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1MDB claims another scalp as Singapore’s money laundering crackdown continues


alcon Bank of Switzerland has had its Singapore banking licence removed for money laundering activity connected to the 1MDB scandal. The Monetary Authority of Singapore (MAS) ordered Falcon Bank, a private bank, to close its Singaporean operations over 14 breaches of the city state’s money laundering prevention law. It has also been fined just over US$3mn. 1MDB is Malaysia’s state-owned development fund. The country’s Prime Minister Najib Tun Razak is accused of channelling around US$700mn from the fund to his own personal bank account. Many topranking officials have been dragged into the scandal, with regulators around the world launching investigations and seizing assets that are potentially related to it. Falcon becomes the second bank to have its Singaporean license revoked

as a result of 1MDB, after BSI Bank in May. MAS found breaches during inspections in both 2013 and 2015, with Falcon Bank failing to strengthen its AML controls, despite being ordered to do so. It has withdrawn Falcon’s merchant banking licence for “persistent and severe lack of understanding of MAS’ AML requirements and expectations”. The authority also imposed financial penalties on DBS and UBS, two commercial banks, for breaches of antimoney laundering (AML) requirements. DBS was fined US$1mn for 10 breaches, with UBS fined US$1.3mn for 13 breaches of AML law. These banks were found to have lapses in controls, including “deficiencies in the onboarding of new accounts, weaknesses in corroborating the source of funds, inadequate scrutiny of customers’ transactions and activities, and failure

to file timely suspicious transaction reports”. These were connected to individuals within the banks, rather than faults in the compliance systems. In a statement, the authority said: “MAS’ inspections did not find pervasive control weaknesses within these banks.” Nonetheless, the events provide further warnings to trade banks operating in Singapore, which has been leading the charge against money laundering in the region. MAS confirms that Standard Chartered is also under assessment and that it will make an announcement on its findings soon. AML expert Sean Norris, Asia Pacific director at risk management software company Accuity, claims that the penalties will be an embarrassment to DBS and UBS, both of which are heavily engaged in stopping breaches of AML procedures. He tells GTR: “I know these banks. Falcon, BSI:

“DBS and UBS will be motivated and embarrassed by what’s happened.” Sean Norris, Accuity

deliberate action and the right judgement has been passed, an immediate revoking of their licence. But with DBS and UBS, they are doing their damnedest to try and deal with AML, sanctions and bad behaviour. The attitude of people I work with in these banks is not to circumvent these. “I can tell you right now that DBS and UBS will be motivated and embarrassed by what’s happened because they’re working night and day to try and stop all of this. In a world of ever-changing compliance and ever-changing cleverness by the bad guys to push money through, it’s a tough gig.”

Asia invoice financing fund to serve areas “untouched” by banks


tenn Financial, an invoice financing firm, has launched a US$300mn fund to tap the manufacturing hubs of emerging Asia that are “pretty much untouched by banks”. The UK-based company, with an office in Singapore, has combined its own capital with that of alternative asset manager Crayhill Capital Management to launch a platform for acquiring 120-day trade receivables from SMEs in China and Southeast Asia. The launch comes at a time when many traditional financial institutions are vacating the space as they derisk their balance sheets and

focus their resources on core sectors and geographies. Stenn’s CEO Walter Colebatch tells GTR that despite many banks announcing supply chain financing programmes in Asia, they are encountering little competition on the ground. “The feedback we are getting from our clients is that dealing with banks is time-consuming, inefficient, inflexible and bureaucratic for them. We only expect that to increase, and the differential between invoice financing firms like Stenn and the banks to increase,” he says. “Secondly, while banks talk a good shop when they launch these programmes, we find

the real-world marketplace on the ground in developing manufacturing nations is pretty much untouched by those banks. So, in reality, we are not bumping into them on the ground,” he adds. The view reinforces that held by many alternative financiers in Asia. Speaking to GTR in Hong Kong, Rajah Chaudhry, the CEO of online working capital platform Paycelerate, explains that large banks find it difficult to cater for the granularity of Asian supply chains. Their programmes are often not scalable and destined only to work for large multinationals and their long-term, steady suppliers

throughout the region. This leaves a gaping hole in the market for smaller companies requiring access to working capital. Colebatch adds: “The cashflow shortages and withdrawal of liquidity in the Asian manufacturing countries of the past 12 months or so has seen interest in our services grow significantly. It’s an excellent opportunity for us because while that is happening in Asia, on the other side of the world, importers and retailers are reacting by demanding longer open-account terms or cutting their LC issuances in order to preserve their own working capital.”

November/December 2016 | 39

November/December 2016 issue  
November/December 2016 issue