Singapore regulators taking steps to mitigate risks from entities with Myanmar dealings

FINANCIAL regulators in Singapore said they have taken steps aimed at mitigating risks from entities that have business dealings with Myanmar, in response to queries from The Business Times on a legal memorandum published by human rights groups.

A spokesperson from the Monetary Authority of Singapore (MAS) said that financial institutions (FIs) have been put on "heightened alert in relation to risks emanating from the situation in Myanmar".

Meanwhile, a Singapore Exchange Regulation (SGX RegCo) spokesperson said they are "in active engagement" with the independent reviewer looking into Catalist-listed Emerging Towns & Cities Singapore (ETC) activities in Myanmar.

Their comments were in response to a legal memorandum published by rights groups Justice for Myanmar and the Australian Centre for International Justice (ACIJ) on Wednesday (Oct 20), which said that international law and guidance place due diligence obligations on the Singapore Exchange (SGX), in relation to companies doing business with the Myanmar military.

The groups said Singapore has an international legal obligation to investigate, prevent and cease transactions that amount to wrongful acts, and that this is applicable to business transactions with the Myanmar military and its business interests.

The legal memo - authored by Australia-based lawyers Felicity Gerry and Daye Gang at the request of Justice for Myanmar and ACIJ - was meant to form the "basis of engagement with SGX over Singapore-based businesses linked to the Myanmar military".

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It is focused on the listing of ETC and follows a report by Justice for Myanmar in February, which said property player ETC had contributed millions to the Myanmar army in its Golden City development in Yangon. Shares of ETC have not traded since Feb 26, after it called for a trading halt that was later converted into a trading suspension.

SGX RegCo had queried ETC and its sponsor on the report in February and two independent reviewers were also appointed to look into ETC's dealings in Myanmar. Nexia TS Advisory's review on payments and fundraising activities was published last month, and a review on investment and business activities for compliance with applicable laws by Kelvin Chia Partnership is still ongoing.

"We are in active engagement with the independent reviewer on developments and the terms of the review. SGX RegCo is also in communication with Singapore statutory authorities on the matter," the SGX spokesperson said.

"The review is to provide clarity on ETC's compliance with applicable laws and regulations. Until the review is complete, ETC won't be able to raise funds via the Singapore stock market, nor resume share trading."

ETC has an indirect equity interest in Golden Land Real Estate Development Co (GL), which owns the Golden City project. It explained in March that GL has a build-operate-transfer contract for the Golden City project, and the lessor and counterparty to the contract is Myanmar's Quartermaster General Office (QMGO), the government authority with the necessary rights to grant the contract.

ETC said that in accordance with the contract, it has to pay the fees for the lease of land into an account administered under authority of the QMGO. The QMGO is in turn administered by Myanmar's Ministry of Defence.

Nexia's review last month found that the "payment transactions extracted and reviewed were conducted in the ordinary course of business".

It noted that there were 3 payments to the QMGO amounting to US$5 million relating to land lease premiums. Nexia said: "We understand from the management that the notifications for payment were communicated by QMGO verbally and there were no formal written invoices issued in relation to these payments."

Said ETC last month: "Nexia has not identified any other contractual payment or fund expenditure towards the Myanmar government ministries and departments that have not yet been reported in the annual reports and financial results announcements."

Justice for Myanmar and ACIJ said on Wednesday their legal memo found that these reviews "may not address international law risks in light of the 2019 UN Independent International Fact-Finding Mission on Myanmar report into the Myanmar military's economic interests, and ongoing atrocity crimes".

Some of the potential international law issues highlighted in the memo relate to state responsibility for internationally wrongful acts, and breaches of international humanitarian law.

The rights groups said the legal memo raised the possibility of "reputational and sanctions risks" for SGX, its regulator MAS and, by extension, the Singapore government, "should it not prevent continued payments from ETC to the Myanmar army".

The MAS spokesperson said on Thursday (Oct 21) that they are aware of the ongoing independent review relating to ETC, adding that SGX RegCo, the market regulator, is following up closely on this matter.

The spokesperson added: "MAS requires FIs to properly manage money laundering risks, and not facilitate fund flows that are related to illicit activities. MAS has reminded FIs to stay vigilant to suspicious transactions and take risk-mitigation measures in higher-risk situations."