IMPACT ANALYSIS: MAS enforcement report reveals improvements in enforcement effectiveness

The Monetary Authority of Singapore (MAS) has released its enforcement report for the period July 2020 to December 2021. The report shows a marked improvement in MAS’ effectiveness in safeguarding the integrity of the city-state’s financial system. As well as improving timelines in enforcement actions, MAS said it had issued more reprimands against financial adviser firms for breaches, imposed significant civil penalties on financial institutions for poor money laundering controls and obtained criminal sentences against the perpetrators of market misconduct.

The regulator also reported on continuing high-profile investigations and emphasised the extent of its cooperation with other international and supranational regulators. The report also outlined the work MAS has undertaken to improve its operations and set out its priorities for this year and the next.

Highly effective outcomes

Between July 1, 2020, and December 31, 2021, MAS issued a range of regulatory penalties and secured seven criminal convictions, with three individuals sentenced to imprisonment and four individuals fined. The time taken to obtain criminal convictions has reduced to nine months.

In terms of civil penalties, MAS obtained S$2.5 million in financial penalties and compositions against 16 financial institutions and one individual over an average period of 19 months. The regulator also levied S$150,000 fines in civil penalties in relation to market-rigging by two former trading representatives.

MAS also secured 20 prohibition orders preventing unfit representatives from re-entering the financial industry and issued one licence revocation order to a funds management company. It has also given second chances, where appropriate, to financial institutions and individuals, issuing 23 reprimands to five individuals and 18 institutions, and 157 warnings to 27 individuals and 130 financial institutions or companies.

It also issued 88 letters of advice to 61 individuals and 27 financial institutions and companies, as well as 362 supervisory reminders to 354 institutions and eight individuals. The average time for finalising regulatory actions has been nine months, and the average time to conclude a case file has been seven months.

Enforcement priorities

The regulator specified three areas of focus for last year: market abuse; financial services misconduct; and money laundering-related control breaches. The main types of market abuse investigated by MAS included insider trading, false trading and corporate disclosure breaches. The regulator has concentrated on disclosure to the market and the distortion of securities prices, or false information, which have the potential to undermine public confidence in Singapore’s capital markets.

MAS has been keen to ensure adequate corporate disclosure and the effective supervision of financial advisory conduct. To this end, it introduced initiatives to detect potential mis-selling of products and other forms of misconduct using data analytics. As part of its commitment to improve financial advisory standards, it shared information with major insurers on the best way to analyse traditional
data to identify potential suspicious transactions or red flags.

One of the regulator’s main purposes last year was to conduct inspections of financial institutions and take enforcement action where it found severe deficiencies in anti-money laundering/countering the financing of terrorism (AML/CFT) controls. The regulator imposed a total of S$2.4 million in civil penalties against four major financial institutions.

Case summaries

The report provides case summaries of three enforcement actions in which MAS acted decisively to prevent the dishonest conduct. One of these case studies concerned MAS’ investigation into the criminal market manipulation of shares in Koyo International. Seven individuals had engaged in a false trading scheme, using various accounts under their control to trade in Koyo shares between one
another and with other market participants. Scheme members bought and sold Koyo shares at progressively higher prices, causing Koyo’s share price to surge.

In return for their participation, scheme members received benefits including commissions on trades, sharing in profits and indemnification for their losses. Between February 19, 2020 and December 19, 2021, four scheme members were convicted and sentenced to various terms of imprisonment of between three months and 20 months, and issued with prohibition orders. The cases of
another three members have yet to go to trial.

The enforcement report also includes a case study in relation to market-rigging in shares of Gaylin Holdings, as well as further examples of financial services misconduct.

Money laundering-related control breaches

MAS acted against financial institutions and individuals suspected of being involved in 1 Malaysia Development Berhad (1MDB)-related offences. The regulator reviewed Goldman Sachs (Singapore) Pte (GSSP)’s role in the 1MDB bond offerings. As part of a worldwide resolution, GSSP paid S$122 million to the Singapore government for offences under the Prevention of Corruption Act.

MAS inspections carried out last year uncovered deficiencies in GSSP’s risk governance and controls, including ineffective management oversight of enterprise-wide risks, inadequate documentation and poor corrective action. MAS appointed an external party to review GSSP’s remediation measures, and continues to monitor GSSP after its parent company entered into a deferred prosecution agreement in the United States, the regulator said in its report.

Significant penalties for AML/CFT offences

MAS imposed penalties of S$1 million and S$1.1 million respectively on banks J Safra Sarasin Ltd and Vistra Trust (Singapore) Pte Ltd for serious breaches of AML/CFT requirements. These cases primarily involved systems and controls failures, including: inability to identify beneficial owners of customers’ accounts; failure to inquire into individual or corporate backgrounds; failure to inquire into
unusual patterns of customer transactions that had no obvious economic purpose; inadequate procedures for onboarding; and failure to ensure enhanced customer due diligence for high-risk transactions.

Leveraging technology

The MAS is building a new digital platform for the collaborative sharing of ML/TF information and cases (COSMIC), to enable financial institutions to share information on consumers or transactions across materiality thresholds. COSMIC’s aim is to prevent criminals from building illicit financial networks by exploiting financial institutions’ inability to warn each other about unusual customer activity.
The platform is scheduled to go live in 2023, initially with six participating banks. MAS plans to extend COSMIC to all financial institutions and will eventually make it mandatory to share certain information.

Major cases

The report outlined four major continuing investigations being conducted by MAS: Noble Group Ltd (suspected disclosure-related offences); Hyflux Ltd (suspected director duty offences and non-compliance with accounting standards); Eagle Hospitality Trust (suspected breaches of the Companies Act, Regulations and Listing Rules); and Hui Xun Asset Management Pte Ltd (alleged fraud
relating to the financing of trading activities in nickel). These investigations reveal the wide variety and sophistication of white-collar crime in Singapore.

International cooperation

MAS emphasised the assistance it receives from, and provides to, other international regulators. The regulator conducted its first joint operation with the Hong Kong Securities and Futures Commission and the Hong Kong Police into suspected pump-and-dump activities in Hong Kong in December 2021.
It also worked closely with the Financial Action Task Force (FATF) and other AML/CFT policy makers to improve international standards for combating money laundering terrorism and proliferation financing. The MAS has rendered assistance in 91 requests from the International Organisation of Securities Commissions (IOSCO) and from 22 international regulators, and has sent 14 IOSCO
requests to seven international regulators.

Niall Coburn is the Regulatory Intelligence Expert at Thomson Reuters in the Asia-Pacific region and a Barrister at the Queensland Bar.

As an expert on regulatory issues at Thomson Reuters, Niall writes articles, white papers, gives presentations in the region and liaises with the banking industry internationally concerning regulatory developments in the Asia-Pacific region.

Prior to joining Thomson Reuters, he was the regional Managing Director at FTI consulting, responsible for leading its Regulatory and Forensic Investigation Practice in Australia. FTI is a global consulting firm listed on the New York Stock Exchange with 500 offices worldwide.

Niall was also a Senior Lawyer and Specialist Adviser at the Australian Securities and Investments Commission. In this role he led high-profile investigations into complex corporate crime cases. He has also worked internationally, being part of a team that created the regulatory structure for the Dubai International Financial Centre (DIFC).

Niall was appointed Director of Enforcement at the DIFC in 2003 and worked with international law enforcement agencies to combat financial crime.

Niall has also worked in the Asia-Pacific region in his own consultancy, Coburn Intelligence in China and Hong Kong, investigating major frauds and misleading conduct in the investment industry.

Niall was awarded an Australia Day Honour from the Commonwealth Government for his work leading major criminal investigations at ASIC. He is a Barrister of the High Court of Australia and a member of the Queensland Bar Association and the International Bar Association.

 

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