The View | Have regulations finally killed the secretive Swiss banking industry?
KYC and AML regulations and prosecutions threaten the very existence of Swiss banks either through the revocation of their licences or never ending compliance costs
The demise of BSI Bank at the hands of the Monetary Authority of Singapore and Swiss authorities marks the first time that failure to meet Know-Your-Client (“KYC”) and banker conduct principles became criminal offences that could result in personal liability and the revocation of a bank licence. Most importantly, it marks the ‘end of history’ for the Swiss banking industry.
An international investigation into 1Malaysia Development Bhd’s (1MDB) fallout marshalled enough investigative resources to collect a trail of evidence leading to BSI. The global money laundering and embezzlement investigations surrounding 1MDB involved US$4.2 billion of irregular transactions by the state fund.
While anti-money laundering charges and convictions have occurred before, KYC rules have been more about completing application forms. Not doing so truthfully or accurately have been somewhat difficult to enforce or criminalise. For the first time a gross failure or intentional inability to comply to KYC constitutes a criminal offence.
Ravi Menon, managing director of the Monetary Authority of Singapore stated: “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.”