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MAS fines DBS, OCBC, Citibank and Swiss Life for Wirecard breaches

MAS fines DBS, OCBC, Citibank and Swiss Life for Wirecard breaches

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The Monetary Authority of Singapore (MAS) has fined banks DBS, OCBC, Citibank and insurer Swiss Life a total of SG$3.8 million for breaching requirement on anti-money laundering and countering the financing of terrorism, according to a statement by MAS. All financial insitutions have since accepted the penalties imposed. 

The breaches were identified during MAS’ examinations of the relevant financial institutions following news of irregularities relating to Wirecard AG’s financial statements and the alleged involvement of Singapore-based individuals and entities in the matter, MAS said. These financial institutions were found to have inadequate anti-money laundering and countering the financing of terrorism controls in place when they dealt with people who were involved in transactions with, or who had links to Wirecard AG or its related parties.

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"Although the breaches were serious, MAS did not find willful misconduct by any staff of these financial institutions. The financial institutions have taken prompt remedial actions to address the deficiencies identified by MAS," it said, adding that some of these actions include enhancements to their procedures and processes and training to improve staff’s vigilance in detecting and escalating risk concerns. 

Citibank fined SG$400,000 

For Citibank, MAS imposed a composition penalty of SG$400,000 or breaches between September 2019 and June 2020 relating to accounts maintained by two corporate customers. MAS noted that Citibank failed to "adequately understand the control structure of the customers and failed to correctly identify the customers’ beneficial owner, despite having information which suggested that the control structure and beneficial owners declared by the customers were incorrect."

Citibank also failed to inquire into unusually large transactions that had significantly exceeded one customer’s past transaction amounts and that had no apparent economic purpose. This included an outflow to a party allegedly involved in fraud.

“The case dates back to before June 2020 and since then we have taken steps to strengthen our know your customer (KYC) process,” said a Citi Singapore spokesperson in response to the penalty.

DBS fined SG$2.6 million

DBS on the other hand has received a composition penalty of SG$2.6 million for breaches between July 2015 to February 2020 relating to accounts maintained by 11 corporate customers.

They were fined because DBS failed to maintain relevant and up-to-date customer due diligence information relating to customers’ beneficial ownership, update customers’ money laundering or terrorism financing risk ratings, which resulted in the bank’s failure to perform timely enhanced customer due diligence measures on the customers. DBS also did not adequately establish the source of wealth of higher risk customers and their beneficial owners, instead, relying on customers’ representations of their wealth without adequate corroboration. It also did not adequately inquire into the background and purpose of unusually large transactions that were not consistent with its knowledge of the customers or which had no apparent economic purpose.

In response, DBS issues a statement acknowledging the penalty and noted that it takes its anti-money laundering obligations seriously and that the lapses were related to a network of customers which ultimately was traceable to Wirecard.These transactions were part of an elaborately orchestrated scheme involving a network of complex corporate structures, nominee arrangements and financial products to conceal actual control and/or beneficial ownership, it said. 

"While we detected and acted upon some of these activities through transaction monitoring and customer due diligence – and ultimately exited all relevant entities – we were unable to unravel the scheme in its entirety," DBS said before adding:

We acknowledge that we could have done better.

It noted that today, it is in a "materially better position" to respond faster and more robustly if faced with similar circumstances and that between 2019 and 2022, it had worked closely with MAS to enhance the effectiveness of its anti-money laundering controls.

"This has materially improved our ability to detect and mitigate risks arising from complex networks. MAS has recognised the improvements made," it said adding that it will continue to actively contribute to public-private industry collaborations to combat financial crimes. 

OCBC fined SG$600,000

For OCBC, MAS imposed a composition penalty of SG$600,000 on OCBC for breaches between June 2015 and January 2016 relating to accounts maintained by one corporate customer with OCBC.

"OCBC failed to inquire into the background and purpose of transactions even though they were not consistent with OCBC’s knowledge of the customer and its business or were unusually large and exhibited an unusual pattern that had no apparent economic purpose. OCBC also failed to probe into the customer’s ownership and control structure when the customer’s declared beneficial owner was not a party named in the customer’s corporate registration documents."

Swiss Life fined SG$200,000

 Swiss Life Singapore was fined SG$200,000 for breaches in May 2017 relating to an investment-linked life insurance policy underwritten by the financial institution. It failed to sufficiently understand the reasons behind the higher risk customer’s complex ownership and control structure and failed to adequately corroborate the source of wealth of the customer’s beneficial owner.

Citadelle cleared

MAS added that it has also completed its investigation into Citadelle for suspected contravention of the Trust Companies Act (TCA) by carrying on a trust business without a license. "As the investigation did not reveal any breaches of the TCA committed by Citadelle, MAS will be taking no further action against Citadelle," it said. 

"As Singapore grows in importance as an international financial centre, MAS expects our financial institutions to step up their controls against facilitating illicit financial flows," said Ho Hern Shin, the deputy managing director (financial supervision) at MAS.

"They must implement robust measures to know their customers, monitor on-going transactions to ensure that these are consistent with their understanding of their customers and their businesses, and exercise greater vigilance when customers use complex structures.” 

The news comes shortly after MAS slapped DBS bank with an additional capital requirement after the bank saw a disruption to its digital banking services recently, its second in a matter of weeks.

Together with the additional capital requirement imposed on DBS in February 2022, this translates to approximately S$1.6 billion in total additional regulatory capital, said MAS in a statement. 

"The additional capital requirement on DBS Bank is now a multiplier of 1.8 times to its risk weighted assets for operational risk, an increase from the multiplier of 1.5 times that MAS applied in February 2022 following the November 2021 disruption," it said. 

MAS may subsequently vary the size of the multiplier depending on the outcome of ongoing reviews. It added that after the March incident, DBS Bank had convened a Special Board Committee to oversee a full review of the bank’s IT resiliency, to be performed by an independent external expert.

“DBS Bank has fallen short of MAS’ expectations for banks to deliver reliable services to their customers.  The repeated inconvenience caused to the public is unacceptable," said Ho.

MAS' ruling comes days after DBS bank users experienced difficulties accessing banking and payment services recently due to a "higher volume traffic" on its digibank, according to the bank who were responding to frustrated users on its Facebook page who were unable to access mobile banking services. 

It later posted a statement on its Facebook page confirming that some retail customers faced difficulties accessing its banking and payment services, including DBS/POSB digibank Online and Mobile, DBS Vickers mTrading, DBS PayLah! and ATMs.

"Our digital systems returned to normal within 45 minutes at 1.30pm. Most of our ATMs are also up and running," it said. "Please be assured that our systems are uncompromised, and your monies and deposits remain safe," it continued. 

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