MAS vows tough action to fix lapses in finance sector

SINGAPORE — Recent money laundering cases have hurt the Republic’s reputation as a banking hub and the Monetary Authority of Singapore (MAS) is determined to fix lapses in the financial sector with tougher controls and industry supervision, its managing director Ravi Menon vowed on Monday (July 25).

Pointing to the ongoing probe into fund flows related to Malaysian state investment fund 1Malaysia Development Berhad (1MDB) that showed control failings at three banking giants, DBS, UBS and Standard Chartered, among others, he said it is a stark reminder that the risks are real, and reflects the vulnerability of the financial sector to money laundering and illicit financing risks.

“There is no doubt that the recent findings have made a dent in our reputation as a clean and trusted financial centre. MAS is disappointed with the lapses in AML/CFT (anti-money laundering/countering financing of terrorism) controls and breaches of AML/CFT regulations that we have picked up in our FIs (financial institutions),” Mr Menon said at a briefing during the release of the MAS annual report on Monday.

“What happened is simply unacceptable. We may not be any worse off than other jurisdictions but that is no consolation. We have not met the high standards we have set for ourselves,” he said.

The MAS last week said it uncovered serious lapses in AML processes at DBS and the Singapore operations of Swiss bank UBS and British lender Stanchart in their dealings linked to 1MDB, adding that strong regulatory action will be taken against the financial institutions. The Singapore Government is the largest shareholder in each of the three banks, either through sovereign fund GIC or state-owned investment fund Temasek Holdings.

The MAS also found substantial breaches of AML regulations related to 1MDB at Falcon Private Bank’s Singapore branch as well as weak management oversight, inadequate risk management and internal controls at remittance agent Raffles Money Change. In May, the MAS revoked BSI Bank’s merchant banking licence in Singapore for serious breaches of AML rules linked to 1MDB fund flows. 

“Our closure of BSI Bank shows that we will not hesitate to take the most punitive actions where warranted,” Mr Menon said. On 1MDB specifically, he added it was not appropriate for him to talk about the ongoing investigations.

Analysts said the MAS’ move to strengthen oversight underlines its zero-tolerance policy towards those abusing the financial ecosystem here. UOB economist Francis Tan said: “It shows that the Republic does not tolerate nonsense.” 

The MAS is already sharpening its supervision of AML/CFT controls in the industry by establishing a dedicated AML department. The regulator will also be conducting more intrusive inspections of financial institutions identified as facing higher risks, said Mr Menon.

It will also further strengthen its enforcement capability to conduct rigorous investigations by using data analytics to enhance market surveillance and help identify potential market misconduct as well as investigate specific offences.  For example, the MAS is exploring the use of machine-learning algorithms to identify manipulative trading behaviour in the capital markets or detect patterns in suspicious transactions. 

Separately, Mr Menon welcomed Indonesia’s tax amnesty programme announced last week, which grants special tax rates to tax evaders who declare their past earnings.

“It offers an opportunity to regularise the accounts of those who have accounts here. If they can regularise their tax affairs, that will be good for us. That will give us a degree of comfort that these are not illicit funds. I think that is a good development for us.” The programme is not likely to lead to a large outflow of funds, he added.