they cannot possibly cover all situations and every manner of activity or behaviour ; to try to do so would require ominous amounts of prescriptive and narrow rules that are neither feasible nor practical. so regulators worldwide including ourselves have to consider carefully how to put in place workable rules : having the appropriate regulations that cover the requirements under the fatf standards while taking into account any practical challenges of implementation, operational inefficiencies and unintended consequences. 15. this leads me to the second element of our framework – supervision. it is one thing to have a set of workable rules and regulations. it is another thing to have the requirements clearly understood and complied with. no amount of regulations will be effective if the quality of implementation is poor or if financial institutions ( fis ) are not vigilant. 16. the mas has in recent years stepped up our aml offsite reviews and onsite supervision of financial institutions. our supervisory intensity is necessarily risk - based given that both regulators and the regulated entities work within finite constraints of resources and time. therefore, we have adopted various risk bucketing metrics so that we can be targeted on more vulnerable areas. this has resulted in the intensification of our supervision on areas or businesses that are more prone to ml / tf risks, or where controls have been found to be lacking from past inspections. 17. we have organised and will organise more industry engagements to share supervisory findings on common lapses and good practices at the end of each series of inspections. this is intended to help level up controls over time. 2 / 5 bis central bankers'speeches 18. our inspections go beyond rules - based compliance. we focus on whether financial institutions demonstrate a good understanding of risks, and a good risk culture within the organisations. we much prefer that fis adopt a proactive approach in meeting their regulatory obligations than a passive rule - based attitude. let me elaborate on this. 19. one area relates to governance. you are all familiar with the common thinking of having three lines of defence. recently, there are suggestions to augment this with a “ four lines of defence ” model for better governance in financial institutions. the first line involves frontline and management controls within business units ; then compliance and risk management functions as the second line ; and the audit function as the third line. a newer fourth line involves interactions of the fi with its external auditors and regulators. an fi ’ s senior management and board should monitor and be satisfied that these lines are effective

##kuks to meet the needs of financial institutions conducting shariahcompliant activities in singapore. these sukuks will be issued on a reverse enquiry basis, and will initially be priced off the singapore government securities market. these initiatives are catalysed by feedback from the industry, which has taken an active interest in the development of islamic finance in singapore. i would like to thank the industry for your feedback. we have seen promising growth. a dozen middle eastern banks are operating in singapore, adding islamic financing activities to their conventional financing. singapore's first islamic bank, islamic bank of asia has just opened its first overseas office in bahrain. international banks are structuring islamic financial products in singapore. daiwa ’ s ftse shariah japan 100 etf is therefore well placed to meet the growing demand for shariah compliant financial solutions. this listing adds to the range of etf and shariah compliant products in singapore, and provides a direct channel for investing in japan. trade and investment between japan and the middle east are increasing, and will continue to rise in the coming years. the flow of finance and investment capital will rise to complement these. japan which has the second largest economy in the world has much to offer to promote the flow of capital, ideas and technology. i am pleased that investors and financial institutions like daiwa have found singapore a useful node to facilitate this flow between japan and the middle east. we will, on our part, continue to facilitate this deepening of business and financial relations. on that note, let me extend my heartiest congratulations to daiwa asset management and the singapore exchange for embarking on this venture. we look forward to its success and the creation of more innovative investment products from daiwa asset management and other financial institutions to add to the vibrancy of our market. thank you.