Indranee Rajah to chair Inter-Ministerial Committee strengthening anti-money laundering regime in Singapore

SINGAPORE: In a bid to fortify its defences against increasingly sophisticated financial crimes, Singapore has revealed plans to establish an inter-ministerial committee tasked with enhancing the nation’s anti-money laundering (AML) regime.

The announcement came during a parliamentary session on Tuesday (3 Oct), as Second Minister for Home Affairs,  , outlined the government’s commitment to combating money laundering.

Chaired by Second Minister for Finance, Indranee Rajah, the newly formed committee will collaborate with sectoral regulators to conduct a comprehensive review of Singapore’s AML framework.

The review will prioritize four key areas:

• How Singapore can better prevent corporate structures from being abused by money launderers;
• How financial institutions can enhance their controls and collaborate more effectively to guard against and flag suspicious transactions;
• How other players such as real estate agents can help to better guard against money laundering risk;
• And how Singapore can centralise and strengthen monitoring and sense-making capabilities across government agencies to better detect suspicious activities.

Indranee Rajah emphasized that any identified gaps in the AML system would lead to the tightening of regulations and enforcement measures to deter criminal exploitation.

Singapore has also set its sights on reinforcing verification checks at various points within the immigration process.

However, Indranee cautioned against hasty reactions, urging moderation to avoid adverse impacts on the business environment.

ACRA implements stringent measures to combat money laundering in Singapore

Indranee Rajah also underscored the rigorous measures taken by the Accounting and Corporate Regulatory Authority (ACRA) to prevent the misuse of companies for money laundering.

One of ACRA’s notable requirements is that all companies must have at least one director who is a resident of Singapore.

This ensures that someone can be held accountable for any breaches committed by the company within the country. For non-resident foreigners seeking to establish companies in Singapore, they must either appoint a resident business partner as a director or engage a nominee director to act on their behalf.

To align with international standards, there are currently no limits on the number of companies a director can be involved with.

However, Ms Indranee Rajah noted that the majority of directors in Singapore hold fewer than 10 directorships.

In addition to these requirements, ACRA actively monitors company activity post-incorporation. Signs of inactivity, such as failure to file annual returns, lead to companies being struck off the registry after a specified period or upon intelligence provided by other agencies.

Over the last five years, approximately 17,000 such companies have been struck off by ACRA.

Ms. Indranee Rajah highlighted that the companies associated with money laundering cases have been filing returns with ACRA, which is why they remain on the register.

However, she emphasized that ACRA imposes additional requirements on foreign-owned or foreign-controlled companies.

For instance, non-residents seeking to establish companies in Singapore are mandated to engage ACRA-authorized corporate service providers, known as Registered Filing Agents (RFAs), for the incorporation process.

RFAs are legally obligated to conduct thorough customer due diligence, which involves identifying and verifying the identities of customers and the beneficial owners of the intended incorporated company.

They must ensure the establishment of customer identities through additional documents or information if the customer is not physically present, and inquire about the purpose and legitimacy of the company structure’s use.

Crucially, RFAs are instructed not to proceed with the incorporation of a company if a customer fails due diligence checks.

Ms Indranee Rajah revealed that between 2021 and 2023, ACRA imposed 24 sanctions against RFAs, including eight cases where RFA registrations were canceled or suspended.

Furthermore, ACRA is actively investigating the role played by RFAs in the money laundering cases and has vowed to take enforcement action as deemed necessary.

Singapore’s STR office processes over 43,000 reports in two years

On a separate note, Second Minister Josephine Teo underscored the unique challenges presented by the sheer magnitude of daily transactions in Singapore, which provide cover for illicit activities.

Several Members of Parliament have submitted Parliamentary inquiries regarding Singapore’s Suspicious Transaction Reports (STRs).

These queries aim to understand the extent of STR filings, the sharing of information among government agencies, and potential enhancements to the STR regime.

To enhance its effectiveness, the Suspicious Transaction Reporting Office (STRO) within the Commercial Affairs Department has collaborated with sectoral regulators to develop red flag indicators.

These indicators serve to improve the detection of money laundering activities by gatekeepers and are regularly updated to address emerging risk factors in the money laundering landscape.

Between 2020 and 2022, the Suspicious Transaction Reporting Office received a staggering 43,000 Suspicious Transaction Reports (STRs) annually, averaging more than 150 reports each working day.

Notably, over 80 per cent of these reports were filed by financial institutions.

To bolster its capabilities, the STRO deployed a data analytics system in February 2022. This system aims to enhance its ability to process the large volume of STRs and elevate the quality of financial intelligence shared with domestic law enforcement agencies.

Over the same period from 2020 to 2022, Singapore secured convictions for at least 240 individuals on money laundering charges and seized assets valued at more than S$1.2 billion.

Additionally, in the past five years, 17 financial institutions faced regulatory action for violations related to anti-money laundering and counter-terrorism financing requirements.