Financial crimes in Singapore – an overview
July 2019 | SPECIAL REPORT: WHITE-COLLAR CRIME
Financier Worldwide Magazine
July 2019 Issue
Financial crime is an ever increasing threat to today’s global economic climate. As a financial hub, Singapore is certainly not immune to this. There have been recent high-profile cases, notably an investigation into ties between financiers in Singapore and the troubled Malaysian state fund known as 1MDB. This culminated in BSI Bank and the Singapore branch of Falcon Private Bank being shut down and S$30m of fines being imposed.
The most recent data released by the Monetary Authority of Singapore (MAS) reports that between 1 July 2017 and 31 December 2018, one criminal conviction, S$16.8m in financial penalties and compositions and S$698,000 in civil penalties were meted out. This is in addition to the 19 prohibition orders, 37 reprimands, 223 warnings and 444 supervisory reminders issued.
The increase in volume and complexity of financial transactions, as well as the growth in cross-border transactions, has proved to be challenging to the Singapore authorities, who aim to curtail the spread of financial crime.
Regulatory bodies and authorities in Singapore
The Commercial Affairs Department (CAD) is a department of the Singapore Police Force and the principal white-collar crime enforcement agency in Singapore. It has various specialist departments and groups focusing on areas such as commercial fraud and financial fraud.
MAS conducts investigations and audits to ensure compliance with provisions and regulations under statutes such as the Securities and Futures Act (Cap. 289) (SFA). It is also Singapore’s central bank and the body responsible for the regulation and supervision of financial institutions in Singapore.
The attorney general has sole prosecution powers and has control, direction and discretion of prosecution of offences in Singapore. The Economic Crimes and Governance Division is responsible for all prosecutions in respect of financial crimes and corruption cases in Singapore.
Since March 2015, MAS and CAD have embarked on a joint investigations arrangement. Where previously, each agency conducted its own investigations, this joint arrangement allows for the investigation process to be optimised and streamlined. This collaboration ensures that any market misconduct is swiftly detected, investigated and efficiently dealt with. It also allows the agencies to pool their investigative resources and expertise, drawing from MAS’s role as a financial regulator and CAD’s financial crime investigation and intelligence gathering capabilities.
The October 2013 penny stock crash involving three Singapore-listed companies – Asiasons Capital Ltd, Blumont Group Ltd and LionGold Corp Ltd, was the largest market manipulation case in Singapore’s history. This led to the formation of this joint investigations arrangement which was launched to cover offences such as insider trading and market manipulation. Previously, MAS and CAD investigated financial crimes independently, based on an initial assessment of whether the offence was likely to be a civil penalty or criminal prosecution case. Joint investigations now enable both agencies to collaborate from the start, with the decision on whether a case is subject to civil penalty action or criminal prosecution being made only when investigations are concluded.
Insider dealing and market abuse
The SFA is the principal legislation dealing with insider dealing and market abuse. The relevant offences under the SFA include: false trading and market-rigging transactions (section 197), market manipulation (section 198), making false statements (section 199), fraudulently inducing persons to deal with capital market products (section 200), insider trading (sections 218, 219 and 220(1)) and the employment of manipulative and deceptive devices (section 201). Punishment can include a fine of up to S$250,000 and imprisonment for a term of up to seven years.
Fraud and offences
Corporate fraud in Singapore includes theft, dishonest misappropriation, criminal breach of trust, cheating, dishonest or fraudulent disposition of property or payment of a debt, dishonest or fraudulent execution of a deed of transfer and forgery and falsification of accounts. These offences may be committed by individuals, including officers of a company in their personal capacities, as well as by companies.
Persons or companies who attempt, abet or conspire to commit the abovementioned offences can also be deemed to be guilty of offences under the Penal Code.
The Companies Act (Cap. 50) sets out certain specific corporate fraud offences, such as making false and misleading statements, making false reports, fraud by officers and breaching directors’ duties.
Other causes of fraudulent action include: fraudulent misrepresentation (the common law position of fraudulent misrepresentation is codified in the Misrepresentation Act), breach of fiduciary duties, and breach of trust, dishonest assistance and conversion.
Bribery and corruption
In Singapore, the main regulatory provisions are encapsulated in the Prevention of Corruption Act (Cap. 241), whereas offences by or relating to public servants are set out in Chapter IX of the Penal Code. The Corruption Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap. 65A) (CDSA) provides for the seizure of the fruits of corruption.
In Singapore, the Corrupt Practices Investigation Bureau (CPIB) is the dedicated agency responsible for investigating corruption. The CPIB reports directly to the prime minister and is independent from the Singapore Police Force and other government agencies, to prevent any undue interference in its investigations. It has extensive powers to investigate allegations of corruption.
Last year, Keppel Offshore & Marine agreed to pay a US$422m settlement, reached with the US, Brazil and Singapore, to avoid a criminal trial for allegedly bribing Brazilian officials. This fine is believed to be a record involving a Singapore-listed entity.
Money laundering and terrorist financing
Singapore is a member of the Financial Action Task Force (FATF), an intergovernmental body established to set standards and promote the effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and the financing of proliferation, and other related threats to the integrity of the international financial system. As such, Singapore has gone to great lengths to maintain a strong legal and regulatory framework, to detect and deter money laundering and terrorism financing and to align its anti-money laundering and terrorism financing regime with international standards.
The CDSA is the main legislation in relation to money laundering, terrorist financing and breach of financial/trade sanctions. The Organised Crime Act 2015 (No 26 of 2015) criminalises the commission by organised criminal groups of serious offences, which involves money laundering.
Singapore has adopted a strict stance against terrorist financing. The Terrorism (Suppression of Financing) Act (Cap. 325) (TSFA), as revised in 2018, sets out harsher penalties and increased enforcement powers. These harsher penalties and increased enforcement efforts come against the backdrop of the growing volume and complexity of financial transactions, which make such crimes harder to detect and address, due to ease of money transfers between persons and across borders.
On 19 March 2018, MAS announced that it had imposed penalties of S$5.2m on Standard Chartered Bank, Singapore Branch and S$1.2m on Standard Chartered Trust (Singapore) Limited , for breaches of its anti-money laundering (AML) and countering financing of terrorism (CFT) requirements.
Recent trends and developments
In order to strengthen its protection of consumers and safeguard public trust in financial institutions, MAS stated in its latest Enforcement Report published on 19 March 2019, that it will implement several measures, such as: (i) timely and adequate disclosure of corporate information by listed companies; (ii) business conduct of financial advisers and their representatives; (iii) financial institutions’ compliance with AML/CFT requirements; (iv) brokerage houses’ internal controls to detect and deter market abuse; and (v) surveillance and investigations into suspected insider trading.
MAS has also harnessed data analytics and augmented intelligence for the purposes of increasing the precision of its AML/CFT monitoring and detecting market manipulation respectively, under ‘Project Apollo’, an intelligence tool devised by MAS to assist enforcement officers in sorting out cases according to importance.
In terms of the average time taken to review and investigate a case, those involving criminal prosecutions took about 33 months on average. This is followed by 30 months for those with civil penalties, six months for regulatory actions and three months for referrals to external agencies. The average time taken across all concluded cases was about eight months.
Financial crime is an increasing threat to today’s economic climate, and regulatory authorities in Singapore are taking the necessary steps to ensure that financial crime is being curtailed. In particular, the close collaboration between CAD and MAS will enable speedy enforcement of financial laws, and will deter people from using Singapore as a conduit for their crimes.
Debby Lim is a partner at Shook Lin & Bok LLP. She can be contacted on +65 6439 0633 or by email: firstname.lastname@example.org.
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Shook Lin & Bok LLP