SINGAPORE/ZURICH: Singapore closed down BSI's operations in the city-state, while Switzerland began criminal proceedings against the private bank, in the biggest international crackdown on financial entities dealing with a scandal-hit Malaysian government fund.

The Monetary Authority of Singapore (MAS) said on Tuesday it had withdrawn BSI Bank's status as a merchant bank in Singapore for serious breaches of anti-money laundering rules, the first time in 32 years it has taken such action against a bank.

In a statement that highlighted an "unacceptable risk culture," regulatory lapses and gross misconduct of some of BSI's staff, MAS said it was also reviewing transactions of other banks in Singapore. (ttp://bit.ly/1TtsyAw)

The central bank has referred five former executives of BSI Bank to the public prosecutor for possible criminal charges, including its previous Asia CEO, Hanspeter Brunner,m and another suspended executive.

Brunner did not respond to a request for comment.

"BSI Bank is the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector," said Ravi Menon, managing director of MAS.

'STRONG SIGNAL'

The Singapore central bank's action was "a shot across the bow to the industry," said Chris Wilson, a partner at PwC Consulting, specialising in anti-money laundering and financial crime.

"This sends a strong signal to senior management of any institution out there that they could also face these issues," he said, adding that regulators in other countries may now review their own rules or step up enforcement.

MAS did not explicitly name 1Malaysia Development Bhd (1MDB) in its statement. But the Swiss Financial Market Supervisory Authority or Finma said in Zurich that Swiss-based BSI AG had committed serious breaches of money laundering regulations through business relationships and transactions linked to the corruption scandals surrounding the Malaysian state investor.

The fund, which was founded by Malaysian Prime Minister Najib Razak in 2009 shortly after he came to office, is being investigated for money-laundering in at least six countries.

A Malaysian parliamentary committee in April identified at least $4.2 billion in irregular transactions by 1MDB. It recommended the fund's advisory board, which Najib chaired, be disbanded. Both 1MDB and Najib have denied any wrongdoing.

The Malaysian attorney general's office in January cleared Najib of any criminal offences or corruption, declaring that $681 million deposited into his personal bank account was a gift from Saudi Arabia's royal family.

The probes surrounding 1MDB have cast an unwelcome spotlight on Singapore, which is one of the world's leading wealth management centres and has been trying to burnish its anti-money laundering credentials.