Are Regulatory Costs Going To Soar For Banks In Singapore?

Last week, Singapore’s financial regulator, the Monetary Authority of Singapore (MAS), issued a statement containing the identity of three banks that were found to have had lapses in anti-money laundering controls when they dealt with financial transactions related to 1MDB, Malaysia’s tainted state investment fund.

Singapore’s largest bank by assets, DBS Group Holdings Ltd (SGX: D05), was one of three banks named by MAS, alongside UK-based Standard Chartered Bank and the Swiss-based UBS.

On Monday, the MAS said it would continue naming any financial institutions that it finds to have breached anti-money laundering rules. MAS stated that the recent findings involving the three banks have been a huge blow for Singapore’s reputation as a clean financial centre.

The regulator will launch dedicated units starting in August to monitor money-laundering activities and also said it will step-up the number of inspections it conducts on financial institutions.

It seems that the MAS is determined to regain any trust that may have been lost from the global public and investors and to repair any possible cracks in Singapore’s brand as a trusted financial centre.

This raises the question: Would this lead to more regulations for banks operating here in Singapore with regards to anti-money laundering controls?

MAS has said that more anti-money laundering rules are unlikely.

But ever since the global financial crisis took place in the late 2000s, banks in Europe and the US have had to face much stricter regulations. Fines have also been heavy when they are found to have breached these regulations.

For example, British bank HSBC Holdings PLC was fined more than US$1.92 billion in 2012 when it was found to have been involved with money laundering incidents connected to Mexican and Colombian drug cartels.

Financial sector regulations and reforms have been a big impediment to the banking sector in the west.

MAS has not really indicated what the long-term plans are or what official reforms, if any, there may be to ensure better control with regards to anti-money laundering issues. But, investors may still want to keep a close eye on developments within this space.

All the local banks – DBS Group Holdings Ltd, Oversea-Chinese Banking Corp Limited  (SGX: O39), and United Overseas Bank Ltd (SGX: U11) – could be significantly affected if there are major reforms to current banking regulations.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.