Regulators move to improve compliance culture in Singapore

The financial industry has gone through a troubling period since the great crash, so the initiative by MAS promoting a culture of compliance is designed to bolster confidence

Philippa Allen
Philippa Allen

To cultivate an ethos of ethical behavior and responsible risk-taking in the financial industry, the Monetary Authority of Singapore (MAS) in April 2018 proposed guidelines to strengthen the individual accountability of senior managers and lift standards of conduct in financial institutions.

The target date for rollout was originally slated for the last quarter of 2018. However, the measures have yet to come into effect.

The guidelines, once released, will directly impact banks, insurers, finance companies, exchanges, clearing houses, capital markets services licenses holders, licensed financial advisers and trust companies in Singapore.

The Asset spoke with Philippa Allen, CEO of Compliance Asia, to glean her insights on how the impending directives will likely influence the day-to-day operations for affected firms in Singapore.

“The parameters set by the Singapore regulator are in line with the new emphasis across all major financial centres to create a compliance culture from the inside at financial institutions,” says Allen. 

“It is definitely hard to measure individual compliance attitudes, but it is about setting up the right framework inside firms to encourage better behaviours,” Allen adds.

Compliance conducted by everyone

The UK and Hong Kong have already introduced their senior management regimes and MAS is following the G20 and Financial Stability Board recommendations on implementing similar controls.

But with senior management at financial institutions in Singapore already conducting responsibility and accountability tasks, could the proposed MAS guidelines heap yet more pressure on them?

“There is a global trend towards increasing senior management responsibility – one of the criticisms post-financial crisis is the lack of options available for regulators in most countries to actually punish the individuals responsible for allowing institutional misconduct, and especially those in the ‘back office’ who can actually have a lot of control in firms,” Allen points out.

Some commentators may question whether MAS is right to undertake such a move given little evidence of wrongdoing in the city-state’s financial sector.

“There has been fallout in Singapore around mis-selling, manipulation and other abusive behaviour over the last 10 years. The MAS has historically been cautious about publishing enforcement actions, but that is changing, and as the financial industry is growing quickly in Singapore, it is important that the MAS has the right toolset to take action when they need to,” Allen says.

“Also, it gives the MAS the power to take action against chief operating officers, senior IT, risk, HR and compliance staff. In the past, they could only take action against the CEO and authorized representatives,” she adds.

Speaking up for the greater good

The proposed MAS guidelines also suggest financial institutions should have distinct whistleblowing mechanisms in place. But will the incentive to report malfeasance be compatible with Asian culture?

Allen sees no issue. “Many large firms already have whistleblowing schemes in place. Also, some smaller firms in Singapore where it might be hard to have an independent whistleblowing channel in place are not in scope.  They have not gone as far as the SEC in the US and introduce a paid whistle-blowing scheme.”

So, what can the industry expect from the regulator in terms of the worst-case scenario for senior managers who fail to adhere to the guidelines?

“From the experience overseas, this can lead to dismissal and if the MAS takes a serious view of the conduct, individual fines and or suspensions from the financial industry,” is Allen’s view.

Despite the tightening regulatory net, however, rogue individuals can commit illicit dealings. Nick Leeson’s actions in Singapore in 1995, which brought down Britain’s oldest merchant bank, Barings Bank, clearly demonstrate the destructive power of an untamed loose cannon. So, will the prospective guidelines mean such conduct will be eradicated for good?

“That is always possible, but the aim is with better supervision, more reporting and more training, it becomes clear to individuals that this type of behaviour is not worth the risk as the consequences are too great,” says Allen  

“As the MAS now has a ‘name and shame’ enforcement process, people cannot move from one firm to the next without bad behaviour catching up with them,” Allen adds.


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25 Mar 2019


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