In less than a week, the Monetary Authority of Singapore (MAS) announced that it had withdrawn the regulatory status of two firms, a fund manager and the Singapore subsidiary of one of Switzerland’s oldest private banks.
Case 1
On May 20, 2016, the MAS announced that it had withdrawn a fund manager’s status as a Registered Fund Management Company (RFMC) with immediate effect. As a result of this action, the firm is no longer permitted to carry out business in fund management in Singapore.
The MAS took action on the grounds of the firm’s non-compliance with certain provisions of the Securities & Futures (Licensing and Conduct of Business) Regulations.
Specifically, the firm failed to:
- Notify the MAS of various changes including change of its principal place of business, resignation of its director and changes to its director’s personal particulars, within 14 days after the change
- Submit an auditor’s report and accompanying financial statements (known as the Form 25B) within five months following its financial year-end
- Provide information about its fund management business in response to the MAS’s written direction dated December 17, 2015
Before the MAS enhanced Singapore’s fund management regulatory regime, with effect from August 7, 2012, 12 exempt fund managers were reprimanded by the MAS between November 2011 and July 2013 for repeated late submissions of Form 25 statutory filings after their financial year-ends.
This firm appears to be the first fund manager whose regulatory status in Singapore has been publicly withdrawn by the MAS. We note that in this case, late filing of multiple types of regulatory submissions occurred, including non-compliance with a written direction.
The case reminds the fund management industry to monitor regulatory deadlines and regulator requests for information, and plan ahead for ample time to respond appropriately. Firms must also have a system for collecting changes of particulars of their directors and for fund managers that hold a capital markets services license, as well as their representatives. This is necessary for fund managers to be able to inform the MAS of such changes in a timely manner.
Case 2
On May 24, 2016, the MAS announced that it had notified one of Switzerland’s oldest private banks of its intention to withdraw the firm’s status as a merchant bank, citing breaches of anti-money laundering (AML) requirements, insufficient management oversight of its operations and misconduct by some of its staff.
MAS reports cited:
- Front office policy and process lapses and weak enforcement by control functions in 2011
- Due diligence failures in 2014
- Insufficient senior management oversight, numerous breaches of various AML regulations, unacceptable risk culture and habitual violations of certain compliance and control requirements as well as MAS’ regulations in 2015.
The managing director of the MAS, Mr. Ravi Menon, called these failures the worst case of control lapses and gross misconduct in Singapore’s financial sector.
This is the first time that the MAS is withdrawing its approval for a merchant bank since 1984.
Beyond withdrawing the bank’s regulatory status, the MAS also levied financial penalties of S$13.3 million for 41 breaches of the MAS’s notice on AML regulations. These breaches include failure to perform enhanced customer due diligence on high risk accounts and monitor for suspicious customer transactions on an ongoing basis. The MAS also referred various senior management and staff of the bank to Singapore’s Public Prosecutor for evaluation of potential criminal misconduct.
The MAS reminded financial institutions to take AML responsibilities seriously and urged firms’ management to emphasize professional integrity and risk consciousness.
A flurry of high-profile enforcement action in less than a week is unusual in Singapore. The MAS said that it would conduct supervisory reviews of other financial institutions and bank accounts through which suspicious and unusual transactions have taken place. Thus, further enforcement action may follow. Firms should review their compliance and risk management systems, including in AML, customer due diligence and suspicious transaction monitoring controls.
