More action against illicit financial activities


Emerging threat: A Rolls-Royce vehicle being seized in connection with the S$2.8bil money-laundering case in Singapore in October. Allegations have erupted that wealthy Chinese have been pouring ill-gotten gains into the Asian financial hub. — Bloomberg

SINGAPORE: A S$2.8bil money-laundering case that rocked Singapore in 2023 has put a spotlight on the republic’s work in having to continuously monitor and improve its legislative and regulatory measures.

Lawyers said the country needs to also continue being proactive in maintaining the highest standards of integrity so it can carry on as a trusted financial hub.

The money-laundering case, for instance, has shown that even the most stringent regulatory environments can be vulnerable to illicit financial activities, they said.

“The case exposed the vulnerabilities of the real estate sector to money laundering activities, highlighting the critical role property developers play in preventing such crimes,” said Gazalle Mok, a partner at law firm Rajah & Tann Singapore’s corporate real estate practice.

A slew of changes have been made to collectively address concerns related to money laundering, housing accessibility, investor demand, and fair business practices, she added.

“Looking forward, these initiatives are poised to strengthen Singapore’s position as an attractive investment destination, promote responsible financial practices, and contribute to a thriving and inclusive society,” Mok said.

Seah Ching Ling, director of Drew & Napier’s tax and private client services, said proactive measures are essential in upholding Singapore’s global reputation as a trusted financial hub committed to the highest international standards of integrity and compliance.

Foreign investment

While some foreign investors may initially be deterred from coming to Singapore by the seemingly stricter requirements, “what we hope to attract in the long run are the bona fide and high-quality investors”, she said.

There were several major developments in 2023.

The multi-billion-dollar money-laundering case in August threatened Singapore’s fiercely guarded reputation as a global financial hub with a high compliance rating based on standards set by the Financial Action Task Force. The task force is an inter-governmental body responsible for combating money laundering and the financing of terrorist networks.

A total of 10 foreigners, originally from China, were arrested and charged in one of the most substantial money laundering scandals globally with S$2.8bil in seized assets.

Alleged dirty money was funnelled through various sectors, including Singapore’s banking and property markets, to disguise the profits of crime as legitimate earnings.

In response, banks in Singapore implemented stricter client scrutiny protocols to combat illicit financial activities. They will be able to share information on potentially risky clients on a centralised digital platform called Cosmic developed by the Monetary Authority of Singapore (MAS) and six major banks, and which is on track to be launched in 2024.

The Cosmic initiative targets sophisticated money laundering networks by focusing on the abuse of shell companies, misuse of trade finance for illicit purposes and the financing of the proliferation of weapons of mass destruction, Seah said.

Family offices, responsible for managing the wealth of affluent families, have also found themselves under the microscope due to potential connections with some of the accused.

MAS is reviewing its internal processes for awarding tax incentives to family offices and will tighten them where necessary.

To protect the integrity of the property sector and contribute to a cleaner financial system, the Developers (Anti-Money Laundering and Terrorism Financing) Act 2018 came into effect on June 28.

Property developers must assess money-laundering risks, conduct due diligence on buyers and report suspicious transactions to the authorities.

The authorities have also been empowered to deal with money mules or people who help money launderers, and prevent the abuse of the national digital identity or Singpass for money laundering or scam operations.

An inter-ministerial committee, led by Second Minister for Finance Indranee Rajah, will review Singapore’s anti-money laundering regime.

However, lawyers noted the need to proceed with caution and warned of the potential repercussions of over-regulation on legitimate applicants.

Protecting customers

Meanwhile, efforts are being made to insulate customers from losses associated with the speculative and highly risky nature of digital payment tokens (DPT) or cryptocurrencies trading under the proposed regulations for service providers in Singapore.

Benjamin Liew, a partner at Rajah & Tann Singapore’s financial institutions practice, said regulations would be updated to make it mandatory for DPT service providers to segregate customers’ assets from their own and hold these assets on trust for customers.

“This would help mitigate risk of loss or misuse of customer assets and facilitate return of assets to customers when the service provider goes insolvent,” he said.

Other requirements include safeguarding customers’ monies, daily reconciliation of customers’ assets, having a custody function that is operationally independent from other business units, and disclosure of risks in having assets held by the service provider, he added.

In November, MAS announced tighter rules related to DPT service providers’ business conduct and consumer access.

The regulatory measures will be implemented in phases from mid-2024, making Singapore one of the strictest regulatory regimes in the world governing retail access to cryptocurrencies, lawyers said.

Steps are also being taken to protect victims from ruthless scammers as the number of cases continues to rise. From January to June, the number of scam cases grew by 64.5% year on year to more than 22,300, with victims losing S$334.5mil.

MAS and the Infocomm Media Development Authority unveiled in October a set of proposed Shared Responsibility Framework guidelines, which introduced the waterfall approach to assess how responsibility will be shared for certain phishing scams.

Responsibility coverage goes beyond retail banks and includes finance companies, non-bank credit card issuers and relevant payment-service providers issuing e-wallets.

Liew said guidelines, rather than hard coding in the legislation, are a nimbler regulatory instrument.

“This allows the regulators to take an evolving approach to combat scams and support victims in Singapore,” he said.

Bank runs

The year started with a rude shock for the global financial sector when disgraced 167-year-old Credit Suisse had to be rescued from collapse by rival UBS in a Swiss government-orchestrated deal in March to avert a banking crisis.

That same month, Silicon Valley Bank – bankers to technology startups in the US – went from solvent to broke in under two days as depositors rushed to withdraw funds.

Trouble at these banks resurrected questions on protecting consumers from such financial disasters, said Sophie Mathur, partner and Asia head of corporate at law firm Linklaters.

These incidents again highlighted the need for high levels of capital to protect consumers against losses and rules on liquidity to deal with sudden demands for cash.

Silicon Valley Bank did not have the cash when depositors needed it. In the case of Credit Suisse, the Swiss bank was liquid and well capitalised, but it too suffered a run, prompting concerns the same thing can happen to any bank, anywhere, at any time.

After a public consultation, MAS announced that the insurance coverage on Singapore-dollar bank deposits in the city-state would be raised from S$75,000 to S$100,000 per customer with effect from April 1, 2024. — The Straits Times/ANN

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