MAS vows tougher action against money laundering

MAS managing director Ravi Menon at its annual report media conference on July 25.
MAS managing director Ravi Menon at its annual report media conference on July 25.ST PHOTO: JOYCE FANG

It plans more 'intrusive' checks, will continue to name and shame financial institutions

Singapore regulators will step up checks on financial institutions and take tougher actions when firms breach anti-money laundering rules.

Monetary Authority of Singapore (MAS) managing director Ravi Menon gave this stern warning yesterday when he said Singapore's reputation as a clean financial centre has taken a hit after three banks here were found to have lapses in anti-money laundering controls in relation to financial transactions involving Malaysia's state fund 1MDB.

He said regulators had taken the unprecedented step of naming the three banks - DBS Bank and the Singapore branches of UBS and Standard Chartered Bank - last week and would continue to name and shame financial institutions found to have breached anti-money laundering rules.

  • MAS annual report briefing: Other key points

  • • Singapore's economy will be sluggish, not much difference is expected between the second half of this year and the first.

    • The growth forecast of 1 per cent to 3 per cent for this year is being reviewed as part of a regular exercise.

    • Inflation, which has been low for a long time, is moving upwards. Overall inflation will likely climb out of negative territory and move towards 1 per cent next year.

    • Not time yet to ease property cooling measures.

Mr Menon said the regulator also plans to conduct more "intrusive" inspections of institutions deemed to face higher risks when it comes to money laundering and terrorism financing.

"Our approach as a supervisor has always been to keep our supervisory dealings with (financial institutions) private and confidential," he said at a briefing on the MAS annual report. "(However) in this area, we are starting to take a different tack because naming and shaming sometimes hurts them more than financial penalties and they have an impact. But we will do this judiciously."

MAS going public with the lapses at the three banks came after BSI Bank was told in May to shut down its operations here over serious breaches of anti-money laundering rules, poor management oversight and gross misconduct by some of the Swiss bank's staff.

Mr Menon said there was "no doubt" that the findings have made a dent in Singapore's reputation as a clean and trusted financial centre.

While the rules and practices here are already very strict and on a par with global standards, he acknowledged that money laundering is growing more sophisticated.

Still, the breaches cannot be excused. "What happened is simply unacceptable. We may not be any worse than other jurisdictions, but that is no consolation. We have not met the high standards we have set for ourselves."

Singapore can do better, he said, and MAS will conduct more intrusive inspections of financial institutions identified as facing higher risks. This could mean asking more questions, looking through minutes and transaction records, and carrying out spot checks, he said.

MAS will also take stronger regulatory actions when practices fall short of standards.

Mizuho senior economist Vishnu Varathan said it is no surprise that MAS is taking unprecedented measures in this area, given the high stakes. "Any self-respecting financial centre that wants to position itself as a global power in financial services needs to address this first and foremost. Business does come first - but only clean business," he added.

Mr Menon also noted that the Singapore economy remains sluggish, although inflation, which has been low for a long time, is on a modest ascent. Core inflation, which excludes accommodation and private road transport costs, will likely rise towards 2 per cent over next year, while headline inflation is expected to climb out of negative territory towards the end of this year, he said.

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A version of this article appeared in the print edition of The Straits Times on July 26, 2016, with the headline 'MAS vows tougher action against money laundering'. Print Edition | Subscribe