A new bill will give the Monetary Authority of Singapore (MAS) more authority to supervise and investigate the financial sector, including the power to enter the premises of financial institutions without a warrant or prior notice in some situations.
The Financial Institutions (Miscellaneous Amendments) Act 2024, which was proposed by Minister of State for Trade and Industry Alvin Tan, aims to “harmonise and enhance” the investigative powers of the MAS across six legislation acts governing various aspects of Singapore’s financial industry. They include financial services and markets, insurance, payment services, financial advisers, the securities and derivatives industry, and trust companies.
“As our financial industry grows in size and complexity, MAS must continually review and enhance its regulatory powers to ensure that it can effectively supervise financial institutions, as well as investigate and punish serious misconduct in our financial sector,” said Tan.
The new bill will also extend the MAS’s existing ability to compel interviews, request written statements and access premises without a warrant.
Benedict Teo, director at Singapore law firm Drew & Napier, notes that such power can be exercised if an investigation relates to a suspected breach of MAS-administered statutes, and the investigator has reasonable grounds to suspect an entity occupies the premises under investigation.
Given little advance notice of on-site investigations and staff interviews, financial institutions are urged to formulate and implement sound compliance policies.
“Firms should update their compliance policies and processes, and conduct training to familiarise their staff,” says Teo. He advises designating officers to promptly assist the MAS, making sure they understand relevant obligations, compliance processes, privilege issues, record storage and retention policies.
“Financial institutions should ensure that any staff member interviewed by the MAS would know how to react and be able to provide clear and accurate information to the MAS,” he says.
Financial institutions should be aware of key changes under the new bill, according to Teo.
For locally incorporated recognised market operators, recognised clearing houses, and approved trustees, the MAS approval is now mandatory before appointing both chief executive officers and directors. Approval must also be obtained annually for appointing external auditors of approved exchanges, clearing houses, trade repositories and holding companies.
MAS will have the ability to “direct these entities to remove or replace their appointed auditors, where the appointed auditors are unable to discharge their duties satisfactorily.” The bill also introduces a single “fit and proper” standard for assessing the removal of key personnel rather than separate criteria.
Nevertheless, some members of Parliament have voiced concern about the expanded powers of regulators to potentially enter private premises without oversight. Supporters counter that sufficient safeguards are in place and parallel powers exist in other jurisdictions – such as Australia, Canada and the UK – to allow for effective investigation of serious misconduct.
Teo sought to reassure that the act will not be used where cooperation is expected, and warrants can still be sought afterwards to seize evidence.
While MAS officers may require any person on the premises to produce information, or state where such information can be found, and can also require any person on the premises to preserve evidence, Teo says that MAS officers cannot search and seize evidence on the premises and their powers do not require disclosing legally privileged information.
In a broader context, the bill is part of the MAS’ ongoing efforts to review and update the regulatory framework as new risks emerge. As Minister Alvin Tan says in his speech, the changes grant the MAS legally binding powers over previously unregulated business lines of licensed entities that could still pose contagion threats, such as cryptocurrency trading.
Overall, though, the major expectation is that financial institutions develop a culture of awareness and compliance with all regulatory requirements, says Teo.
“It is only when all staff members and management buy into the need to conduct their daily activities in compliance with the financial institutions’ statutory and regulatory obligations, making compliance part of their everyday routine as opposed to something to be concerned about only when things go wrong, that financial institutions can best prevent and address serious misconduct allegations,” he notes.
