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The Straits Times says

The buck stops where the law begins

For the first time since 1984, when Jardine Fleming (Singapore) was shut down, the Monetary Authority of Singapore (MAS) withdrew its approval for a merchant bank in May this year. It acted against BSI Bank for serious breaches of anti-money laundering requirements, poor management oversight of the bank's operations, and gross misconduct by some of the bank's staff. Such practices fly in the face of Singapore's fundamental requirement that financial institutions here comply strictly with regulations against money laundering and the financing of terrorism.

In the latest episode of a sorry saga, the authorities have said that they have found lapses in anti-money laundering controls in several financial institutions here, including DBS Bank and the Singapore branches of Standard Chartered Bank and UBS. The Singapore action came swiftly on the heels of the American probe into corruption at Malaysian state fund 1MDB.

That big names have not been spared, including DBS - a winner of multiple awards - reiterates the seriousness with which the city-state views infringements of its laws. The unprecedented naming and shaming of the banks reiterates what is at stake in money laundering at a time when Singapore risks being used as a conduit for illicit financial flows. Hence, financial institutions owe it to their viability, and to Singapore's reputation, to put in place sound and vigilant systems when they provide services to clients. Monitoring transactions must remain a key duty of banks even as they compete for mobile capital, enticed by rival destinations where oversight is a matter of taste.

The financial industry would do itself a favour by paying heed to the warning that the MAS will conduct more intrusive inspections and take tougher action against errant institutions. Business is part of Singapore's DNA but not the business of facilitating dubious deals. Otherwise, it would join a race to the bottom inhabited by "zombie" banking jurisdictions. Of course, high standards must be balanced with the need to keep capital flowing and to avoid excessive red tape that could prompt banks to protect themselves first, rather than serve legitimate clients as efficiently as possible.

Given the strenuous banking oversight here, there is little cause for some to speculate that Singapore is trying to undermine Indonesia's new tax amnesty scheme by seeking to block the return of foreign funds held in its banks. Singapore has no interest in sheltering illicit tax monies and it subscribes to internationally agreed standards for combating money laundering and exchanging information. Such a clear anti-money laundering stance can help thwart blame by foreign politicians who wish to divert attention from their chronic inability to deal with tax evasion and domestic corruption for decades.

A version of this article appeared in the print edition of The Straits Times on August 01, 2016, with the headline 'The buck stops where the law begins'. Print Edition | Subscribe