Singapore flags banks as top money laundering risk post S$3B money laundering scandal

SINGAPORE: Singapore’s banking sector, along with wealth management, presents the highest risk of money laundering in the city-state, according to the latest Money Laundering National Risk Assessment (MLNRA) published by the government on Thursday (20 June).

The Home Affairs Ministry, Ministry of Finance and the Monetary Authority of Singapore emphasized in a joint statement that banks face heightened exposure to money laundering threats due to the sheer volume of transactions they handle and their dealings with customers from high-risk jurisdictions.

This is Singapore’s first national risk assessment report since 2014, and its updated findings will guide ongoing efforts to ensure that the city-state’s anti-money laundering regime remains responsive to identified risks.

The report coincided with the sentencing of all 10 Fujian-origin individuals involved in a landmark S$3 billion money laundering case, receiving jail terms ranging from 13 to 17 months.

Following the emergence of the money laundering case last year, Singapore established an interministerial panel to review and strengthen its anti-money laundering measures, particularly concerning the inflow of wealth and high-net-worth individuals.

High risk identified in the banking sector

The report identifies various money laundering (ML) threats, including cyber-enabled fraud, organized crime, corruption, tax evasion, and trade-based money laundering.

According to the assessment, Singapore’s status as a leading international financial hub and trade centre makes it susceptible to exploitation by criminal entities seeking to launder illicit funds through its robust economic infrastructure.

The assessment highlights that illicit funds frequently flow into or through Singapore via bank accounts.

This process often involves rapid cross-border transactions facilitated by third parties, including individuals acting as “mules” or corporate entities misusing shell companies.

Instances of money laundering through Singapore-incorporated shell companies controlled by criminal networks are noted.

These entities’ bank accounts are exploited to disguise illicit proceeds as legitimate business transactions, potentially involving significant cross-border movements and withdrawals in cash.

“Overall, banks are assessed to be more vulnerable to money laundering, ” the report noted.

Singapore has a sophisticated and interconnected banking system comprising over 150 banks. As of the end of 2023, the banking sector had a total asset size of almost S$3.5 trillion.

Risks associated with Digital Payment Token (DPT) service providers

The assessment also singled out digital payment token (DPT) service providers as another emerging area of concern within Singapore’s financial landscape.

Internationally, DPTs have been linked to cyber-enabled fraud, theft, ransomware, and transactions on darknet markets as sources of illicit revenue from 2017 to 2022.

Singapore authorities have noted a rise in reported cases involving DPTs, primarily linked to fraud and cybersecurity offences under the Computer Misuse Act (CMA).

The report identifies three main avenues of exploitation:

1. Payment Method: Instances where ransomware demands payment in DPTs or impersonation scams involving settlement fees paid in DPTs.
2. Marketed Product: Scams like Initial Coin Offerings (ICOs) or e-commerce schemes selling fraudulent DPTs.
3. Targeted Item: Unauthorized transactions leading to the theft of DPTs, such as hacking of online wallets or scams where victims unknowingly reveal wallet details.

Nevertheless, the report noted that there has been a notable increase in STRs filed concerning DPTs, indicating heightened awareness and understanding of risks among regulated sectors dealing with DPTs.

High ML risks identified in corporate service providers, real estate, casinos, and precious metals sectors

Among the Designated Non-Financial Businesses and Professions (DNFBP), corporate service providers and real estate sectors are noted for their elevated ML risks, primarily due to their role in facilitating the misuse of legal entities and handling significant financial transactions.

Corporate Service Providers (CSPs), Real Estate Agents/Developers, Casinos, Precious Stones and Metals Dealers are categorized with medium to high ML risks due to their susceptibility to being used for incorporating shell companies and facilitating illicit fund flows.

Lawyers and Accountants are noted for lower but still significant ML risks within their respective roles, the report added.

The assessment underscores the diverse laundering techniques observed, including the misuse of structures like shell companies to obscure illicit fund origins and finance high-value assets.

In response to these findings, Singapore affirms its commitment to enhancing AML measures across sectors.

“Singapore remains committed to reviewing and putting in place appropriate measures to address the identified risks. The findings in the updated ML NRA will guide our ongoing efforts to ensure that our AML regime keeps pace with the identified risks.”

These include continued risk-targeted efforts to sensitise Financial Institutions (FIs) and DNFBPs to the key, new and emerging ML risks, as well as to allow more timely detection, disruption and enforcement of illicit activities by law enforcement and supervisory agencies.

NUS professor highlights concerns over transactions in offshore jurisdictions

Commenting on Singapore’s latest money laundering risk assessment, Mak Yuen Teen, an accounting professor at the National University of Singapore, emphasized that the report underscores the pervasive nature of money laundering risk as a simultaneous and widespread phenomenon.

Professor Mak in a LinkedIn post questioned the extent of this risk among listed companies, particularly given Singapore’s large number of foreign-listed firms and entities with foreign ownership.

He also pointed out frequent instances of transactions involving undisclosed third parties or entities in jurisdictions such as the British Virgin Islands (BVI) and the Cayman Islands, where ultimate beneficial owners remain undisclosed.