Singaporean, Malaysian regulators take action against corruption, money laundering

Regulators in Singapore and Malaysia have stepped up their efforts to tackle fraud and corruption cases, following a substantial increase in the instances of graft, forgery and other financial crimes in the region in recent years. Some of the high-profile cases have included the instances of corruption at 1 Malaysia Development Berhad (1MDB), Malaysia’s troubled sovereign wealth fund, the collapse of Hin Leong Trading and balance sheet fabrications, as well as the fraud at Wirecard.

Hin Leong Trading collapse

Events at collapsed oil trading company Hin Leong Trading have prompted the Singaporean authorities to launch a pilot for a trade finance registry. The also issued a Code of Best Practice for commodity financing.

“A trade finance registry using blockchain technology has been spearheaded by a group of Singapore banks in late 2020 to improve transparency as it would contain data points of the relevant bill of ladings and invoices so they can’t be used again,” said Baldev Bhinder, managing director at Blackstone and Gold LLC, a law firm which specialises in energy and commodity trading in the city-state.

Even with blockchain technology, however, the registry does not provide full visibility, Bhinder said. This is mainly because it is hard to track digitally the route of physical goods from source to end user, given that the majority of commodities are shipped from developing countries with inadequate levels of digital sophistication.

“The code comes at a time of introspection for the trade finance community,” Bhinder said. “It highlights non-exhaustive, nonprescriptive examples of good corporate governance and risk management policies on the one hand, and due diligence and transaction transparency on the other.”

In June last year Singaporean authorities charged Lim Oon Kuin, the founder of Hin Leong Trading, with a total of 130 charges. The charges related to cheating and forgery in loans borrowed from 16 banks, leading to losses of $291.9 million. Lim and his two children were charged with engaging in fraudulent trading, fabricating balance sheets and even creating trades for finance.

The Singaporean authorities also brought charges in a case last year which involved fraudulent trading in nickel and forgery, levying a fine of $1 billion. Ng Yu Zhi, 33, was the director of two firms that were investigated by the Singapore police’s financial crime unit. The alleged fraud involving Envy Global Trading and Envy Asset Management is believed to be the largest in Singaporean history,
according to prosecutors.

The blockchain technology-driven registry, together with the code of conduct, can both be seen as part of the authorities’ plans to build a more transparent, better governed and high-tech “smart nation”. This will include a greater capability to deter and disrupt financial crime.

New anti-corruption measures in Singapore, Malaysia

Against this backdrop, the Monetary Authority of Singapore (MAS) has teamed up with the Corrupt Practices Investigation Bureau, Singapore’s anti-corruption body, to introduce measures to target corruption and improve corporate conduct.

The authorities announced Project Orchid, which will aim to issue a digital currency by building the necessary technical infrastructure and competencies for the city-state. They have have co-developed COSMIC, an information-sharing platform to tackle money laundering, terrorist financing and proliferation financing in the banking sector.

The Malaysian Anti-Corruption Commission (MACC) has this year started to explore the development of infrastructure projects outside Kuala Lumpur, while the country’s Anti-Corruption Act just came into force in 2020.

“The commission’s greater powers appear [to have been] buoyed by changes to the Anti-Corruption Act, which give it an arsenal to tackle domestic concerns, and help international efforts,” according to Hogan Lovells’ “Global Bribery and Corruption Outlook 2022”. Hogan Lovells is a U.S.-UK law firm co-headquartered in London and Washington.

The MACC first used used Section 17A of the newly implemented Anti-Corruption Act against a ship chartering company in March last year. Hogan Lovells expects these cases to become more in coming years.

1MDB saga and latest developments

Malaysia’s corruption landscape has been largely dominated by 1MDB, a government-run investment fund that was intended to pursue investment and development projects for the economic benefit of Malaysia and its people.

The fund — partly raised via three private bond sales totalling $6.5 billion orchestrated by ex-Goldman Sachs bankers during May 2012 to March 2013 — was largely looted by Najib Razak, the former Malaysian prime minister, and other associates, including Jho Low.

Roger Ng, a former banker with Goldman Sachs, went on trial in a federal court trial in Brooklyn on Monday in the latest chapter of one of the largest financial crime and compliance failures of the century. Tim Leissner, the former chair of Goldman Sachs’ Southeast operations and Ng’s former manager, orchestrated most of the transactions. Leissner pleaded guilty in the summer of 2018 to bribery,
conspiracy and money laundering. Leissner is expected to be the star witness in the U.S. governments case against Ng, possibly as early as this week.

Prosecutors will use Leissner’s testimony to try to demonstrate that Ng played an important role in the scandal.

About the author

Yixiang Zeng is Southeast Asia Correspondent Cover at Thomson Reuters Regulatory Intelligence. She covers financial regulatory framework developments in Southeast Asia with a focus on banking, wealth management, securities and fund management groups.

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