One Step Closer to a Mandated Reference Checks Regime: the MAS finalises its proposals for the regime
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The Monetary Authority of Singapore (MAS) has recently finalised its proposals on mandating reference checks.
The finalised proposals are substantially in line with those initially proposed in its Consultation Paper on Proposals to Mandate Reference Checks (Reference Checks Consultation) issued on 14 May 2021, which we discussed in our update, “Singapore’s Proposal to Mandate Reference Checks and Misconduct Reporting” dated 7 June 2021. The finalisation of its proposal was set out in its Response to Feedback to the Reference Checks Consultation (Response), published on 12 December 2023.
The key requirements of the mandatory reference checks regime are as follows:
- All financial institutions and other entities regulated by the MAS will be required to carry out reference checks. This will include persons regulated under the Payment Services Act, banks, merchant banks and others.
- Such reference checks must be carried out on prospective hires for senior management positions and persons involved in the following key functions:
- risk-taking functions;
- risk management and control functions;
- performing critical system administration; and
- authorising or approving payments (excluding small payments)
- The requirements for reference checks are the same for all financial institutions / MAS regulated entities:
- The information to be covered in making reference checks will be standardised to a list of mandated matters specified by the MAS.
- The lookback period will be a minimum of five years.
- The information must be provided within 21 calendar days of the receipt of the request.
- Financial institutions and MAS regulated entities will also need to maintain conduct records over all of their employees (except for those in ancillary functions such as clerical personnel or drivers).
These requirements will mean that Singapore’s reference checks regime will be substantially aligned with that implemented in the UK.
Noteworthy comments from the MAS Response
In terms of the processes for carrying out reference checks, the following comments from the MAS in its Response are noteworthy:
- Where a financial institution or MAS regulated entity is considering the hire of a prospective employee that is or has previously worked for a related company (that is also a financial institution or MAS regulated entity), it need not make a reference check request to that related company, if it has access to the records of that prospective employee.
- Where a financial institution or MAS regulated entity has not maintained conduct records for a period of five years from the time the reference check requirements come into effect, they may state so in their response to the request. The prospective employer should nevertheless take steps to satisfy itself of the fitness and propriety of the prospective hire.
- As noted, the information to be provided will be mandated. Among the information mandated is a requirement to disclose investigations against the employee: In respect of on-going investigations, the MAS has stated that the information must be provided only if the individual was the subject of the investigation (not, for example, a witness) and was aware that he/she was being investigated. In other cases of on-going investigations, the information need not be provided.
- While the MAS had proposed requiring that disciplinary action that would have been taken be provided as part of the information mandated, it has decided to remove this following feedback.
- Where any of the key functions for which reference checks are outsourced to a third-party service provider, financial institutions and MAS regulated entities must ensure that the third party service provider’s employees meet their own hiring policies for the role they are performing, based on the same criteria that would be applicable to their own employees if the function had been performed in-house. Within the financial institution/MAS regulated entity, senior management roles that oversee such outsourced functions will be subject to reference checks. We would note in this regard that the MAS has also recently issued its finalised notices on requirements for outsourcing.
- Separately, the MAS has stated that financial institutions/MAS regulated entities may outsource reference checking to a third-party service provider.
- The MAS had proposed allowing employees to view references. However, following feedback, the MAS has decided not to proceed with this proposal.
The likely next step is for the MAS to publish draft notices on the requirement to conduct reference checks for public comment, before issuing the finalised notices. The MAS has stated in its Response that it will provide a transitional period of one year from the issuance of the notices. Accordingly, it is likely that the earliest date from which reference checks will be mandated will be sometime in 2025. There is still some time yet before the proposals are fully in force, although financial institutions should commence preparation at an appropriate stage to ensure that they are ready to request for, and respond to requests for reference checks.