The last few years have been, to say the least, turbulent times for the global financial services industry. What seems like a long and endless list of regulatory breaches, fines, court cases and senior industry leaders losing their jobs shows few signs of abating. New and updated legislation has become commonplace, with firms worldwide looking at what rules they have to comply with and how best to do so.
It is customary that when a regulator announces changes to regulation, or additional guidance and notices, large sections of industry denounce the change as unnecessary, burdensome, and an additional cost that doesn’t need to be borne (at least in the immediate future).
The recent announcement by the Monetary Authority of Singapore with regards to the tightening of the current Anti-Money Laundering regulations was met with optimistic overtures from industry and analysts alike, marking an unusual moment when financial services firms actually seem happy to see changing, and indeed more, regulation.
How can we explain this?
Largely this is an issue around perception and timing. Singapore is already perceived as a major global financial centre, a place where banking on an institutional as well as a retail level is well developed and well supported. Over recent years, as places such as Switzerland have increasingly come under threat from foreign authorities, most notably in this instance the US, Singapore has gained a new moniker; the Switzerland of the East.
It is fairly widely acknowledged that nobody wants to be branded the Switzerland of the East. In an effort to rebuff these sentiments and prove that issues around money laundering and tax malpractice are taken seriously, Singapore made tax evasion a predicate offence against money laundering in 2013. And with the most recent proposals, Singapore is further enhancing its claim to be stringent in the global fight against money laundering. Many firms here already apply the standards being brought in under the new guidelines, but formalizing these lays down a marker externally that tells people Singapore is doing its job properly. Enhanced steps around the identity of beneficial owners, especially for companies and trusts, as well as additional screening and due diligence for certain transactions, lends credence to the notion of doing a thorough job to weed out unsavoury incidents from the system.
Industry practitioners, senior financial figures, compliance officers and academics have all come out in support of the changes. Indeed, many have pointed to the fact that the new proposals are already in place across large swathes of the Singapore finance industry and so these amendments will serve to formally put in place regulation that is already in action. The perception here is not one of creating unnecessary and burdensome work for the financial services sector, but instead one of the regulator demonstrating that it understands the changing nature of finance and what this means in practice for various organisations.
With the next Financial Action Task Force mutual evaluation of Singapore due in 2015, the timing couldn’t be better. Singapore has made significant progress, as reported by FATF, following the last mutual evaluation report in 2008, and has since been active in working to minimize money laundering and terrorism financing risks. With the changes in June 2013 to tax evasion as a predicate offence, and the recent consultation paper coming out a year later and just over a year in advance of the FATF visit, keeping the PR initiative at the forefront of people’s minds is a good strategy to highlight the proactive nature of the Monetary Authority, demonstrating a continued ability to safeguard industry, albeit in a manner that the industry was already largely adopting. The positive reception from across the board only serves to highlight the view that this is a good move on behalf of MAS.
Ultimately the proposed changes will not mean a huge amount, in practice, for many firms here. There has been a flurry of activity, with articles, editorials, roundtables and commentary from a wide range of sources, almost unanimously agreeing that this is a positive step. Will it be enough to remove the idea of Singapore being the new Switzerland? Only time will tell, but this is a strong step in the right direction.