Sinyee Koh of Duff & Phelps Speaks to HFMWeek on Singapore's Regulatory Enforcement

HFMWeek (HFM): Can you provide a brief background on Singapore’s enforcement history?

Sinyee Koh (SYK): Singapore’s financial services regulator, the Monetary Authority of Singapore (MAS), has a broad regulatory remit of regulating financial markets and licensing financial intermediaries in Singapore. The MAS can also take civil penalty enforcement action against any market participant for market abuse. However, it does not have powers of criminal enforcement for market abuse. Criminal investigation for white-collar financial crime lies with the Commercial Affairs Department (CAD) of the Singapore police force and any resultant criminal prosecution is undertaken by the Public Prosecutor.

The MAS is known for its no-nonsense approach; meanwhile it also acts as a supportive, pragmatic and business-friendly regulator. The MAS has historically said that its regulatory philosophy is based on developing sensible outcome-focused rules coupled with intrusive supervision, while encouraging firms to develop robust internal systems and controls. It has taken enforcement action where appropriate, but until recently there have been relatively few high profile enforcement cases in Singapore compared to some much trumpeted cases in other financial centers, which were at times accompanied by eye-watering fines. Where the MAS has taken action however, it has generally proven swift and decisive.

HFM: What recent key enforcement developments have unfolded in Singapore’s financial services sector?

SYK: While it previously relied more on supervision, the MAS has recently been moving to a harder enforcement stance. It seems that with changes worldwide and in Singapore, the MAS is deliberately broadening its regulatory toolkit with more and stricter enforcement action. MAS has in various recent pronouncements said that the MAS will take stricter enforcement action where conduct is at odds with regulatory expectations and requirements.

I see three possible reasons that may have prompted the MAS’ tougher stance. First, the Singapore financial services landscape has changed. Second, there are new threats to financial services markets globally. Third, there have been two relatively major scandals in Singapore.

To start, Singapore’s financial services sector has rapidly grown. Post-financial crisis, financial sector growth in Singapore consistently outpaced that of the overall economy, growing 5.3% in 2015 compared to 2% overall GDP growth. In 2015, the asset management sector in Singapore’s aggregate AuM increased 9% to SGD2.6trn. Singapore now boasts more than 1,500 financial institutions of varying sizes and degrees of systemic importance. With an increasing number of intermediaries, MAS would need to re-calibrate its toolkit.

Next, the Panama Papers exposed a myriad of financial and other intermediaries connected to onshore and offshore accounts. Financial flows are fluid and cross-border. There is a risk of undesirable activity aggregating in jurisdictions viewed as having less stringent or less transparent systems. The MAS has said that like all major international financial business centers, Singapore’s financial sector risks being used as a conduit for criminal activity. It has recognized that it must do more to combat money laundering and other illicit financing activities. Financial crime itself is also evolving, as seen in the February 2016 cyber-heist on the Federal Reserve Bank of New York. It is natural that regulators worldwide would favor a heightened enforcement stance to keep firms on their toes and maintain market integrity, especially a no-nonsense and pragmatic regulator like the MAS.

Lastly, Singapore has had some domestic scandals. First, in a “penny stock saga”, the shares of three listed companies lost a combined market value of about SGD8bn ($6.4bn) in just three days of trading in 2013. The authorities continue to investigate if this was due to market abuse. Meanwhile, market watchers have openly speculated whether Singapore’s enforcement regime is tough or swift enough. This year, in the “1MDB scandal”, the MAS found various banks, capital market intermediaries and a remittance agent in Singapore to be conduits for complex and disguised 1MDB-related fund flows involving multiple entities and individuals operating in several jurisdictions. MAS’ stepped up enforcement follows these breaches.