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The fallout from the Wirecard scandal has been on the minds of Singapore lawmakers, as has a major outage at DBS — its second in only two months.
In a parliamentary question submitted last week, a Singapore MP asked the government to clarify how the exposing of the Wirecard scandal will inform its anti-money laundering/counter-terrorism financing (AML/CTF) policies going forward.
Ang Wei Neng of the People’s Action Party (PAP) also asked the government to confirm how many financial institutions (FIs) have been investigated for breach of AML/CTF rules in the past five years, and how many of these cases relate to Wirecard.
Responding, central bank minister Tharman Shanmugaratnam said that 20 investigations of AML/CTF breaches were conducted between June 2018 and June 2023, with 17 of these leading to enforcement action.
From the total, Shanmugaratnam said that only four of the 20 investigations relate to Wirecard, and all four of the FIs involved in those cases have already been penalised.
Last month, as covered by VIXIO, Citibank, DBS, OCBC and Swiss Life were issued S$3.8m ($2.8m) in fines for AML/CTF failures related to persons and legal entities connected to Wirecard.
Although the breaches were “serious”, the Monetary Authority of Singapore (MAS) found no evidence of wilful misconduct, and the four FIs did not dispute the penalties they received.
Around the same time, a Singapore state court convicted two former Wirecard Asia employees for breach of trust offences — the first criminal convictions related to the Wirecard scandal worldwide.
Chai Ai Lim, 44, and James Aga Wardhana, 39, both pleaded guilty to breach of trust for aiding and abetting Edo Kurniawan, a former Wirecard executive, in his misappropriation of company funds.
Kurniawan, who was vice president of controlling and international finance at Wirecard Asia, misappropriated more than S$310,000 ($230,000) from the company, according to the court’s ruling.
Wardhana was sentenced to 21 months in prison, while Lim was sentenced to 10 months in prison.
The verdict led to questions from Singapore lawmakers as to whether more could have been done to expose the Wirecard scandal sooner.
In February, the Singapore Police Force (SPF) fended off similar criticism, arguing that it moved as quickly as it could to investigate and prosecute individuals when evidence of the Wirecard scandal emerged.
For example, Singapore’s first criminal investigation related to Wirecard was opened in early July 2020, nine days after Wirecard announced that it was filing for insolvency.
In mid-July 2020, two weeks after the German authorities announced the arrest of former Wirecard CEO Markus Braun, the SPF said it had reached out to German authorities and began cooperating on related investigations.
Baptiste Forestier, head of compliance at B2B payments firm Hero and host of the Laundromat podcast, said the Wirecard case continues to provide a “stark reminder” of the importance of robust and proactive AML controls globally.
“The fact that established institutions such as Citibank, DBS, OCBC and Swiss Life were implicated in AML breaches related to Wirecard in Singapore shows that no entity is immune to such risks,” he told VIXIO.
“It's a wake-up call for all of us in the financial sector to constantly review and update our AML protocols.”
Getting closer to COSMIC data sharing
On the regulatory front, Shanmugaratnam also drew attention to the Collaborative Sharing of ML/TF Information & Cases platform, also known as COSMIC.
When COSMIC launches in 2024, it hopes to facilitate more efficient data sharing between FIs and the authorities, and more efficient detection and reporting of suspicious activity.
In March this year, as covered by VIXIO, a bill authorising the COSMIC platform and its new data-sharing provisions was introduced to parliament and was adopted in May.
As per the bill, COSMIC aims to break down “information silos” that currently prevent FIs from sharing certain forms of customer data due to data protection rules.
For AML professionals, Forestier said that platforms like COSMIC represent a “promising step forward” for increasing transparency and detection capabilities.
“By facilitating data sharing among financial institutions, we can collectively strengthen our defences against money laundering and financial fraud,” he said.
“We must learn from the Wirecard case, and that means embracing transparency, fostering cooperation and leveraging technological advancements to ensure robust AML frameworks.”
DBS outage blamed on 'human error'
Finally, in response to a parliamentary question on the cause of a DBS outage in May, Shanmugaratnam said an internal investigation has attributed the outage to “human error”.
Specifically, a DBS preliminary investigation showed that the outage was caused by errors in the coding of a program that was used for system maintenance.
“The error led to a significant reduction in system capacity, which in turn affected the system’s ability to process internet and mobile banking, electronic payment, and ATM transactions,” said Shanmugaratnam.
The minister also pointed out DBS’ finding that the cause of the May 2023 outage was different to the cause of the March 2023 outage, which has been attributed to “inherent software bugs”.
In the May 2023 outage, DBS’ services were not fully restored until after 6.5 hours. The central bank said that any outage of two hours or more is “unacceptable” and justifies the imposition of additional capital requirements on the offending bank, such as those applied to DBS.
Both outages are still under investigation by a DBS Special Board Committee and independent third parties, the findings of which the MAS will share publicly in due course.
