Malaysia's SC fined RHB Investment Bank RM900,000, its highest-ever hit on a financier

RHB Investment Bank Bhd, the wholly-owned investment banking arm of RHB Bank, was reprimanded and fined RM900,000 by Securities Commission Malaysia in December 2018 over breaches of the Capital Markets and Services Act 2007, The Edge Malaysia reported. The regulator found the bank failed to conduct ongoing due diligence on the trading accounts of seven clients, failed to report suspicious transactions in five accounts to Bank Negara Malaysia's financial intelligence unit, and failed to verify client identities using reliable sources.

The individual failures were concrete. Khe Yew Chun, head of retail, securities and futures at the main branch, proactively sought a letter relying on three individuals stated to be involved in misappropriating monies deposited with an RHB IB client, and had it verified without the branch manager knowing of another letter; a false and misleading letter was submitted to the SC. He was reprimanded and suspended for one month. Former CEO Mike Chan was reprimanded and fined RM200,000 for failing to ensure adequate policies controlled the company's affairs.

The RM900,000 was, at the time, the highest fine the SC had imposed on a financial institution — near the RM1 million administrative cap, doubled from RM500,000 in 2015 — though small beside the parent bank's RM2.31 billion net profit that year. RHB IB appealed the decision.

RM900,000 fine — the SC's highest on a financial institution (max RM1M) — plus RM200,000 personally for ex-CEO Mike Chan and a one-month suspension.

Due diligence was not being performed on seven client trading accounts — the first line of AML defence was simply not running.

Five accounts threw off suspicious-transaction signals that never reached Bank Negara Malaysia's Financial Intelligence and Enforcement Department.

A branch head proactively built on individuals flagged for misappropriation and a false, misleading letter ended up in front of the SC itself.

The CEO-level fine for failing to organize adequate policies shows the regulator held management, not just the branch, responsible.

AML compliance is a control system, not paperwork: when due diligence, suspicious-transaction reporting and staff supervision all decay at once, the regulator prices the whole system, not one slip.

RHB IB appealed the administrative action, an SC spokesman said. Chan, who had run the investment bank for about three years from August 2013 before moving to lead RHB Bank Singapore in 2016, left the RHB group that year. The SC noted its administrative actions had been posted publicly since December 2018.