SINGAPORE, Aug 18 — On Tuesday, in one of the biggest money laundering probes in Singapore, the police arrested 10 foreign nationals who were allegedly involved in laundering money from overseas crimes and forgery.
About S$1 billion (RM3.42 billion) in cash and assets were seized, frozen or issued prohibition of disposal orders. These include 94 properties, 50 vehicles, 270 pieces of jewellery, handbags and watches.
In a statement on Wednesday, the Monetary Authority of Singapore (MAS) said that intelligence and information from suspicious transaction reports filed by financial institutions had earlier alerted the police to suspicious activities through Singapore’s financial system.
The red flags included suspicious fund flows, dubious documentation of source of wealth or funds, and inconsistencies or evasiveness in information provided, said MAS.
On its website, MAS says that combating money laundering is one of its priorities and it requires financial institutions here to have sufficiently robust controls to detect and deter such illicit activities.
These controls include the need for financial institutions to identify and know their customers, conduct regular account reviews, and monitor and report any suspicious transaction.
Singapore is not only an active member of the Financial Action Task Force (FATF), the global standard setting and oversight body for anti-money-laundering, but also co-chairs its Policy Development Group to help develop international standards.
Despite Singapore’s strong anti-money-laundering stance and stringent measures, the nation still remains “attractive” to criminals seeking to launder their money, said experts who spoke to TODAY.
Why is this so and what has Singapore done to combat money laundering?
TODAY speaks to experts to find out.
What is money laundering?
Money laundering starts from a criminal offence that procures a large sum of money and refers to the process of “cleaning” these proceeds so that they appear to have originated from a legitimate source.
Elke Biechele, chief executive officer of RisikoTek, a specialist software and services provider that detects financial crimes, said that there is a need to crack down on money laundering activities due to its detrimental impacts on the economy.
“Money laundering allows criminals to keep their criminal proceeds, circumvent taxes and promotes crime and corruption, disrupting economic growth,” she told TODAY.
“This is disadvantageous to all of us because they can continue their criminal operations and accumulate wealth through illegal means,” said Biechele.
According to a 29-page document of guidelines for banks by MAS that is available online, money laundering can generally be done in three ways:
• Placement, or the physical disposal of the criminal proceeds
• Layering, which is by creating layers of financial transactions to disguise the audit trail in an attempt to delink the funds from the criminal activity
• Integration, which is placing the laundered funds into the economy as legitimate business funds if layering is successful
One method criminals use is to place illegal proceeds in offshore banks with more lax regulations and then try to transfer them to financial institutions here.
Money launderers also use assets to cover up their trail, such as high-end properties, luxury cars, precious stones and expensive watches.
Managing partner at Lighthouse Law Adrian Wee told CNA that criminals are able to use illegitimate funds to buy these items as merchants typically do not enforce stringent anti-money laundering processes when customers purchase luxury goods.
“This enables criminals to move large amounts of dirty money disguised as secondary sales of these luxury items,” he added.
Why is Singapore attractive to money launderers?
Despite Singapore’s strong commitment to fight money laundering, the country continues to be a target for money launderers trying to park their criminal proceeds.
Experts say this is because of Singapore’s strong currency and economy and its reputation as an international financial hub.
“Money launderers want to park their money where the currency and economy is strong because their wealth would appreciate over time, rather than decline in value,” said Biechele.
Some criminals may also assume that it is easier for them to keep their illegal transactions under the radar, given the high volume of financial transactions in a financial hub such as Singapore, said Associate Professor Sandra Annette Booysen, who specialises in commercial law at the National University of Singapore.
Singapore is also held in high regard internationally, which is the ultimate aim of money laundering. This is so that the funds are seen as “clean” should there be a need to move them elsewhere.
Besides targeting countries that have a high flow of transactions, money launderers also try to reduce their chances of being caught by using fake identity cards and passports.
“Money launderers often buy passports from countries where there is poor legal enforcement, such that they can easily bribe officers who are in charge of collecting personal identification data and use other people’s passports to engage in financial transactions,” said Biechele.
“In the event that their financial accounts or companies are flagged, the authorities will go after the people whose identities were stolen instead of the actual criminals who will be very difficult to trace.
“Eventually the investigation or the charges will be dropped as they cannot find the actual culprit.”
In Singapore, those found guilty of money laundering can be jailed for up to 10 years, or fined up to S$500,000, or both.
What is Singapore doing to fight money laundering in the finance industry?
In MAS’ statement on Wednesday, it said it does not tolerate the abuse of Singapore’s financial system for illicit activities.
“MAS will take firm action against financial institutions which are found to have breached MAS’ stringent requirements ... or to have inadequate controls against money laundering,” the central bank said.
These requirements are spelled out comprehensively in various “guidance(s)”, “guidelines” and “notices” issued by MAS, including a 47-page document last revised in March 2022 that is available on the MAS website.
The requirements include the following:
• Risk assessment and risk mitigation
• Customer due diligence
• Reliance on third parties
• Correspondent banking and wire transfers
• Record keeping
• Suspicious transaction reporting
• Internal policies, compliance, audit and training
For risk assessment, banks should take the appropriate measures to identify, assess and understand its money-laundering risks in relation to its customers, the countries they are from and where the banks have operations as well as the banks’ products.
Banks should also develop and implement policies, as well as procedures and controls to effectively manage and mitigate these risks.
In addition, banks should perform customer due diligence by ensuring that they identify and verify their customers’ identity, and that they do not open or maintain an anonymous account or an account with a fake name.
The document also spells out clearly when such due diligence should be performed, including crossing certain transaction thresholds, as well as how this should be done for non face-to-face business relations and non-account holders.
MAS also requires that banks rely on third party financial institutions only if the latter are subject to and supervised for compliance with anti-money laundering requirements consistent with FATF standards.
When a bank provides correspondent banking to a foreign bank or financial institution, it must adequately assess the foreign bank and ensure that it has proper anti-money laundering controls in place.
It must also identify the identity of an entity that sends a wire transfer and adequately record the wire transfer, including the name of the sender and beneficiary and their account numbers.
Further, a bank must record, maintain and retain data, documents and information on all its business relations with or transactions for a customer.
Lastly, a bank should implement appropriate internal policies, procedures, controls, and audit and training to detect suspicious transactions and promptly submit reports on these activities.
To bolster anti-money laundering efforts, MAS has proposed additional measures to strengthen surveillance against money laundering risks to the single family office sector, which is growing rapidly.
MAS has also collaborated with six major commercial banks to set up a digital platform for financial institutions to share information on suspicious customers or transactions.
This platform called the Collaborative and Sharing of Money Laundering/Terrorism Financing Information and Cases is set to be rolled out in phases from the second half of next year.
What about non-finance industries?
FATF recommendations also apply to non-financial institutions, such as the real estate industry, according to a 45-page guide on estate agent regulations last revised in March 2022 available on the Council for Estate Agencies’ website.
The guide sets out measures that real estate agents should do to combat money laundering, including customer due diligence such as verifying their clients’ identity and asking them to complete a particulars form for all transactions.
Agents must also undertake due diligence measures on their clients if their clients are foreigners, physical cash is used in the property transaction, there is suspicion of money laundering activity, or there are doubts about the customer’s particulars obtained.
Should there be any reason to suspect that a property or transaction is linked to criminal conduct, the agent must lodge a report with the suspicious transaction reporting office.
Some red flags that may appear include real estate purchases with a significant amount of cash or clients who are willing to purchase a property without inspecting it.
Since June, the Urban Redevelopment Authority has also implemented new anti-money-laundering measures, including requiring developers to conduct due diligence checks on home buyers based on their risk profiles.
These prospective buyers have to be screened against the lists of terrorists, terrorist entities and designated individuals.
As for dealers of precious stones and precious metals, they are regulated by laws enacted in 2019 to prevent money laundering and terrorism financing.
In response to TODAY’s queries, a Ministry of Law spokesman said that it provides guidance to dealers in the sector on their obligations, including how they should stay vigilant to emerging money laundering red flags, conduct due diligence on and screening of their customers.
When there are reasons to suspect their customers are engaging in money laundering activities, the dealers should file a suspicious transaction report.
They should also look out for red flags, such as the transaction being inconsistent with the customer’s profile or the customer is vague or resistant in providing additional information on their source of wealth.
The spokesman said: “We engage the precious stones and precious metals dealers industry regularly, such as partnering key industry associations to train and educate them of the industry’s money laundering risks.
“In addition, the ministry shares regular guidance materials to the industry to apprise them of the anti-money laundering regulatory requirements, and encourage them to implement adequate programmes and measures to effectively manage and mitigate money laundering risks.” — TODAY
