Singapore's year of misbehaving moneymen puts MAS on high alert

The MAS building.
The MAS building.PHOTO: ST FILE

SINGAPORE (BLOOMBERG) - The naughty list for Singapore financiers has rarely been so long.

From the 1Malaysia Development Bhd.-linked scandal to a 333-count front-running case and the largest market-manipulation prosecution in Singapore's history, this year's allegations of moneymen behaving badly have put the city-state's image as a squeaky-clean financial hub to the test.

Regulators have responded with their busiest year of enforcement actions, shutting the local units of two Swiss banks, fining some of the world's biggest lenders and seizing S$240 million of assets.

Mr Ravi Menon, the head of Singapore's central bank, summed up the city's mood as the 1MDB-related cases escalated in July: "We can do better".

"2016 was the year of significant crackdown in Singapore," said Mr Hamidul Haq, a lawyer at Rajah & Tann and author of Financial Crimes In Singapore. "Companies, financial traders and bankers are being kept on their toes."

The stakes could hardly be higher for a city that relies on finance for 13 per cent of its economy and has 200,000 jobs tied to the industry. With exports sliding and the local oil services industries in a slump, Singapore needs to protect the reputation of its financial sector as it grapples with the weakest economic growth since 2009.

Strengthening enforcement functions under a new department is a strong signal of its commitment to uphold Singapore's reputation, the Monetary Authority of Singapore said in an e-mailed response to questions. The regulator said it will continue to boost its enforcement and surveillance capabilities to deter criminal behavior and poor controls.

"This will ensure that any wrongdoing is swiftly detected, thoroughly investigated and firmly dealt with," the MAS said.

Singapore, which prides itself on having a clean and trusted system, is rated by Transparency International as the least corrupt nation in Asia and consistently ranks among the top 10 globally.

That reputation was forged 51 years ago when Lee Kuan Yew, founder of modern Singapore, and politicians from his People's Action Party dressed in white to show they could not be corrupted. That image helped to lure foreign investment to the city, where more than 200 banks have since set up shop.

The island emerged unscathed from the Bank of Credit and Commerce International global money laundering scandal in 1991 after MAS refused to grant it a licence, though it is not immune to financial wrongdoing.

In 1995, Nick Leeson's US$1.5 billion loss from unauthorised trades brought down Barings, the UK's oldest merchant bank. In 2004, China Aviation Oil (Singapore) Corp. revealed a US$550 million derivatives fraud.

While Singapore has undergone significant change in tackling money laundering since 2008, "moderate gaps" remain in the city, Paris-based Financial Action Task Force said in September.

MAS chief Mr Menon vowed to take stern action after the city's reputation took a hit following revelations that money linked to 1MDB went through Singapore. The fund, at the center of global money-laundering and corruption probes, has consistently denied wrongdoing.

The country is the only jurisdiction to charge and convict bankers in connection with 1MDB. Yak Yew Chee, an ex-banker at Swiss firm BSI SA, pleaded guilty in November to charges including forging documents and failing to disclose suspicious transactions, while Yvonne Seah Yew Foong, who reported to Yak, was sentenced to two weeks in jail for aiding in forging documents. A former wealth planner at BSI, Yeo Jiawei, was found guilty of perverting the course of justice and faces further charges of money laundering and forgery, among others. Yak and Seah didn't appeal their convictions and sentences. Yeo is considering an appeal, according to his lawyer.

"There's no doubt about the tone that we take," Singapore Law Minister K Shanmugam said at a media lunch earlier this month, adding that the rule of law is the city's life blood. "It's got to be understood that the MAS will be very tough if you don't follow the rules."

The MAS was given a bigger stick to wield in 2015 after a penny-stock crash in 2013 mysteriously wiped out S$8 billion over three trading days, an event seen contributing to lower subsequent trading volumes. Lawmakers granted the regulator enhanced powers including being able to search premises, seize items and order financial firms to monitor customer accounts.

The alleged "masterminds" in the penny-stock case were charged in November after MAS investigators and white-collar crime police sifted through two million e-mails, thousands of phone records and financial statements and 180 trading accounts to solve the largest securities fraud in the city's history. Previously, the regulator had to refer criminal probes to the Commercial Affairs Department and could only fine culprits.

"Hopefully, the MAS will continue to focus on catching the bigger fish like they have done in 2016," said Lan Luh Luh, a professor at the National University of Singapore Business School. "It's always a dilemma between tightening the reins too much, going after the very little guys and staying open for business." Crowdfunding and financial technology may come under scrutiny in 2017, according to Prof Lan. The two areas are not heavily regulated and may be open to abuse, she said.

Singapore's enforcement actions this year have made it one of the most active financial regulators in Asia. In rival Hong Kong, the Securities and Futures Commission has been settling probes and creating specialised teams under new enforcement chief Thomas Atkinson.

Other countries have also seen heightened supervisory focus. Indonesia started a tax amnesty plan aimed at repatriating cash stashed overseas while giving evaders a way to come clean. China has placed regulatory curbs to rein in shadow banking and contain debt risk.

"That's the global trend - it's going to become harder to hide illicit money," said Mr Andre Jumabhoy, a Singapore-based lawyer who advises on government enforcement at K&L Gates LLP. "There's a real emphasis in making sure that if you want to be a serious global financial centre like Singapore wants to be, you've got to abide by the rules."