Monetary Authority of Singapore launches debut enforcement report

Written by Holly Whitehead on Thursday April 25, 2019

Monetary Authority of Singapore details enforcement actions and key initiatives as it launches debut enforcement report

On 20 March 2019, the Monetary Authority of Singapore (MAS) published its inaugural enforcement report. This report – which will be published every 18 months – notes the MAS’ enforcement principles, and the enforcement actions taken by them, between July 2017 and December 2018, as well as the key initiatives the MAS has put in place to preserve Singapore’s reputation as a trusted financial centre. By doing so, this report hopes to provide greater accountability and transparency on the MAS’ enforcement outcomes and strategies.

The report is broken down into five sections, which we will be exploring in further detail during the course of this blog.

1. MAS’ enforcement principles

Enforcement plays a vital role in financial supervision. The MAS itself has stated that ‘having an effective and robust enforcement function is a key priority’ and they are determined to deliver high standards in this regard.

The report lays out the enforcement approach of the MAS as being shaped by the three principles of the MAS’ ‘enforcement philosophy’.

These three principles are:

1. early detection of misconduct and breaches of law
   
   
2. effective deterrence
   
   
3. shaping business and market conduct.

2. Summary of key enforcement outcomes

This section looks at the actions taken on breaches of MAS-administered Acts, Regulations and Notices from July 2017 to December 2018 and the average time taken for reviews and investigations by the MAS.

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These results are due to the efforts of the Enforcement Department within the MAS – a dedicated branch of investigators established in 2016 to combat breaches of the MAS rules.

You may be wondering why the financial penalties seem so low considering the fines handed to banks following the MAS’ probe in to the 1MDB scandal, however the majority of those fines were actually applied before July 2017 and therefore haven’t been included here.

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3. Key areas of focus

The MAS states in this section of the report that they focused on three key areas for enforcement:

1. market abuse – conduct which disrupts genuine price discovery and undermines market integrity
   
   
2. financial services misconduct – breaches or misconduct by licensed entities and representatives
   
   
3. money laundering-related breaches – money laundering-related breaches by entities and individuals.

For each key area, the report states the outstanding reviews and investigations by types of offences, discusses one or two ‘featured cases’ that the MAS investigated and the enforcement actions that stemmed from those, and examines the key initiatives that the MAS is taking to strengthen its enforcement approach.

Let’s take a quick look at the key initiatives for each key area:

1. Market abuse. The MAS is disrupting potential market misconduct through engaging brokers in order to safeguard the integrity of Singapore’s capital markets. By doing this, the MAS can minimise negative market impact from ongoing suspicious trading activities and support the third aim of their enforcement approach: shape business and market conduct.
   
   Interestingly, the MAS is also using an ‘Augmented Intelligence tool’ which they are calling ‘Project Apollo’. This data analysis technology helps enforcement officers assess and prioritise cases for investigation, reducing the time required to review each investigation lead from several days to just a few hours.
   
   
2. Financial services misconduct. The MAS has embraced a proactive approach to detecting financial advisory misconduct. They are combining large data sets to identify potential misconduct cases using advanced rule-based analytics. This enables the early detection and investigation of offences, meaning that the MAS can allocate enforcement actions in a timely manner and better protect investors.
   
   
3. Money laundering-related breaches. The MAS has employed data analytics to sharpen and intensify anti money laundering and counter financing of terrorism (AML/CFT) supervision. One example of this is the use of insights from the network analysis of information drawn from suspicious transaction reports (STRs). Key outcomes of using data analytics to enhance AML/CFT supervisory effectiveness include sharpened supervision and enhanced surveillance and detection.

4. International cooperation

This section advises how the MAS collaborates closely with international regulators and enforcement agencies to combat cross-border misconduct. For example, they are:

• a Board Member of the International Organization of Securities Commission (IOSCO)
• a member of IOSCO Committee 4 on Enforcement and the Exchange of Information. MAS were able to provide assistance in 119 IOSCO requests from 22 international regulators
• signatories to IOSCO’s Multilateral Memorandum of Understanding (MMoU) and Enhanced MMoU
• co-chair of the Policy Development Group of the Financial Action Task Force (FATF). Singapore is an active member of FATF, and as co-chair, it works closely with fellow AML/CFT policy makers and supervisors to develop international standards to combat money laundering, terrorism and proliferation financing

5. 2019/2020 priorities

The final part of the report details the 2019/2020 enforcement priorities for the MAS. In other words, in 2019/2020, the MAS will focus its enforcement efforts to strengthen the following:

1. timely and adequate disclosure of corporate information for better investor protection
   
   
2. the business conduct of financial advisers and their representatives
   
   
3. AML/CFT compliance – by utilising thematic reviews and assessments of AML/CFT controls in financial institutions
   
   
4. brokerage houses’ internal controls to detect and deter market abuse
   
   
5. surveillance and investigations into suspected insider trading

This new Enforcement Report was built on last year’s ‘Enforcement Monograph’ and provides some detailed and noteworthy insights into the MAS’ enforcement work and priorities. As Gillian Tan, Executive Director of the Enforcement Department at the MAS states: ‘As Singapore’s financial industry grows in size and complexity, so will the risks of financial misconduct.’ Therefore, it will be interesting to see what the next report reveals in 18 months’ time and how it builds upon this one.

The ICA Conference in Singapore is returning this year! We have just announced the date and location, will you be joining us? 

Further reading:

• Compliance culture - what is the challenge? 
  
  
• 5 ways to establish a fraud-averse environment
  
  
• 6 tips to help you on your study journey

This article forms part of the #BigCompConvo - Join us as we explore and debate the latest challenges and issues facing you and regulatory and financial crime compliance professionals all over the world. If you’d like to contribute an article as part of the Big Compliance Conversation get in touch with us at contributions@int-comp.org