The Monetary Authority of Singapore (MAS) has ordered Swiss lender BSI Bank, linked to the 1Malaysia Development (1MDB) state fund scandal, to shut down its Singapore operations.

The regulator said that the bank would lose its merchant banking status in Singapore owing to serious breaches of anti-money laundering requirements, poor management oversight, and gross misconduct by some of its employees.

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BSI Bank, a wholly-owned subsidiary of BSI, has been operating as a merchant bank in Singapore since November 2005 and provides private banking services.

The regulator has also slapped a fine of SGD13.3m ($9.6m) on the BSI unit for 41 breaches that include failure to perform due diligence on high-risk accounts and monitor suspicious customer transactions.

Moreover, MAS has referred six senior BSI executives to the public prosecutor, including the bank’s former Singapore CEO and his deputy, to assess whether they have committed criminal offences.

MAS managing director Ravi Menon said: "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.

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"Controls need to be robust, surveillance vigilant, and the management culture must emphasise professional integrity and risk consciousness."

For the first time in over 30 years Singapore has cancelled a bank’s merchant banking license. In 1984, Jardine Fleming (Singapore) was ordered to shut down operation for serious lapses in advisory work.

The BSI group is currently in the process of being bought by Swiss private banking group EFG International.

MAS added that in the interest of customers, it will allow the transfer of BSI Singapore’s assets and liabilities to the Singapore branch of EFG or to the parent BSI SA.