The central bank of Singapore is checking if banks including UBS and DBS Group Holdings broke any anti-money laundering rules while handling transactions linked to the scandal-hit Malaysian state fund 1MDB.
Reuters reported that Switzerland's Falcon Private Bank and Coutts International, owned by Geneva-based Union Bancaire Privee, are also under scrutiny. UBS, Coutts, and DBS have all declined to comment on this matter.
The Monetary Authority of Singapore (MAS) is going through several aspects of the banks' operations including their customer information, the source of the customer's funds, and whether the banks were carefully screening politically-exposed persons such as government officials.
An official, who declined to be identified due to the sensitivity of the matter, said the probe could lead to fines and other penalties if the authority finds any lapses. However, it is not yet clear which transactions by the banks are being examined.
"We have transparently shared our view and have nothing to add,"a Zurich-based spokesman for Falcon told Reuters, in response to the MAS review.
Falcon, which is owned by one of the world's leading sovereign wealth funds, Abu Dhabi's International Petroleum Investment Company (IPIC), previously said that it is in contact with Singapore's central bank and will cooperate with the authorities.
After the review is completed, MAS will make an announcement if any action will be taken against them.
Singapore is facing a lot of pressure to show whether the banks in the city-state are adhering to the tough anti-money laundering rules across the globe. Some lawyers said the United States has already imposed hefty fines on banks for lapses related to such case, but the Asian regulators have been very slow to do so.
Nizam Ismail, Singapore-based partner at RHTLaw Taylor Wessing LLP, said "it is also important for Singapore to be seen to be taking action against any abuse of its private banking sector for money laundering".
In the latest probe, MAS decided to close down the operations of Swiss private bank BSI AG in Singapore in late May. The first time in 32 years, the authority has taken such action against a bank for serious breaches of anti-money laundering rules.
Apart from that, the authorities also said that there had been gross misconduct by some of the employees and poor management oversight of the operations in the bank.
MAS also imposed a fine of S$13.3 million ($9.9 million) on the bank, while the Swiss authorities also said that they would seize 95 million Swiss francs ($97 million) of BSI's profits.
Malaysian companies and banks linked to 1MDB are still being investigated and probes are being conducted by authorities in the United States, Switzerland, Luxembourg, Singapore and the United Arab Emirates.