It's no secret that today's rapidly changing pace of life and constantly updated business conditions force each of us to keep our finger on the pulse to meet the requirements of the time and, at the same time, remain within the framework of traditional values. Many jurisdictions prefer a more conservative path of development. Having chosen "their course" once, they stick to the conventional direction for many years, not trying to look for new and bold solutions. However, some countries manage to combine the time requirements while maintaining traditions correctly, as Singapore does.

Over the past few decades, this city-state has created ideal conditions for starting and developing a business. If we talk about the legislative component, all laws are focused on developing entrepreneurial activity. However, any innovations are relevant only if they do not upset the balance between modern requirements and those conditions that in the second half of the 20th century secured the status of an “economic miracle” for Singapore.

Today Singapore is a promising jurisdiction with flexible business development conditions in many areas. However, the Singapore authorities are not ready to completely give up market control. A free economy should not harm the legislative, judicial and executive systems of government. We are well aware of how, in the old days, offshore territories tried to maintain the secrecy of deposits and the anonymity of beneficiaries. Such trends inevitably lead to problems with financial regulators. In addition, there are risks of including sanctions and pressure from the international community.

In this regard, traditional offshore and mid-shore companies adhere to the generally accepted “rules of the game” and try to “be friends” with those on whom the quality of their life depends.

If something “goes wrong”, unpleasant and substantial measures will be taken against traditional offshore companies:

• the closure of all European programs responsible for obtaining citizenship by investment;
• introduction of stricter control over beneficiaries;
• introduction of mandatory registers of shareholders/owners;
• transparency of the banking sector;
• expanding the criteria for high-risk business.

With the advent of new powers of the Monetary Authority of Singapore (MAS), doing business in the jurisdiction will become more complicated. As a result, the jurisdiction risks losing its attractiveness to investors. In addition, the competition with Taiwan, South Korea, and Hong Kong cannot be ignored. Given the circumstances, all this can become a "trigger" to the potential decline of Singapore.

Nevertheless, Lee Hsien Loong's government was forced to take this step since the prime minister had little choice.

So, what innovations are coming to Singapore, and how will this affect the business flow in the city-state?

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What are innovations awaiting Singapore?

Tasks related to the escalation of the MAS powers of MAS:

• to strengthen Singapore's financial sector;
• to ensure more effective management of technological risks;
• to prevent participation in the banking/financial industry of fraudulent schemes, the actions of criminal elements and criminal communities.

According to analysts, the measures taken will significantly reduce systemic risks that cast doubt on the stability of the entire industry and, in the future, will inevitably lead to significant destructive changes.

For the first time, they started talking about innovations in July 2021. On the same day, an available list of extended MAS powers was submitted for consideration. The plans included adopting a new backbone law on financial services and markets. The law should streamline the existing scattered regulatory acts.

According to MAS officials, the innovation will prevent the questionable actions of all market participants. However, they prefer to remain silent about the fact that MAS will receive additional powers by adopting the law. And this is understandable: a free society is unlikely to be “happy” with the adoption of other permits for prohibitive/restrictive legislative acts that will have to be enforced without fail.

Sceptics criticised the vague wording of the proposals and the main criterion on which all innovations are based - the qualification of the act (misconduct) as "unsuitable" for working in the financial market, allowing variability. Therefore, the evaluation criteria that will enable the "inclusion" of different interpretations cannot be of a strictly fixed order. Nevertheless, in this regard, it can be assumed that the scheme will often "work":

- point one: the boss is always right;

- point two: if the boss is wrong, see point one.

And although this approach is not the norm for Singapore, most likely, the risks for such a “forecast” are not unfounded.

The new document focuses on the issue of combating money laundering, countering the financing of terrorism, as well as who provides digital token services outside of Singapore. It must be said that in the jurisdiction, laws governing the movement of digital tokens already exist. However, according to the authority's representatives, they do not meet the tom requirements and need to be tightened.

COSMIC digital platform

The COSMIC digital platform was presented not so long ago, on October 1, 2021. In this regard, it is premature to talk about the prospects for the impact of COSMIC on the industry.

According to its fundamental principles of operation, COSMIC is comparable to the system of automatic exchange of financial and tax information CRS (Common Reporting Standard). However, the distinguishing feature is that COSMIC will not be a set of administrative rules and regulations but a digital platform. The main tasks of the platform were mentioned above, but we will repeat: the primary mission is to prevent the financing of terrorism and money laundering.

COSMIC is quite an exciting project. However, not many jurisdictions around the world are ready to take such measures. It is especially unclear how COSMIC will be combined with CRS and to what extent they will be able to interact with the financial structures of other countries. It can be cautiously predicted that the measures that international financial regulators are diligently “promoting” will be chosen by each country under its preferences, and they may not favour COSMIC. Our assumptions are based on the fact that innovations related to COSMIC are carefully criticised at all levels and do not yet find proper support from the outside.

Conclusion:

• The COSMIC platform can be called a joint project of some of Singapore's largest commercial banks: DBS, OCBC, UOB, SCB, Citibank and HSBC;
• There will be no free access to information. However, it is incorrect to talk about its complete "closedness";
• Total exchange of information is not planned. Access to data will require strong justifications and clearly stated goals, as discussed above;
• COSMIC should create conditions for "seamless" integration with existing financial information analysis tools;
• Only MAS will be allowed access. It is not planned to broadcast information "on the side";
• Planned launch date of COSMIC – Q1/Q2 2023;
• In November 2021, MAS discussed future innovations with stakeholders, which resulted in changes to the project documentation.

Changes in MAS powers

If we discuss the upcoming amendments planned to be introduced into the current legislation, some sceptics may feel that MAS is acting as a "usurper" of power. However, this is an erroneous assumption. No matter forecasts regarding the "influential" Singapore, it will equalise rights with any offshore jurisdiction sooner or later.

The list of laws that will expand the powers of MAS:

- the law on credit institutions (Credit Bureau Act);

- the law on banking activities (Banking Act, [BA]);

- the law on financial advisers (Financial Advisers Act, [FAA]);

- the law on payment services (Payment Services Act, [PS Act]);

- the law on trust companies (Trust Companies Act, [TCA]);

- the law on securities and futures (Securities and Futures Act, [SFA]);

- the insurance law (Insurance Act, [IA]);

- a general law on the functioning of the financial sector, which has not yet been given an official name (new Act, relevant Acts).

Groups of amendments and changes:

• Part A: expansion of the scope of supervisory, investigative control powers of MAS;
• Part B: additional official comments that are given on the actual application of new laws (SFA, FAA, TCA);
• Part C: extending MAS's SFA advisory powers to oversee financial institutions in cases of unregulated business.

About updates to Part A:

• expansion of powers for personal search and recording of interrogation testimony;
• the right to obtain a court order if a person has ignored the appearance for questioning;
• the right to request information on the case and contact any person involved;
• mandatory provision of a copy of the interrogation to the person who was present at the interrogation;
• the right to gain access to the premises without a special warrant;
• the right to request a court order to seize evidence;
• transfer of evidentiary information on the case between the NAS, police services and prosecution authorities.

About updates to Part B:

• explanatory commentary on applying the new MAS powers (for SFA, FAA and TCA).

About updates to Part C:

• application of standards for persons related to unregulated business;
• control over the activity of unregulated business;
• activities of those interested in unregulated business and connected with it in one way or another.

Takeaways and recommendations

Innovations of such a level as the empowerment of the MAS do not happen all that often. So for the government of Singapore to make such a decision is a big responsibility. It is because any "tightening of the screws" at the state level, especially if it goes beyond measure, provokes dissatisfaction with partners, disruption of the balance, reduces the pace of the country's economic development and sometimes causes the loss of leading positions in the world economy.

Similar precedents have happened in the past: in the Middle Ages in Spain/Portugal or in the second half of the 20th century in Great Britain (the parade of colonial sovereignties). It is happening now, for example, in the United States.

Therefore, for innovations to “work”, certain conditions are needed. First, accepting the need for innovation as a given is essential. We must understand that these decisions are overdue; they are taken objectively and are not adventurous.

Secondly, in any cardinal changes, finding a good line or a meaningful balance between necessity, safety and comfort for all participants is important. If you "tighten the screws" a little tighter, the business will "look for" other jurisdictions. And there are enough such places today, especially since more than enough people want to "press" Singapore from its leading positions today. On the other hand, if you allow yourself "half-measures", then the meaning of innovation is completely lost.

It must be accepted that innovations are ripe, and today the need for them is connected with the requirements of international financial regulators. In addition, the adoption of innovations reflects the realities of today, and therefore it is simply stupid to ignore them. You cannot roll back to the day "yesterday": it is the path "to nowhere."

Thirdly, innovations will create the ground for strict but fair control.

Singapore belongs to the category of countries where laws are respected. But this does not mean that economic and financial offences do not exist in the country. But, of course, they are in any jurisdiction. So another thing is important here: what is the regulator's reaction to violations? Everything is in order if there is a need for a quick and fair punishment. A reasonable balance has been struck.

Instead of a conclusion:

It is not yet possible to forecast the impact of innovations on business. However, everything will become apparent when the market "adapts" to the game's new conditions, and their expected result becomes obvious. Whatever turn, in this case, business in Singapore will retain its stable position for many years to come. It will be profitable, safe, and, we hope, free.

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