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(Bloomberg) -- Singapore’s central bank directed Falcon Private Bank to cease operations in the city-state on anti-money laundering breaches as it arrested its local branch manager.

The Monetary Authority of Singapore is withdrawing the merchant bank status of the Swiss private bank and also imposing financial penalties on UBS Group AG and DBS Group Holdings Ltd. The action on the three banks follow a probe on fund flows linked to the troubled Malaysian fund known as 1Malaysia Development Bhd. or 1MDB.

The decision on Falcon follows "serious failures in anti-money laundering controls and improper conduct by senior management at the head office in Switzerland as well as the Singapore Branch,” the MAS said.

Singapore has vowed stronger action after the central bank found anti-money laundering lapses at financial-services companies linked to 1MDB. The city-state said in May it would revoke BSI’s license and in July rebuked four banks for lapses in controls, and announced the seizure of S$240 million ($175 million) in assets linked to the alleged fraud. Swiss prosecutors and U.S. authorities are also digging into how billions of dollars may have been diverted from 1MDB, which was intended to fund development projects across Malaysia.

1MDB has consistently denied wrongdoing and Malaysia’s government has said it will cooperate with lawful investigations of local companies or its citizens in relation to the fund. Singapore has criminally charged four people, including three former BSI bankers for their roles in transactions and money flows linked to 1MDB.

Falcon Private Bank said in March it has nothing to hide from regulators probing possible financial irregularities at a Malaysian state investment fund and is cooperating fully with investigators.

For a QuickTake Q&A on 1MDB, click here.

To contact the reporter on this story: Andrea Tan in Singapore at atan17@bloomberg.net. To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Linus Chua, Stephanie Phang

©2016 Bloomberg L.P.

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