Credit Suisse Faces Regulatory Review in Singapore Amid $2 Billion Scandal

18 Oct, 2023

Credit Suisse Faces Regulatory Review in Singapore Amid $2 Billion Scandal

Singapore's financial regulator, the Monetary Authority of Singapore (MAS), is set to conduct an on-site inspection of Credit Suisse Group AG. This action comes in the wake of a money laundering scandal that has sent shockwaves through the city-state. At least one of Credit Suisse's customers has been charged in connection with the scandal.

Credit Suisse's local unit is among the banks that MAS intends to investigate to determine whether they adequately managed the monitoring of their wealthy clients. People familiar with the matter have revealed that MAS officials will conduct interviews with bank personnel and review relevant documents in the coming weeks. The information has been shared on the condition of anonymity as it is not yet public knowledge.

The planned inspection signifies the gravity of the scandal that has implicated more than ten domestic and international banks operating in the Asian financial hub. The

scandal has resulted in the seizure of over S$2.8 billion ($2 billion) in assets, including cash and jewelry, linked to a group of alleged money launderers of Chinese origin.

MAS's forthcoming inspection goes beyond its routine interactions with banks and suggests potential concerns regarding the banks' significant exposure to the suspects and their overall handling of client due diligence. Credit Suisse, for instance, has established relationships with the accused individuals or their associated companies. Notably, one of the suspects, Vang Shuiming, held a S$92 million account with the Swiss lender, which is the largest known account associated with this case. Credit Suisse has chosen not to comment on the matter.

An MAS spokesperson referred to comments made in parliament by Minister of State Alvin Tan earlier in the month. Minister Tan indicated that the regulator is conducting supervisory reviews and inspections of banks with a "major nexus" to the case. He also expressed concern that financial assets constituted the vast majority of the assets seized thus far.

Vang held accounts with other banks as well, including Bank Julius Baer (S$33 million), United Overseas Bank Ltd., and RHB Bank Bhd.'s local unit, according to police affidavits. The inspection by MAS may investigate internal red flags raised by these banks and the timing of filing suspicious transaction reports.

For Credit Suisse, this regulatory review is just one of several challenges it faces as its parent company, UBS Group AG, focuses on the integration of thousands of employees from its former rival worldwide. It's worth noting that MAS previously conducted a similar inspection of Credit Suisse in 2017 in connection with the 1MDB scandal, which was Malaysia's largest corruption case at the time. Credit Suisse was subsequently fined S$700,000, the smallest penalty imposed by the regulator on banks in Singapore at the time.

Since the scandal came to light in August, banks in Singapore have intensified their scrutiny of clients, particularly those of Chinese descent with multiple passports. Authorities are also examining potential links between the accused and single family offices, and they are prepared to tighten regulations where necessary.

The investigation into the money-laundering ring dates back to 2021 when banks and companies filed suspicious transaction reports. The reports alerted authorities to suspicious activities involving the country's financial system.