SPEECH BY MR YIP HON WENG, MP FOR YIO CHU KANG SMC AT THE SECOND READING OF THE FINANCIAL SERVICES AND MARKETS BILL ON 5 APR 2022
Mr Speaker Sir,?
1. As a global financial hub, Singapore must stay abreast with the rapidly evolving financial landscape. Today, technology has led to a rapid increase and innovation in new financial products and assets. Conversely, the risks and challenges of managing these products and assets, as well as the financial institutions and persons involved, have also heightened. I support the consolidation and enhancement of the regulatory powers under this Bill, to address the challenges. I believe that this will lead to a more holistic and comprehensive management of the financial services sector. I have several queries on the Bill.
2. First, Mr Speaker sir, can the Minister provide further clarification on the Harmonised and Expanded Powers to Issue Prohibition Orders (or PO)? If a person has been placed on a watchlist or issued something of equivalence to our PO by an overseas jurisdiction, would they be issued a PO here by default??This will facilitate various national regulators to better work together to maintain the integrity of global markets.
3. The Bill also states that persons who have been issued a PO may be, among other things, prohibited from becoming a substantial shareholder of a financial institution. Will it be an offence to wilfully assist the PO individual to evade the PO?
4. Even with the PO, it is not difficult for seasoned fraudsters to set up their theatre here, with actors and props in tow. Take for example the recent case of a blockchain company that is being investigated for cheating offences. One of the key personnel was previously convicted for commercial crimes.[1],[2],[3],[4] ?Usually, these cases only come to light after some of our citizens are cheated by these individuals. Such incidents would make a mockery of our regulators in the way we oversee such theatrics. More than just putting up regulations and by-laws, we should look at the gaps in how we allow businesses to get registered.?Ever so often, we hear of bank account holders being flagged out and put through a lot of queries over the sources of funds in their own bank accounts, while the real sharks swim away after gnawing an arm or a leg. In sum, we need a more pro-active enforcement of our laws and licencing conditions. This has to be in addition to more effective oversight and not just closer monitoring of our financial institutions.
5. Notwithstanding the above, I am pleased that the Bill in its provisions (for example, Clause 174), expressly allows for the prosecution of directors and individuals involved in the management of the corporation, for offences committed by corporations. This is a clear signal to fraudsters that there is no hiding behind the corporate veil. It is also broad enough to prosecute fraudsters who often avoid registering themselves as officers of corporations.
6. Second, Mr Speaker sir, can we further enhance and streamline the regulation of virtual asset service providers (or VASPs), to better manage money laundering and terrorists financing risks (or AML/CFT)? I note that MAS does not intend to regulate non-fungible tokens (or NFTs) for now. However, the NFT market is vulnerable to money-laundering activities. In a recent study, the U.S. Treasury Department revealed that NFTs may become a tool for money laundering in the high-value art market.[5] ?Recent sales of high-profile art pieces involving NFTs have sold for millions, indicating that this art sector has reached similar valuations as traditional art mediums. These art sectors using NFTs are popular vehicles for illicit financial flows. NFTs can even be used to conduct self-laundering. In this scenario, criminals may purchase a NFT with illicit funds, and proceed to transact with themselves to create records of sales on the blockchain and wash the cash clean. I have asked several NFT-related PQs previously, given these concerns. Can the Ministry clarify how the possible risks of AML/CFT through NFTs are addressed under this Bill? Can NFTs be brought into the definition of virtual assets, so that the new rules will apply equally to NFTs?
7. I note the specification that the Bill covers VASPs created in Singapore, or carrying on business of providing digital token services from a place of business in Singapore. What about foreign digital token services which provide virtual assets activities within Singapore?
8. I would also propose that we further streamline the capture of licensees under this Bill. MAS has explained that if a VASP is already licensed, exempted from licensing, or required to be licensed under the relevant provisions in the Securities and Futures Act, Financial Advisers Act or Payment Services Acts, then it need not be licensed under the FSMA.[6] Is it not possible to consolidate all of these licensees under one omnibus Act?
9. Third, Mr Speaker sir, how often will the maximum penalty of $1 million be meted out for technology risk management lapses? The technology sector progresses rapidly and funds flow in copious amounts daily. ?A 2018 IMF report stated that projected cyber-attacks were costing financial institutions at least $100 billion globally on an annual basis.[7]?This figure would likely have risen with the sharp rise in technology progression and cybersecurity breaches in recent years.
10. In this connection, financial institutions often have significant funds. Also, inflation would degrade the deterrent effect of a fixed financial penalty. As such, how often will the range of financial penalties set out in the Bill be amended?
11. Lastly, Mr Speaker sir, will there be exceptions where the statutory protection will not be in effect, even with the absence of wilful misconduct, negligence, fraud or corruption? I support the provision of Statutory Protection from Liability clauses in the Bill. This will encourage mediators, adjudicators and dispute resolution employees, to conduct their duties with greater confidence and autonomy, which are important for successful mediation.
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Conclusion
12. In conclusion, Mr Speaker sir, as a top financial services centre and Fintech innovation hub, we must stay ahead of the various challenges and developments in the industry. Singapore has built up a strong global reputation for reliability and resilience. This remains unwavering, even in the face of recent global crises.?Swarths of capital and data from all over the world flow through our nation every day. We must continue to review our legislations on a regular basis, to ensure that they remain robust and adequately comprehensive to support developments in our finance sector.
13. I support the Bill.
[2] https://finance.yahoo.com/news/aaex-global-singapores-aaex-blockchain-135900978.html
[3] https://asia.nikkei.com/Editor-s-Picks/China-up-close/Chinese-billionaire-who-plotted-with-North-Korea-pops-up-after-16-years
[4] https://www.police.gov.sg/media-room/news/20220221_invstgtn_into_investment_schemes_involving_ana_blockchain_technology_innovation_pte_ltd
[5] https://www.coindesk.com/policy/2022/02/04/us-treasury-department-warns-of-nft-risk-in-art-related-money-laundering/
[6] https://www.mas.gov.sg/-/media/MAS/News-and-Publications/Consultation-Papers/2020-July-Consultation-on-FSMA/Response-to-Feedback-Received-on-the-New-Omnibus-Act-for-the-Financial-Sector.pdf - para 3.5
[7] https://blogs.imf.org/2018/06/22/estimating-cyber-risk-for-the-financial-sector/