Singapore, as one of the world's leading financial centres, handles millions of transactions every single day.

The news of the recent S$2.8 billion money laundering case shocked many, especially as Singapore has a reputation as a trusted and well-governed financial hub.

Minister of State for Trade and Industry Alvin Tan explained in Parliament on Oct. 3, 2023,

"The international connectedness, diversity and depth of our financial ecosystem also makes us attractive to criminals, who will seek to exploit these very qualities to hide their tracks and launder their ill-gotten gains."

Singapore's strategy against finance criminals

Speaking on behalf of Deputy Prime Minister and Minister for Finance Lawrence Wong in a ministerial statement addressed to Parliament, Tan said that the case shows the government's unflinching commitment to keep Singapore clean.

"While criminals will vary their tactics to conceal their illicit activities, we will deploy all the resources and powers at our disposal to thwart them, bring them to justice and continually strengthen our defences against them," he said.

He explained the Monetary Authority of Singapore (MAS)'s three-pronged strategy to bolster the country's financial sectors' defences against money laundering and terrorism financing risks.

Prevention

MAS imposes strict Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) requirements on financial institutions, Tan said.

Amongst these requirements, financial institutions must perform due diligence checks on their customers. This includes verifying the customer's identities and monitoring customer accounts to detect suspicious customer transactions or activities.

For higher-risk customers, financial institutions must perform additional checks to establish if the customers' wealth and funds are legitimate.

When a financial institution detects suspicious customer behaviour, it must promptly report this to the Suspicious Transaction Reporting Office (STRO) and then take appropriate mitigation measures, such as placing restrictions on the account or, where warranted, terminating the customer relationship.

These checks are also required for those applying for Single Family Offices (SFO) tax incentives.

"MAS screens the individuals and entities involved in the SFO against databases and other information sources for money laundering, terrorism financing, and other adverse news," Tan said.

He also added that MAS is reviewing its internal incentive administration processes and will tighten them when necessary.

Detection

The second prong of MAS's strategy is detection.

This involves partnering with financial institutions and other agencies to detect bad actors and tighten their collective defences.

One such partnership is the AML/CFT industry partnership (ACIP), which consists of the financial sector, regulators, law enforcement agencies and other government entities.

The partnership aims to identify, assess and mitigate key and emerging money laundering and terrorism financing risks facing Singapore.

Tan said that this partnership has borne fruit, citing the successful conviction of the former chief financial officer of Agritrade International for her role in deceiving financial institutions to grant at least S$776 million in credit facilities.

To further strengthen its detection capabilities, MAS is developing a digital platform, COSMIC, which stands for “Collaborative Sharing of Money Laundering/Terrorism Financing (ML/TF) Information & Cases”.

This is in collaboration with six major commercial banks in Singapore: DBS, OCBC, UOB, SCB, Citibank, and HSBC.

COSMIC will augment ACIP's efforts, Tan said.

"It will allow participant financial institutions to share with one another information and customers whose profile or behaviour exhibits potential financial crime concerns, which they currently cannot do due to customer confidentiality obligations," he explained.

COSMIC is on track to be launched in the second half of 2024. Currently, there are no plans to extend COSMIC to entities beyond the financial sector.

Tan also said they are actively working with international supervisory counterparts on common areas of concern, such as the 1Malaysia Development Berhad (1MDB) scandal and Wirecard cases.

Enforcement

Enforcement complements the first two prongs of prevention and detection.

"Where there are breaches of MAS's requirements, MAS takes firm enforcement action against financial institutions as well as key financial institutions' staffs," Tan said.

In the 1MDB case, significant penalties for AML/CFT violations were imposed, and some individuals and senior management were permanently banned from working in Singapore's financial sector.

Two banks were even closed down for egregious AML/CFT breaches.

Non-Constituency Member of Parliament Leong Mun Wai asked in a supplementary question how these rules will play out for banks potentially involved in the S$2.8 billion money laundering case.

In reply, Tan said:

"We cannot act prematurely and we ought not to prematurely attribute any guilt or offence on the banks prematurely until investigations have been completed."

Reviewing efforts

Tan said the current efforts are not enough to mitigate future money laundering and terrorism financing risks.

"MAS is conducting detailed supervisory reviews and inspections on the financial institutions with a major nexus to this case," he said.

MAS will also take a critical look at how the suspects were able to access financial services in Singapore.

Some of them have been charged with presenting forged documents to financial institutions, he added.

Consequently, MAS will assess whether financial institutions have upheld robust AML/CFT process practices.

While there has been some speculation that the money laundering operation has hurt Singapore's standing as an international financial centre, Tan believes otherwise.

"I believe that our approach to this case will in fact enhance Singapore's global standing as a trusted financial centre with a strong rule of law, and that we will continue to keep the trust and confidence that Singaporeans and investors have in us."

Top image via Facebook/ Singapore Police Force