Singapore regulatory enforcement update: Q4 2016

A round up on regulatory enforcement developments in Singapore for the fourth quarter of 2016.

Key areas of regulatory focus: Anti-money laundering, market misconduct and 2016 enforcement round-up.

  1. MAS imposes fines on Standard Chartered Bank and Coutts for 1MDB-related AML breaches 
  2. Ex-BSI banker convicted of witness tampering in 1MDB probe
  3. “Singapore’s Financial Centre: Resilience, Dynamism, Trust"
  4. Charges brought in Singapore’s largest market manipulation case 
  5. Regulatory enforcement round-up for 2016

1. MAS imposes fines on Standard Chartered Bank and Coutts for AML breaches

This quarter saw further activity in respect of 1MDB and AML. As we reported in our Regulatory Enforcement Update for Q3 2016, the MAS has fined firms, including UBS and DBS, for AML failings and ordered BSI and Falcon Private Bank to close their local operations for compliance and oversight failings linked to 1MDB.

On 2 December 2016, the MAS fined the Singapore branches of Standard Chartered (SCB) and Coutts & Co S$5.2 million and S$2.4 million respectively for breaches of anti-money laundering requirements. 

The MAS also served notice of its intention to issue a prohibition order against a former director of Goldman Sachs (Singapore). The proposed order will ban the director from performing any regulated activity under the Securities Future Act or taking part in the management of any capital market services firm in Singapore for a period of 10 years.

As with previous fines, the MAS identified inadequacies in SCB’s policies and procedures, insufficient independent oversight of front office staff, and a lack of awareness of money laundering risks among some bank staff. However, the MAS recognised that the control weaknesses were not pervasive, and there had not been willful misconduct. The regulator also noted that the bank has proactively taken measures to address the weaknesses identified and strengthen its controls. 

In respect of Coutts, the MAS’ supervisory examination of Coutts revealed breaches of AML requirements in relation to customer due diligence measures for politically exposed persons (PEPs). The MAS noted that the failure to exercise the necessary enhanced due diligence on accounts for PEPs was the result of actions or omissions of certain officers who have since left the bank. 

In a public statement, the MAS said: 

“We (MAS) have taken tough regulatory actions against various financial institutions this year for AML control lapses. These actions send a strong signal that we will not tolerate the abuse of Singapore’s financial system for illicit purposes. The supervisory investigations into the intricate web of international fund flows have been a learning experience for financial institutions as well as for MAS. Our financial sector will emerge cleaner and stronger from the lessons learnt.” 

The MAS is nearing completion of its supervisory examinations of financial institutions in Singapore through which 1MDB-related fund flows took place, and will provide a final update in early 2017.

2. Ex-BSI banker convicted of witness tampering in 1MDB probe

Action is also being taken against individuals. On 21 December 2016, former BSI banker, Yeo Jiawei, was convicted on four charges of witness tampering and was given a 30-month jail term for his involvement in the alleged misappropriation of funds from 1MDB. This is the longest sentence yet handed down by the courts in respect of 1MDB. Seven other charges involving cheating, money laundering and forgery will be dealt with next year. 

Yeo is the third person to be convicted in Singapore's 1MDB investigation. Yvonne Seah Yew Foong, a former BSI private banker, was sentenced to two weeks in jail and fined S$10,000 for helping to forge documents and failing to report suspicious transactions. In addition, her supervisor, Yak Yew Chee, is serving an 18-week jail term and was fined S$24,000 after pleading guilty last month to similar offences.

3. “Singapore’s Financial Centre: Resilience, Dynamism, Trust"

These actions are consistent with a more active enforcement agenda aimed at protecting Singapore’s reputation as a key financial centre. Earlier this year, Mr. Ravi Menon (Managing Director of MAS) gave a keynote address to the Foreign Correspondents Association entitled “Singapore’s Financial Centre: Resilience, Dynamism, Trust”. Mr Menon stated:

“Upholding high standards of integrity in the financial industry is an absolute priority. This means having an effective regime against market misconduct and misdemeanours and illicit finance, namely money laundering and terrorism financing.”

Mr Menon placed ultimate responsibility for AML/CFT with the board and senior management of financial institutions, perhaps signaling a move in the future towards individual senior management responsibility akin to the Senior Managers Regime in the UK and Manager in Charge regime in Hong Kong. He made it clear that they were responsible for:

  • putting in place robust monitoring mechanisms to detect suspicious activities
  • promoting strong risk awareness and constant vigilance among all staff, and
  • empowering their compliance and risk management people.

4. Charges brought in Singapore’s largest market manipulation case 

On 25 November 2016, the MAS charged two individuals with market misconduct offences for manipulating the shares of Blumont Group Ltd (Blumont), Asiasons Capital Limited (Asiasons) and LionGold Corp Ltd (LionGold) between August 2012 and October 2013, in what is the largest market manipulation case in Singapore’s history. 

The large-scale manipulation resulted in the penny stock crash that wiped out S$8 billion in value over two days in October 2013 and a loss of confidence in Singapore’s financial markets.

In the course of the investigation the Attorney General’s Chambers, in partnership with the CAD and the MAS, conducted over 50 raids, interviewed more than 70 persons and reviewed extensive documentary evidence comprising over 2 million emails, half a million trade orders, and thousands of telephone records and financial statements. 

The fraud involved the use of a ‘web’ of over 180 trading accounts to carry out manipulative trades in Blumont, Asiasons and LionGold shares on the Singapore Stock Exchange. In addition, Goldman Sachs and Interactive Brokers were duped into extending more than S$170 million in margin financing to the accounts at the time.

The individuals were charged with six counts of conspiring to create a false appearance with respect to the market for Blumont, Asiasons and LionGold shares and four counts of conspiring to manipulate and support the share prices shortly before their collapse. 

5. Regulatory Enforcement round-up for 2016

Singapore's enforcement actions this year have made it one of the most active financial regulators in Asia. Much of the activity was driven by 1MDB related enforcement, and therefore departs for the norm. To some extent the MAS had no choice but to take decisive action in order to secure its role as an international regulator of a key global financial centre. Other regulators were already taking action in respect of the same facts. Will 2017 deliver up more of the same? Certain issues, such as financial crime, are increasingly being dealt with by coordinated efforts between multiple regulators and government authorities. If that trend continues, we can expect to see Singapore taking a greater role in enforcement of misconduct more generally. 

We have set out below a timeline of some of the most important enforcement actions and developments from 2016.

2016 Enforcement Timeline 

21 December 2016

A former BSI banker is convicted on four charges of witness tampering and given a 30-month jail term for offences relating to 1MDB. 
16 December 2016  A former BSI banker is convicted and sentenced to two weeks in jail and fined SGD $10,000 for helping to forge documents and failing to report suspicious transactions in relation to 1MDB.
2 December 2016  MAS fine Standard Chartered bank (S$5.2million) and Coutts & Co (S$2.4million) for AML breaches relating to 1MDB.

MAS served notice of its intention to ban a former Goldman Sachs (Singapore) banker from the securities industry for ten years for offences relating to 1MDB.  
25 November 2016  MAS charge two individuals with market manipulation offences for manipulating the shares of Blumont, Asiasons and LionGold - the largest market manipulation case in Singapore’s history. 
11 November 2016  A former BSI banker is sentenced to 18 weeks in jail and fined S$24,000 after pleading guilty to forging documents and failing to report suspicious transactions in relation to 1MDB. 
10 October 2016  Falcon Private Bank is fined S$4.3million and forced to close its Singapore branch for serious failures in anti-money laundering controls and improper conduct by senior management relating to 1MDB. Falcon Bank's Singapore branch manager is also arrested by the CAD.

MAS fine UBS (S$1.3million) and DBS (S$1million) for AML breaches relating to 1MDB.
25 August 2016  MAS charge three former traders with insider trading in Singapore’s first ‘front-running’ case. The traders were handed a total of 333 charges for offences committed from April 2007 to May 2014.  
1 August 2016  MAS set up two dedicated departments (AML and Enforcement) to combat money laundering and strengthen enforcement.  
22 July 2016  MAS charge a Malaysian investor with market misconduct offences in Singapore’s first ‘spoofing’ case. 
24 May 2016  BSI bank is fined S$13.3million and forced to close its Singapore branch after “serious” breaches of anti-money laundering regulations in relation to its involvement with 1MDB. The breaches included a failure to perform enhanced customer due diligence on high-risk accounts, failure to monitor and report suspicious transactions, poor management oversight of the bank’s operations and gross misconduct by senior staff. 
3 May 2016  MAS fine a former Sinomem Technology CFO and an asset manager, Triumpus Asset Management, S$316,000 for insider trading offences. 
25 January 2016  MAS fine a former UOB trader S$110,000 and ban him from the securities industry for two years for insider trading.