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Singapore to step up fight against money laundering

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In the last three years, MAS has imposed financial penalties on 27 financial institutions for offences linked to money laundering and terrorism financing.


AS A sophisticated financial centre, Singapore needs to step up to "aggressively target" more complex cross-border cases of money laundering, even as it is armed with a strong regulatory framework to fend off dirty money and terrorism financing.

This is according to a fresh report from the Financial Action Task Force (FATF), an inter-governmental body that looks at countering illicit fund flows and terrorism financing, and of which Singapore is a member.

And Singapore will respond with greater force to fight against dirty money, a joint statement from three regulatory agencies on Tuesday showed. The response comes even as the FATF inspections in late 2015 took place before Singapore stripped 1MDB-linked BSI Bank of its licence to operate in Singapore.

Full details over investigations linked to the web of 1MDB fund flows were also not given to FATF then, because they were ongoing. FATF had noted Singapore was pursuing "some complex cases" involving transnational fraud and corruption.

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"Singapore's law enforcement agencies, which have been pursing complex transnational money laundering cases, will strengthen their capabilities to identify and investigate more of such cases," a statement from the Ministry of Home Affairs, Ministry of Finance, and the Monetary Authority of Singapore (MAS) said.

It added that the financial intelligence unit under the Commercial Affairs Department will develop more sophisticated data analytics to combat threats of tainted money flowing through Singapore from abroad.

Singapore scored well in regulations. FATF said Singapore had strong preventive measures, and targeted financial sanctions against terrorism and against financing a mass expansion of weapons of mass destruction. Its supervision of the financial sector is "robust", FATF said.

The authorities here have offered "high quality" requests for, and assistance in, international cooperation in battling money laundering and terrorism financing, FATF added.

But with the rising tide of risks linked to money laundering and terrorism financing, FATF has now assessed financial centres, such as Singapore, based on their inherently higher money laundering and terrorism financing risks. The last FATF report on Singapore was done in 2008, but the task force has since revved up its standards to account for the increasing threat posed by money laundering and terrorism financing.

Indeed, FATF noted that the size of Singapore's private banking and asset management industry, as well as its position as an international trade hub, increase the country's vulnerabilities in money laundering and terrorism financing activities. More than three-quarters of funds managed in Singapore are from foreign countries, with most of them out of Asia-Pacific.

FATF also cited data from authorities here showing that money laundering offences linked to illicit funds from aboard and churned in Singapore, made up 66 per cent of all money laundering investigations.

"Singapore is seen as a key financial centre for combating AML/TF threats in Asia, and given our status as a hub through which increasing amounts of money are flowing, our contribution in fending off such threats is crucial for an effective effort," said Stefanie Yuen Thio, joint managing director at TSMP Law. "We are asked to be gatekeepers, but the challenge will be in the fact that the funds do not originate here."

PwC Singapore's regulations leader Kwok Wui San said the report is a "strong affirmation by the international community that Singapore can take a more leadership role in combating complex transnational crimes".

"Other countries in the money chain must also do their part. There must be willing government-to-government cooperation, effective intelligence, sharing of intelligence, and trusted and strict law enforcement."

To be clear, efforts by Singapore regulators to fight money laundering have been percolating over the last few years, ahead of the FATF report.

In the last three years, MAS has imposed financial penalties on 27 financial institutions for offences linked to money laundering and terrorism financing. MAS had also had a six-fold jump in onsite inspections on financial institutions between 2013 and 2016, compared to the prior three-year period. It has directed banks of all sizes to replace senior managers found to be incompetent in management oversight.

These efforts have picked up speed this year, but were not captured fully by the FATF report. Notably, in the wake of the 1MDB scandal, MAS has pledged more intrusive supervision, and will publicise sanctions against financial institutions that persist in breaking anti-money laundering rules. In August, MAS also created a dedicated anti-money laundering department.

Lam Chee Kin, DBS's head of group legal, compliance and secretariat, noted important initiatives over the last 12 months that, with the FATF report, will help to ensure that the level of public-private dialogue and cooperation will remain strong and effective to combat financial crime.

And given the growing complexity of such activities, financial institutions will have to remain constantly vigilant in detecting irregularities and devising counter measures, said Loretta Yuen, OCBC's head of legal and regulatory compliance.

In the joint statement, the three Singapore agencies also said Singapore's regime to combat terrorism financing "was not accorded sufficient credit" by FATF assessors, who do not accept the Internal Security Act as a form of criminal prosecution. And as inspections took place in 2015, FATF did not account for convictions this year of six radicalised Bangladeshi nationals under the Terrorism (Suppression of Financing) Act.

To tackle other gaps highlighted in the FATF report, Singapore will also improve the transparency behind beneficial owners of companies, and lift standards in assessing money laundering and terrorism financing risks of businesses as well as charities.

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