Reply to COS Cuts on TDSR, anti-money laundering measures, sustainable financing, corporate governance, and expropriation of unclaimed funds
For Parliament Sitting on 2 March 2017
Name and Constituency of MP
Ms Sylvia Lim, MP, Aljunied GRC
1. To call for an adjustment to the TDSR policy to cater for those with substantial assets.
2. To assess Singapore's anti-money laundering measures in the light of recent developments such as the 1MDB saga, and the efficacy of related agencies such as the Suspicious Transaction Reporting Office.
Name and Constituency of MP
Mr Louis Ng Kok Kwang, MP, Nee Soon GRC
3. Recently, some of our local banks were named for allegedly financing irresponsible palm oil companies linked to deforestation and the haze. In 2015, the Association of Banks in Singapore (ABS) released a set of industry guidelines to enhance responsible financing, but it seems that these measures have not borne fruit. International banks such as HSBC have started to strengthen their lending criteria, but local banks have not published environment, social and governance (ESG) policies. Will MAS encourage financiers to adhere to the ABS guidelines? And what further steps will it take to prevent local financiers' involvement in environmental destruction, which could lead to haze?
Name and Constituency of MP
Mr Henry Kwek Hian Chuan, MP, Nee Soon GRC
4. Many publicly listed companies are concerned about the increasing complexity in regulations and rising cost of compliance, specifically in the area of corporate governance. What steps are MAS taking to address this?
Name and Constituency of MP
Ms Chia Yong Yong, NMP
5. Is there any legislation in Singapore empowering the Singapore government to expropriate unclaimed funds held by non-government entities, such as banks and other professional or commercial entities?
Answer by Mr Ong Ye Kung, Minister for Education (Higher Education and Skills) and Second Minister for Defence, on behalf of Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister in charge of MAS:
1 Madam Speaker, let me start by addressing Ms Sylvia Lim’s question on the Total Debt Servicing Ratio (“TDSR”).
2 We understand the underlying concerns. Retirees who own fully paid-up properties may want to take up a mortgage to support their children’s education, pay medical fees, or support their retirement expenses, maybe start new companies. But some of them are unable to do so today under the TDSR rules.
3 I do remember Ms Sylvia Lim asking this question last year. It is the same question, but I would give the same answer today. MAS has been receiving similar feedback. We understand the concerns, and are studying the matter.
On Money Laundering
4 Ms Sylvia Lim also asked about our anti-money laundering (AML) regime and the efficacy of related agencies, and what steps they are going to take. Let me give some perspective here.
5 Singapore is a global business and financial centre. It sees substantial financial flows daily, in many forms. Every such global centre carries risks relating to money laundering and other financial crimes. Increasingly, criminals are developing complex, cross-border schemes to mask illicit flows or ill-gotten gains through financial centres around the world.
6 Ms Sylvia Lim mentioned 1MDB-related flows which is a clear example – it is by far one of the most complex, sophisticated and largest money laundering cases to date. These flows were channelled through multiple jurisdictions, including the US, Switzerland, Hong Kong, Luxembourg, Netherlands and Barbados, and through many parties and entities, of which many were shell companies incorporated in British Virgin Islands, Cayman Islands and Seychelles.
7 We have taken many steps and a robust approach to address these risks, because trust and rule of law underpin our international reputation. It is a moving game, and our approaches and methods have to keep evolving.
8 Our approach is multi-faceted. We have put in place a strong regulatory regime against money laundering, complemented by close supervision, unstinting enforcement where there are offences in Singapore, and active international co-operation. Because of the severity and complexity of 1MDB, in fact we started a special supervisory examination two years ago on banks that are suspected of being involved.
9 The Financial Action Task Force has independently assessed our system last year and re-affirmed Singapore’s strong regulatory framework, alert supervision of the financial sector, and effective use of financial intelligence by the Suspicious Transaction Reporting Office. And also, we share intelligence with our counterparts all over the world.
10 But as the 1MDB example shows, even with strong rules, we cannot eliminate financial crime. This is why we need deterrent enforcement. In the case of the 1MDB-related transactions, we were the first jurisdiction in the world to take enforcement actions.
- We shut down two banks - BSI and Falcon Bank - and imposed financial penalties on several other financial institutions.
- Our courts have fined – and in some cases imprisoned – the individuals who were complicit. And this has included senior management in some of these banks.
- I believe the message has gone out loud and clear – Singapore will not tolerate the criminal abuse of its financial system.
On Strengthening Responsible Financing
11 Mr Louis Ng asked if MAS will encourage local financiers to adhere to The Association of Banks in Singapore (ABS) industry guidelines on responsible financing.
12 In short, we do. MAS has been working closely with the financial industry on this. Since the launch of ABS’ Responsible Financing Guidelines in 2015, ABS member banks are expected to factor into their lending and investment policies sustainability issues such as greenhouse gas emissions, deforestation, resource efficiency, labour standards, and corporate integrity.
13 The local banks have established internal taskforces on environment, social and governance issues, to help integrate the ABS Guidelines into their lending and business practices. Banks have implemented environmental risk weightings as part of their loans assessment criteria. Loan decisions relating to companies which are assessed to have high environmental risks will be escalated to the banks’ senior management.
14 ABS has also recently introduced specific guidelines for banks on dealing with haze-related risks, such as no open burning on plantations, and build capacity on fire prevention with local communities.
On Banking and Finance Corporate Regulations
15 Mr Henry Kwek has raised a concern on increasing complexity in regulation and rising cost of compliance, specifically in the area of corporate governance.
16 As an international financial centre, we must ensure that our system remains sound and effective, and stays abreast of international norms.
17 On corporate governance, ours is a tiered approach. The Companies Act sets out fundamental requirements for directors to act honestly and use reasonable diligence in discharging their duties. The Code of Corporate Governance sets out corporate governance best practices, and applies to listed companies on a comply-or-explain basis. The comply-or-explain regime recognises the need for flexibility, and allows listed companies to adopt alternative ways to achieving good governance, as long as deviations from the Corporate Governance (CG) Code are accompanied by meaningful explanations.
18 To ensure that our corporate governance regime remains progressive and relevant, MAS has formed a Corporate Governance Council to review the CG Code and practices. The Council members are drawn from various stakeholder groups, including small medium enterprises (SMEs), to provide broad and diverse perspectives on CG issues.
19 The Council will review how the comply-or-explain regime can be made more effective. It will consult widely, to ensure that business considerations, investor feedback, as well as international developments, are taken into account. Ultimately, the review seeks to ensure that the CG Code continues to support sustained corporate performance, business growth and innovation, and maintain investor confidence in our capital markets.
On Expropriation of Unclaimed Funds
20 Ms Chia Yong Yong asked if there is any legislation that empowers the Singapore Government to expropriate unclaimed funds held by non-government entities, such as banks and other professional or commercial entities.
21 There is currently no such legislation. Owners retain their legal right of claim even when their accounts have been inactive.
22 MAS has been studying the need for a formalised framework to deal with such unclaimed funds. In the meantime, MAS is studying ways to help individuals locate their inactive accounts, with a view to reducing such unclaimed funds.