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Singapore should hit errant corporates harder

The Edge Singapore
The Edge Singapore • 5 min read
Singapore should hit errant corporates harder
SINGAPORE (Jan 15): The corruption scandal that Keppel Corp is embroiled in has raised questions in Parliament this past week about whether the company and its executives have been sufficiently punished.
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SINGAPORE (Jan 15): The corruption scandal that Keppel Corp is embroiled in has raised questions in Parliament this past week about whether the company and its executives have been sufficiently punished.

Given that the case has damaged the country’s reputation and also involved large sums of money, opposition Member of Parliament Sylvia Lim said there are perceptions on the ground that the penalty that has been imposed in a global resolution with authorities in the US, Brazil and Singapore is a mere “slap on the wrist”.

In response, Senior Minister of State for Finance and Law Indranee Rajah said “any penalty or claim that [Keppel] might be subject to under Singapore law would be far less than what [Keppel] is now liable for under the coordinated resolution”, and that the penalties under the Singapore Act alone “wouldn’t get us anywhere near the penalty under the global resolution”.

Singapore’s penalties for offences related to corruption would have left Keppel liable for a fine of up to $100,000. In contrast, the company will pay total restitution of more than US$422 million ($562 million) under the global resolution. Singapore will receive 25% of this sum, or US$105.6 million. Brazil will receive 50% of the sum, or US$211.1 million. The US will get the remainder.

The fine, Indranee points out, is eight times the bribes Keppel paid. “As far as the company is concerned, make no mistake, there has been a heavy price to pay and deservedly so,” she says.

According to documents made available by the US Department of Justice, shareholders of Keppel could have been burdened by an even larger fine under US sentencing guidelines — from just under US$563 million to more than US$1.1 billion. Keppel received a discount because of its substantial cooperation with the investigation, and for taking extensive remedial measures, according to the DOJ.

Should Singapore introduce tougher penalties for corporate corruption? “I think it’s hard to argue that a $100,000 fine is an effective deterrent in today’s world. High time we reviewed and refreshed the penalties imposed on corporates,” says Stefanie Yuen-Thio, joint managing partner at TSMP Law Corp, commenting on the penalties corporations face from Singapore authorities.

“However, setting a monetary limit may also not be effective, and we may want to consider a limit that takes into account factors such as the size, revenue and profitability of that company, and the amount of gain that the corrupt act produced. To be truly effective prevention, the punishment must be a good deterrent. In the case of individuals, sending them to jail is obviously still a good deterrent, but the same does not apply to a corporate,” she adds.

It could also be time to relook the way local authorities deter, detect and prosecute the involvement of corporate entities in criminal activity. In recent years, Singapore has found itself involved in the scandal surrounding 1Malaysia Development Bhd. And, the manipulation of a clutch of penny stocks in 2013 had far-reaching consequences for the local stock market.

No doubt, effective cooperation with other countries is becoming increasingly important. “It’s worth remembering that while Singaporean authorities can be active in rooting out corruption on our shores, it’s much harder to uncover such crimes if they take place out of Singapore. In such cases, we have to rely on cooperation with the authorities of other jurisdictions, which is what I understand took place [in the case of Keppel],” says Yuen-Thio.

“In fact, another way to look at such cases is that they are a good example of effective prosecution of the offence. The authorities, as I understand, cooperated across borders, sharing information and coordinating on their investigations and time lines. Without such cooperation, it’s possible that these cases would take longer to close and it would be harder to enforce as they typically involve entities and actions across several jurisdictions,” she adds.

At the same time, Singapore should not pass up an opportunity to take the lead on regional and even international cases.

At the Global Forum on Asset Recovery, held in the US last year, US Attorney General Jeff Sessions spoke about the international impact of crime. “Bribes paid to an official in West Africa can be spent on a yacht in Miami. Dangerous drugs produced in Afghanistan or Colombia can kill a teenager in Cincinnati or Sydney. A social media post in Syria can inspire a terrorist attack in Europe. A criminal from Mexico can victimise innocent people in Portland or San Francisco,” he said.

To that end, the DOJ has restrained US$3.5 billion in corruption proceeds — nearly half of which is related to 1MDB. Since 2004, the US has returned about US$119 million to the people of Italy, US$115 million to the people of Kazakhstan, more than US$20 million to the people of Peru and millions more to the people of Nicaragua, South Korea and Taiwan.

Singapore has effectively dealt with crime within its own borders, such that the country is seen as among the least corrupt in the world. Perhaps it should extend that expertise to improve the standing of the region.

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