The Proportionality Problem: When Guidance Outpaces Capability
- juliachinjfourth
- May 27
- 8 min read
The Framework Isn't the Problem
Source of Wealth checks have been an age-old pain point in private banking. Too light, and you risk onboarding illicit funds. Too heavy, and you lose clients to competitors, frustrate relationship managers, and create bottlenecks that serve no one.
Regulators worldwide have been grappling with this balance for years. Most land on the same answer: proportionality. Apply checks that match the risk. Use judgement. Stop treating every client like they're hiding something.
Fair enough. That's sensible guidance.
But here's the question no one's asking: Are we actually ready to do this?
Singapore offers a benchmark. Over the past two years, MAS and the industry have built what is arguably the most advanced regulatory framework for proportionate SOW checks anywhere in the world.
The guidance is thoughtful. The principles are clear. The industry collaboration is real.
And yet, Compliance teams remain stuck in over-documentation mode.
The answer isn't in the circular. It's in the culture.
This isn't just Singapore's challenge. It's a global one. And what's playing out here offers lessons for every jurisdiction grappling with the same tension.
The Regulatory Stack: Singapore as Benchmark
July 2024: MAS Circular on Establishing Sources of Wealth (AMLD 08/2024)
The foundation. Risk principles of materiality, prudence, and relevance. Design policies that are "risk-proportionate and reasonable." Senior management oversight for higher-risk accounts. A clear signal: stop the one-size-fits-all approach.
May 2025: ACIP Best Practices Paper
The AML/CFT Industry Partnership produced a comprehensive paper on risks in wealth management, with practical case studies and tiered due diligence frameworks. Industry perspectives on how FIs should actually establish SOW — not just what the rules say, but how to apply them.
May 2026: Supplementary Circular
Further guidance on materiality and relevance. The explicit goal: avoid "unnecessary and excessive steps." MAS Managing Director Chia Der Jiun announced that the median account opening time should come down to within one month from six weeks or longer for complex cases.
PBIG Process Enhancement Tips
Alongside the May 2026 circular, the Private Banking Industry Group is releasing practical methods to address common bottlenecks. Case studies and training for RMs and compliance professionals to follow.
On paper, this is exactly what the industry asked for. A risk-proportionate approach. Less box-ticking.
More judgement.
The framework is sound. The direction is right.
So why isn't it working?
What the Guidance Gets Right
The 2024 circular correctly identifies that SOW checks should be tailored to "the unique circumstances and profile of each customer." The ACIP paper provides case studies that move beyond abstract principles. The May 2026 circular explicitly addresses the over-engineering problem.
Chia Der Jiun framed it well: "a risk-proportionate regulatory approach that avoids undue regulatory burden."
This isn't about lowering standards. It's about applying them intelligently.
The recognition that one-size-fits-all doesn't work? That's progress.
And it's a model other jurisdictions, from Hong Kong to London to Dubai, should study closely.
The Critical Gap: Proportionality Without Capability
Here's where it breaks down, not just in Singapore, but everywhere proportionality is expected.
Proportionality is a skill, not just a principle.
"Apply proportionality." Three words. Sounds simple.
But here's what it actually sounds like in practice:
RM: "The client's been in business for 30 years. Source of wealth is clear."Compliance: "We need more documentation."RM: "Like what?" Compliance: "Just... more."
The guidance tells compliance teams to apply "materiality" and "relevance." But what does that actually look like at 9 AM on a Monday when an analyst is staring at a client file with ambiguous information?
Materiality
How much wealth is "material" enough to require deeper corroboration? The guidance doesn't say. Because it can't. Context matters. But that means someone has to make a judgement call.
Culture implication: Judgement requires confidence. Confidence requires knowing you won't be blamed if you get it wrong.
Ask yourself: If an analyst makes a proportionate call that later proves insufficient, what happens to them?
Relevance
Which documents are "relevant" for a third-generation family business versus a tech founder versus a retired diplomat? The answer is different every time. And the person making that call needs training, not just policy.
Culture implication: Case studies are examples, not decision trees. They show what someone else did. They don't tell you what to do when your case doesn't match.
Ask yourself: Have your teams been trained on how to think through borderline cases, or just on what the guidance says?
The Reality
Most compliance teams have been trained to over-document, not to exercise judgement.
For years, the implicit message was: when in doubt, ask for more. Cover yourself. Don't be the one who missed something.
Now we're asking those same teams to do less. To trust their instincts. To make risk-based calls.
Without changing anything else about how they're supported, evaluated, or protected.
Ask yourself: What would need to change for your team to feel safe making a proportionate call?
The Systemic Issue: When Targets, Sales, and Compliance Collide
Here's what the guidance doesn't address: the structural disconnect between management, sales, and compliance.
Industry commentary captures it well:
"Targets are usually set by management based on profitability for the business. Now to achieve those goals, RMs will do their hardest to onboard their clients, sometimes to the detriment of the business. Compliance teams, as one level of the bank's defence, have all good reason to question gaps within their framework. So really, RMs are kind of running their business with their hands tied behind their back."
This is the reality on the ground, in Singapore, in Switzerland, in the UK, in the Middle East.
RMs are measured on client acquisition and revenue. Compliance is measured on risk mitigation. Management sets aggressive targets without always considering the friction those targets create downstream.
When an RM pushes to onboard a client quickly, and Risk and Compliance push back with documentation requests, who's wrong? Neither. They're both responding rationally to the incentives they've been given.
"The real problem, and this is my opinion, could be the targets set by management. So do we blame senior management for the high targets set, or do we blame the bank's Risk and Compliance teams for not looking out of the box?"
This is a systemic issue. Telling banks to shorten the process is just a start. But if the underlying incentive structures remain misaligned. If RMs are rewarded for speed while compliance is punished for misses, proportionality will remain aspirational.
Ask yourself: Are your onboarding targets set with input from compliance, or handed down from above?
The Culture Problem No Guidance Can Solve
This pattern repeats across jurisdictions. In Singapore. In Hong Kong. In London. In Dubai.
Leaders announce change. Issue guidance. Expect execution.
But enablement? That's the part that gets skipped.
The context matters here. Singapore's 2026 regulatory easing comes immediately on the heels of the massive S$3 billion money laundering scandal, the Fujian-linked case that originally drove banks to intensely over-engineer their compliance checks out of fear of multi-million dollar fines and prohibition orders.
Industry commentary tells the real story, and it could have come from any jurisdiction:
"The problem is that if there's another major scandal, all the processes will be reviewed again. Banks are in a lose-lose position."
"Scary part is when leadership takes the statement as a mandate to Risk and Compliance to relax requirements and pay the fines later. Then blame the them for the lapse."
"It's a free Put option: be thorough in your AML processes, but don't take too long and don't impact clients."
This is fear-based Compliance. And no circular can fix it.
When analysts have seen colleagues blamed for missing something, they over-engineer. When RMs have been burned by compliance rejections, they over-document. When leadership celebrates faster onboarding but punishes the first miss, teams default to caution.
The guidance says "proportionality."
The culture says "protect yourself."
Guess which one wins?
Ask yourself: When was the last time someone in your organisation was recognised for making a good risk-based call, not just for catching something?
The Missing Step: The 3Es Framework
The problem isn't the guidance. The guidance is sensible.
The problem is we skipped a step. Actually, we skipped a sequence.
Enable first.
You can't ask someone to apply proportionality if they've never been shown what a risk-based call looks like. Not in theory. In practice. With real scenarios. Real pushback. Real consequences.
Enablement means:
Scenario-based training that goes beyond "here's what the circular says"
Clear decision frameworks for borderline cases
Tools and resources that support judgement, not just documentation
Protected space to learn and make mistakes
Ask yourself: Have your people been shown what a good proportionate call actually looks like?
Engage next.
Are Risk and Compliance and front office actually talking? Or just exchanging emails and escalations?
Proportionality requires dialogue, not documentation tennis. It requires RMs who understand why compliance asks what it asks. And compliance professionals who understand the commercial realities RMs face.
Engagement means:
Joint training sessions, not siloed programmes
Regular forums where friction points surface before they escalate
Shared language around risk that both sides can use
Feedback loops that actually close
Ask yourself: When did your compliance team and front office last sit in the same room to solve a problem together?
Empower last.
This is the hardest part. Empowerment means trusting people to make calls. And backing them when they do. Not second-guessing every decision in hindsight.
Empowerment means:
Clear escalation paths that protect, not expose
Leadership that defends proportionate calls even when they're questioned
Performance metrics that reward judgement, not just volume
A culture where "I made a risk-based decision" is respected, not scrutinised
Ask yourself: If someone on your team made a proportionate call that later proved insufficient, would they be supported or blamed?
Remember this:
You can't empower people you haven't enabled. You can't enable people you haven't engaged.
Skip the sequence, and you get exactly what we have now: guidance that sounds great in circulars but creates friction on the ground.
Where to Start
Singapore's PBIG Process Enhancement Tips are a good start. Case studies and training for RMs and compliance professionals acknowledge what guidance alone cannot deliver.
But if we're serious about proportionality, anywhere in the world, we need to work through the 3Es deliberately:
1. Enable: Training on judgement, not just policy
Not "here's what the circular says." But "here's how to think through a borderline case." Scenario-based. Interactive. Repeated.
Ask yourself: Does your training teach people to apply judgement, or just to follow steps?
2. Engage: Build dialogue between functions
Create forums where compliance and front office can surface friction points together. Shared understanding precedes shared ownership.
Ask yourself: Do your people know they can escalate uncertainty without being seen as incompetent?
3. Empower: Leadership accountability for enablement, not just outcomes
It's easy to announce faster onboarding targets. It's harder to invest in the training, tools, and culture that make it possible. Leaders should be measured on whether their teams feel equipped to exercise judgement, not just whether the numbers improve.
Ask yourself: Are your leaders accountable for enabling proportionality, or just for demanding it?
4. Diagnose before you demand
Before expecting teams to apply proportionality, assess whether they have the confidence to do so. Survey your analysts. Talk to your RMs. Find out where the fear lives. Then address it.
Ask yourself: Do you know how your team actually feels about making risk-based calls?
The Key Takeaways
Singapore's MAS and ACIP guidance is arguably the most advanced framework for proportionate SOW checks in the world. It's thoughtful. It moves in the right direction. And it offers lessons for every jurisdiction grappling with the same challenge.
But guidance is not sufficient.
Proportionality requires judgement. Judgement requires confidence. Confidence requires enablement.
And enablement requires a sequence: Enable. Engage. Empower.
Without investment in the people doing the work, in that order, this becomes another circular that sits in a policy folder while nothing changes on the ground.
The question isn't what regulators are asking.
It's whether your culture can carry it.
Where JFourth Fits
This is what transformation-focused advisory looks like.
Not just frameworks and policies. Not just Risk and Compliance programmes and training. But the deeper work of building organisations where proportionality is practiced, not just permitted.
We work with banks, Risk and Compliance teams, and leadership navigating these challenges, in Singapore, across Asia, the Middle East, and globally.
Our focus: Building risk and compliance into business design, not bolting it on as an afterthought.
Whether you're operationalising new SOW guidance, building judgement capability in your teams, or recognising that your culture hasn't kept pace with regulatory expectations, the question is the same:
What kind of organisation do you want to build?
We help you answer that. And then we help you build it.
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