May 26, 2016
The adjectives marshalled most often by bankers to describe Singapore’s regulator used to be “pragmatic” and “business-friendly”. To those, a third probably just got added: “No-nonsense”.
By asking BSI Bank to shut its operations in the city-state, the Monetary Authority of Singapore (MAS) has scored at least two goals and created one group of winners.
Take the achievements. First, the MAS has given itself a leg up over regulators in the United States, Switzerland, Hong Kong, Luxembourg and Malaysia, which are also investigating a multibillion-dollar financial scandal surrounding 1Malaysia Development Berhad (1MDB), the troubled Malaysian state fund whose advisory board has been headed by Malaysian Prime Minister Najib Razak. (Mr Najib has rejected allegations that he profited from state funds, and 1MDB has denied any wrongdoing.)
While the Swiss Attorney General’s office is just getting around to starting criminal proceedings against BSI, Singapore has sent the bank packing.
BSI said on Tuesday that it has cooperated fully with the investigations into 1MDB by the Singapore and Swiss authorities, and remains well-capitalised.
The unexpectedly harsh move may earn Singapore some respect. It is what the world’s fastest-growing major wealth centre badly covets, but does not always get.
As recently as March, the US Internal Revenue Service sought a showdown over Singapore’s bank-secrecy laws by trying to arm-twist UBS into revealing information about an American citizen’s bank account in the city. It was a rather pointless exercise: Turns out the island’s central bank may be perfectly willing to lift confidentiality to aid criminal investigations.
An additional benefit is the example it sets for other financial institutions in the city. Serious breaches of anti-money laundering requirements, poor management oversight and gross misconduct — the reasons the MAS gave for delivering the fatal blow — could merit punishment more serious than a crippling fine, which is what Western regulators typically mete out to errant banks.
Naysayers could argue that it is easy to come down hard on a small, private bank catering to the wealthy, rather than a deposit-taking institution of any size. Malaysian and international media could claim also, with some justification, that regulators in general have been too slow to act.
To that extent, making BSI the fall guy is great for PR and costs nothing. However, even if that cynical view is correct, banks in Singapore are unlikely to want to test their limits for living dangerously.
That can only mean one thing: The real winners from Singapore’s banishment of BSI will be compliance folks. They might not know it, but their bonus cheque for this year just became a little more substantial. BLOOMBERG
About the author: Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services.