BSI who? 5 things you MUST know about BSI Bank shutdown
25 May 2016, 04:22 pm
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And the burning question in many people’s minds – that few dared to voice out loud – was: Who the blazes is BSI Bank?

Indeed, many have not even heard of the name, let alone used its services. Yet, why is the ordered closure of BSI by Singapore’s central bank MAS is huge news?

The Edge Singapore highlights five things you must know about the BSI Bank and the saga surrounding it.

1) You haven’t heard of BSI? Probably because it is was a merchant bank in Singapore

BSI Bank (Singapore) Ltd is a wholly owned subsidiary of the 143-year-old BSI SA bank headquartered in Switzerland, and had been operating on our shores for over a decade, since November 2005.

So why haven’t we heard of it? Because BSI was a merchant bank, which are not allowed to accept sight or savings deposits or borrow from the public.

Merchant banks typically engage in corporate finance, underwriting of share and bond issues, mergers and acquisitions, portfolio investment management, management consultancy, personal banking and other fee-based activities.

In addition, merchant banks may accept deposits or borrow from banks, finance companies, shareholders and companies controlled by their shareholders. So unless you’re one of these, you’re unlikely to have come across BSI in your everyday activities.

2) The alleged corruption runs deep – all the way from the top

MAS has referred names of six of BSI Bank’s senior management and staff to the Public Prosecutor to evaluate whether they have committed criminal offences. And it doesn’t look pretty.

Headlining the list are BSI’s former CEO Hans Peter Brunner, and former Deputy CEO Raj Sriram.

Brunner, 64, retired in March, and was the second notable banker linked to 1Malaysia Development Bhd (1MDB) who resigned in the year, following the February resignation of Tim Leissner, former chairman of Goldman Sachs Southeast Asia. (See also: BSi Bank Asia CEO Brunner retires)

Brunner handed the reins to interim CEO Sriram, who lasted just over a month in the hot seat before it was announced in April that he, too, would leave the bank. (See also: BSI Singapore's interim CEO Raj Sriram to leave bank)

3)  Part of international criminal probe, with some charges linked to Malaysia’s 1MDB scandal

The actions are part of the global money laundering and embezzlement investigations surrounding 1MDB.

The Office of the Attorney General of Switzerland (OAG) said Tuesday that it has opened criminal proceedings against the BSI SA bank “based on information revealed by the criminal proceedings in the 1MDB case”.

“Through business relationships and transactions linked to the corruption scandals surrounding the Malaysian sovereign wealth fund 1MDB, BSI AG committed serious breaches of money laundering regulations and ‘fit and proper’ requirements,”  Swiss Financial Market Supervisory Authority FINMA said in a strongly-worded statement on Tuesday.

BSI said it would co-operate fully with both FINMA and MAS with regards to the 1Malaysia Development Bhd (1MDB) investigations arising from activities that occurred between 2011 and April 2015.

BSI SA’s Group CEO Stefano Coduri on Tuesday tendered his resignation with immediate effect. (See: BSI SA says it will co-operate to “ensure quick and fair resolution”; Stefano Coduri out as Group CEO)

The Malaysian Public Accounts Committee identified at least US$4.2 billion of irregular transactions by the state fund, and recommended the advisory board headed by Prime Minister Datuk Seri Najib Razak be disbanded, reports say. Both 1MDB and Najib have consistently denied wrongdoing.

4) Most number of criminal charges awarded? Nine (so far) for former wealth planner Yeo Jia Wei

Now, here is an award nobody wants to win.

But former BSI Bank wealth planner Yeo Jia Wei is currently facing nine charges as at May 24, linked to the widening investigations on 1MDB. These include that for money laundering and cheating involving millions of dollars, and for perverting the course of justice.

Already held in remand by authorities for 39 days, the court is now reviewing if he will be granted bail, and will make its decision known on Thursday.

Second solicitor general Kwek Mean Luck argued that Yeo should not be granted bail, and stressed that Yeo had tried tampering with witnesses, including his former manager at BSI, Swampillai, to “collaborate” stories to provide a “consistent response” to Commercial Affairs Department (CAD) if questioned.

5) MAS needs to protect Singapore’s reputation as a safe banking haven

“BSI Bank is the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector. It is a stark reminder to all financial institutions to take their anti-money laundering responsibilities seriously,” says MAS managing director Ravi Menon.

“MAS is absolutely committed to safeguarding the integrity and reputation of Singapore’s financial centre. On this, there can be no compromise,” he adds.

MAS said its decision to shut down BSI Bank in Singapore takes into account “serious breach of anti-money laundering requirements, poor management oversight of the bank’s operations, and gross misconduct by some of the bank’s staff”.

MAS also served BSI Bank notice to impose financial penalties amounting to S$13.3 million for 41 breaches of MAS Notice 1014 - Prevention of Money Laundering and Countering the Financing of Terrorism.

 

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