly, attaching “great significance” to the accounts because two of the bank’s board members had initiated the 1MDB relationship, the Swiss regulator said. Both board members pursued their own “illegitimate purposes”, Finma said, adding that they have since left the board and that there’s no evidence other board members of Falcon were implicated.

Red Flags


While Finma didn’t identify the two board members, Singapore’s MAS accused Falcon’s former chairman, Ahmed Badawy Al-Husseiny, of wrongdoing in a separate statement on Tuesday. Al-Husseiny “misled and influenced” Falcon’s Singapore branch to process unusually large 1MDB-related transactions despite multiple red flags, said MAS, which has been cooperating with Finma in its investigation.

Al-Husseiny is the former chief executive officer of Aabar Investments, a unit of International Petroleum Investment Co., an Abu Dhabi government fund. Falcon, founded in 1965 as Ueberseebank, got its current name in 2009 after Aabar took over the firm from American International Group Inc.

Global Scandal

Al-Husseiny faces a travel ban and had his personal assets ordered frozen by the U.A.E central bank, the Wall Street Journal reported in April, citing people it didn’t identify. Al-Husseiny, who declined to comment to Bloomberg in April, couldn’t be reached for comment on his mobile phone Tuesday.

MAS said it ordered Falcon to cease operations in Singapore and that the firm’s local branch manager had been arrested. Finma has started enforcement proceedings against two of Falcon’s former executives and threatened to withdraw the bank’s license if there were any further breaches of money-laundering regulations. The Singapore branch manager couldn’t be reached for comment, and the bank didn’t immediately respond to a phone call seeking comment on the officials.

Falcon’s alleged failures echo those of other banks associated with 1MDB. BSI SA had its Singapore banking license revoked over its role in the 1MDB scandal in May, with Ravi Menon, managing director of MAS, calling it “the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector.”

The U.S. Department of Justice said in July that a handful of global banks were used to shift money improperly without confirming who the recipients were, other than using information provided by 1MDB. At times, when compliance officers raised questions, they were brushed aside and the transfers were eventually approved.

For its part, Falcon said the 1MDB episode has prompted the bank to improve the way it operates.

“Since 2013, the Bank has further enhanced its compliance, invested in additional resources as well as reviewed the organisational setup and relevant processes,” Falcon said. “Furthermore, based on the findings of the regulators, Falcon Private Bank has initiated additional measures to prevent future issues.”Bloomberg"

"‘WE WERE ABUSED’: FALCON, SLAMMED BY BOTH SWISS & S’PORE, LASHES BACK AT NAJIB’S 1MDB OVER US$3.8BIL MONEY LAUNDERING
Politics | October 11, 2016 by | 0 Comments


Regulators ordered Falcon Private Bank to cease operations in Singapore and slammed the bank for “serious” breaches of anti-money laundering regulations in relation to its role in moving funds associated with the troubled 1Malaysia Development Bhd.

The Monetary Authority of Singapore said the firm’s local branch manager has been arrested and Switzerland’s Financial Market Supervisory Authority has startedenforcement proceedings against two of Falcon’s former executives and threatened to withdraw its license if there were any further breaches of money-laundering regulations. Finma linked the private bank to $3.8 billion of 1MDB fund flows, according to a statement released Tuesday.

Falcon “has seriously breached money laundering regulations,” Finma said. The private bank failed “to carry out adequate background checks into transactions and business relationships associated with Malaysian sovereign wealth fund 1MDB which were booked in Switzerland, Singapore and Hong Kong.”
Falcon failed to adequately investigate the background of so-called pass-through transactions totaling $681 million and the repayment six months later of $620 million according to the Finma statement. That’s the amount that appeared in Malaysian Prime Minister Najib Razak’s accounts in 2013 and most was later returned, the country’s attorney general said earlier this year. The Swiss regulator didn’t mention Najib.

Unsettling Move
“Wealthy clients typically get very nervous when they read about their bank being the target of an anti-money laundering investigation, said Jonas Floriani, a banks analyst at Keefe, Bruyette & Woods in London. “When a regulator goes as far as to shut down part of the business there’s every chance some clients will run for the hills.”

The two regulators fined Falcon a combined $5.6 million, with UBS Group AG and DBS Group Holdings Ltd. also drawing penalties from the MAS for anti-money laundering lapses. In a statement, Falcon said it and its Abu Dhabi-based owner, Aabar Investments PJSC, welcomed the completion of the investigations, which “finally resolves the 1MDB topic for the bank with the regulators.” Since 2013, the firm had further enhanced its compliance and taken additional measures “to prevent future issues,” it said.

Abused, Naive


“We will take care to wind down the Singapore branch in an orderly fashion,” Chief Executive Officer Walter Berchtold told journalists in Zurich Tuesday. “Falcon was abused and was a little naive on occasion.”
Falcon had under $900 million in client assets in Singapore, out of 18.2 billion Swiss francs ($18.5 billion) globally, Berchtold said. Aabar, the bank’s parent company, is not going to sell the Swiss lender, he said. “Aabar stands behind the bank 100 percent and views it as a strategic asset.”

Falcon had a relationship with a “young Malaysian businessman” with ties to that country’s government, the Swiss regulator said. The man, who it didn’t identify, had been able to acquire $135 million of assets in a short period of time and transferred a total of $1.2 billion to his accounts at a later date. The bank did not verify how he was able to do so, even though the transaction was “clearly” inconsistent with the information he gave when opening the account.

Besides Singapore and Switzerland, U.S. authorities are also digging into how billions of dollars may have been improperly diverted from 1MDB, which was set up in 2009 to fund development projects across Malaysia. Singapore said in May it would revokeLugano, Switzerland-based BSI SA’s local license, and in July rebuked four banks — including Falcon — for lapses in anti-money laundering controls related to transactions linked to the Malaysian fund.

1MDB has consistently denied wrongdoing and Malaysia’s government has said it will cooperate with lawful investigations of local companies or its citizens in relation to the fund. Singapore has criminally charged four people, including three former BSI bankers for their roles in transactions and money flows linked to 1MDB.

The Swiss regulator said it had identified “serious shortcomings” in Falcon’s anti-money laundering activities and in risk management between 2012 and the summer of 2015. Assets amounting to about $3.8 billion associated with 1MDB were transferred to accounts at Falcon during that period and “generally moved on quickly.”

“The business relationships and transactions booked in Switzerland and at Falcon’s Singapore and Hong Kong branches were unusual and involved a high level of risk for the bank both through their nature and the amounts transacted,” Finma said. “Although management’s attention was drawn to these matters, it repeatedly failed to properly investigate the business relationships.”

The MAS’s withdrawal of the firm’s merchant-bank status brings to an end a boutique private-banking operation that began in the city in August 2008. The regulator had fined Falcon S$300,000 for anti-money laundering lapses after an inspection in 2013, and uncovered “an even larger number” of breaches as well as “serious failings” by senior management at the bank’s head office and by the Singapore branch manager, the MAS said.

Serious Failings


The branch manager, Jens Sturzenegger, was arrested by Singapore’s Commercial Affairs Department on Oct. 5, the MAS said. The regulator fined Falcon S$4.3 million ($3.1 million) for 14 breaches of Singapore’s anti-money laundering rules including failing to adequately assess irregularities in customer accounts and to file suspicious transaction reports.

“Falcon Bank has demonstrated a persistent and severe lack of understanding of MAS’ AML requirements and expectations,” the regulator said. “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.”

Falcon’s Singapore office on the 26th floor of a building overlooking the city’s downtown area was quiet on Tuesday morning, with employees moving about, talking on their mobile phones. Two of them, who declined to provide their names, said they had been notified about the MAS decision and refused to comment further. Building security said later they had been instructed to deny media access to the office.

Taking Action
Founded in 1965 as Ueberseebank, the Zurich-based bank was renamed Falcon in 2009 after Aabar, an investment company controlled by the Abu Dhabi government, took over the firm from American International Group Inc. Falcon has offices in London, Abu Dhabi and Dubai.

The Singaporean regulator, which had vowed stronger action on anti-money laundering lapses earlier this year, also fined UBS S$1.3 million and DBS S$1 million in relation to 1MDB. The MAS had found control lapses by specific bank officers, the regulator said, adding that it had completed its inspections of the two banks’ 1MDB fund flows.

UBS and DBS said in separate statements they will strengthen controls and take actions against employees responsible for the lapses.

The boards and senior management at banks “must set the tone from the top – that profits do not come before right conduct,” MAS Managing Director Ravi Menon said in the statement. “MAS will work closely with the industry to ensure that standards are kept high and will take strong deterrent actions against institutions that fall short.”– Bloomberg"

"FOR SERVICING NAJIB & CO, FALCON IN DEEP TROUBLE: SWISS AG MULLS CRIMINAL CHARGES AFTER S’PORE SHUTDOWN

Politics | October 11, 2016 by | 0 Comments


Switzerland’s Office of the Attorney-General (OAG) may open criminal proceedings against Zurich-based Falcon Private Bank following sanctions from Swiss financial watchdog Finma, the OAG said today.
“The question of opening criminal proceedings against Falcon Private Bank Ltd is being considered,” the OAG said in a statement.

“In this context, the OAG has requested the Swiss Financial Market Supervisory Authority Finma to provide a copy of its enforcement decision and will decide whether to open criminal proceedings against the Falcon Private Bank after analysing this decision.”



Finma ordered Falcon to turn over 2.5 million Swiss francs ($2.56 million) in what it said were illegal profits after finding breaches in money laundering regulations in connection with Malaysian state investment fund 1MDB.

Separately, the Monetary Authority of Singapore (MAS) said it had ordered Falcon’s Singapore branch to cease operating because of “a persistent and severe lack of understanding” of Singapore’s money-laundering control.– Reuters"

When is this financial dealing going to explode?