Mr Ravi Menon, the managing director of the Monetary Authority of Singapore (MAS), has made clear that Singapore’s approach towards the commission of wrongdoing in the financial sector is to focus on the individual responsible and their supervisor. “[P]eople continue to do wrong things because they’re not being held personally liable and responsible… Increasingly the MAS’ approach is to place responsibility on the individual responsible for the lapses and their supervisor,” he said on Wednesday, 29 June 2017, at the release of the MAS Annual Report 2016/2017.

Mr Menon noted that while fines against financial institutions in other jurisdictions were high, regulators in these jurisdictions have not gone after the top banking executives involved. He explained the MAS’s view was that while punishing the bank serves a purpose of sending a very clear signal to the board and senior management, huge fines would not hurt a bank's senior management, board of directors or individuals responsible, but instead hurt its shareholders.

The MAS has, in the past, always considered the “tone from the top” to be important in ensuring probity and responsibility. Mr Lee Boon Ngiap, the assistant managing director of the MAS, at his speech to the Life Insurance Association on 6 March 2017, noted the need for “board and senior management treating culture with the same importance as capital, and demonstrating that values matter as much, if not more, than valuations”. The Securities and Futures Act also reflects this by allowing the regulator to look at whether a corporation’s board of directors or high managerial agent tacitly or impliedly permitted market misconduct, or whether a corporation’s corporate culture encouraged non-compliance. However, these matters are looked to for determining the corporation’s liability for the misconduct.

With this speech by Mr Menon, it is clear that the MAS’s emphasis on the responsibility of senior management is going to be backed up with bite against the individuals responsbile. And the MAS is determined to follow through:

  • In August 2016, it set up a dedicated anti-money laundering department and centralised all enforcement into that department.
  • The frequency and number of inspections carried out on financial institutions has increased six-fold from 2013 to 2016.
  • In its Annual Report 2016/2017, the MAS noted that its inspections look at, among other things, whether the Board and senior management have effective oversight of money laundering/terrorism financing risks.

In taking action against individuals responsible, the MAS has relied on a range of enforcement remedies. These include bringing criminal charges against the individuals or imposing civil penalties on them. The difficulty in law, however, has always been drawing a direct line between the contravention and the words and actions of senior management.

The recent actions by the MAS in relation to anti-money laundering lapses that occurred in relation to 1MDB-related transactions show that the MAS might deal with this difficulty by relying on regulatory action against the individuals involved: as a result of its investigations in the 1MDB matter, the MAS issued two prohibition orders (a 10-year prohibition against a former director of Goldman Sachs (Singapore) Pte Ltd and a 15-year prohibition against a former BSI Bank Limited employee) and lifetime bans (one against a former branch manager of Falcon Private Bank Ltd and one against another former BSI Bank Limited employee). It has also served notice of its intention to issue prohibition orders against three other individuals.

The actions by the MAS and Mr Menon’s speech signal the start of a new post-1MDB era to restore Singapore’s reputation as having a sound and honest financial services system.