Singapore

Singapore is the most developed country in Southeast Asia. Its success as a respectable free market economy is largely due to its meticulous planning of its economy, careful execution and a corruption-free environment. Singapore’s GDP is higher than that of most developed countries making it one of the richest countries in the world.

The economy depends heavily on exports, particularly in consumer electronics, information technology products, pharmaceuticals, and on a growing financial services sector. Real GDP growth averaged 8.6% between 2004 and 2007. The economy contracted 0.8% in 2009 as a result of the global financial crisis, but rebounded strongly at 14.8% in 2010, on the strength of renewed exports, before slowing to 5.2% in 2011 and 1.3% in 2012, largely a result of soft demand for exports during the second European recession.

Being a global international trade centre, Singapore was badly hit during the recent global recession but managed to survive partly due to its strong economic background, in addition to its huge reserve.  Over the longer term, the government hopes to establish a new growth path that focuses on raising productivity, which has sunk to an average of about 1.0% in the last decade. Singapore has attracted major investments in pharmaceuticals and medical technology production and will continue efforts to establish itself as Southeast Asia's financial and high-tech hub.

According to Bhaskarsan and Wilson:

‘Singapore’s economic system has been described as ‘authoritarian capitalism’ but it might be more accrurately described as ‘pragmatic socialism’. The government does not implement radical socialist redistribution policies thorugh high taxes on higher earners or on corporate profits to generate revenues for the provision of universal welfare benefits. Rather it has sought to benefit the general population through ‘supply-side socialism’ in the form of job creation, the provision of public housing, education and medical services.’[1]

As a regional center for banking and finance, it is understandable that many money launderers are interested in using Singapore for money laundering purposes if possible. Despite the concentrated effort of the Singapore government, money laundering is still a problem. The Asian nation, which has the highest proportion of millionaires in the world, was criticized in a March 2011 U.S. State Department report as being vulnerable to money launderers. Money-laundering convictions in Singapore climbed to an average of 21 a year from 2008 to 2010, compared with four between 2000 and 2007, according to the Financial Action Task Force, a Paris-based watchdog. Between 2010 and 2011 alone, 44 people were convicted of money laundering offences in Singapore.[2] Most of these cases were related to fraud. During the same period, nearly $130 million worth of criminal proceeds were seized or frozen as they were linked to money-laundering investigations.

One of the known methods to launder money in Singapore is to use money mules. In 52 cases reported to the police from January to September 2012, more than S$16mil (RM40mil) and about 100 mules were involved, according to the Commercial Affairs Department (CAD). These ‘money mules’ have been helping overseas money-laundering syndicates move millions of dollars to the city-state. Most of them are men who get to know the fraudsters online and end up acting as middlemen, allowing money to move through their bank accounts. The transactions ranged mostly between US$18,000 (RM54,000) and US$150,000 (RM450,000), although the biggest was almost US$430,000 (RM1.29mil). At least seven people have been arrested and charged in court.

As of December 2012, there were 37 offshore banks in operation, all foreign-owned. Asset under management in Singapore is around S$1.34 trillion. As of 2011, Singapore had at least $700 billion in foreign funds under management. Although clear-cut illegal money cannot enter its banking and financial system, grey money is arguably still being accepted. The grey money includes money obtained by dictators and corrupt politicians and their family members. Singapore has two casinos but various measures are being taken to avoid the casinos from being used for money laundering activities.[3]

However, bank secrecy laws and the lack of routine currency reporting requirements might make Singapore an attractive destination for dictators, drug traffickers, criminals, terrorist organizations and their supporters seeking to launder money.

Money laundering usually occurs mainly in the offshore sector, but may also occur in the non-bank financial system, which includes large numbers of moneychangers and remittance agencies.[4]

As more and more bank scandals surface in the financial capitals of London and New York, Singapore is seeking to implement tougher rules and strengthen existing standards as regulators move to safeguard and reinforce the reputation of Singapore’s fast-growing financial service sector.[5]

The AML and CTF regime is contained in the following statutes:

·      Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act

·      The Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDTOSC) criminalises money laundering, provides for confiscation of proceeds of crime and imposes record keeping and reporting obligations on financial institutions.

·      Terrorism (Suppression of Financing) Act 2002.

·      Monetary Authority of Singapore (Anti-Terrorism Measures) Regulations 2002. This regulation applies CTF measures specifically to all branches and offices of financial institutions incorporated in Singapore (whether located in Singapore or elsewhere) or incorporated outside Singapore but located in Singapore. The Regulations prohibit those financial institutions from providing or collecting funds, resources or services for terrorists and from dealing with terrorist property.

Sine year 2000, the Financial Intelligence Unit (FIU) of Singapore has been Singapore Police’s Suspicious Transaction Reporting Office (STRO). In December 2004, STRO concluded a Memorandum of Understanding (MOU) concerning the exchange of financial intelligence with its U.S. counterpart, FinCEN. STRO has also signed MOUs with counterparts in Australia, Belgium and Japan, and continues to actively seek MOUs with additional FIUs. To improve its suspicious transaction reporting, STRO is developing a computerized system to allow electronic online submission of STRs, as well as the dissemination of AML/CFT material. It plans to encourage all financial institutions and relevant professions to eventually participate in this system. Procedural regulations and bank secrecy laws limit STRO’s ability to provide information relating to financial crimes.

In addition to laws, the legal and regulatory frameworks of anti-money laundering are also shaped by guidelines. The Monetary Authority of Singapore (MAS) regulates most aspects of financial licensing and has issued a series of regulatory guidelines (Notices) that cover AML requirements, such as know-your-customer, verification of identity, and reporting and record keeping. In addition to banking institutions, professionals like lawyers and accountants in Singapore are also subject to the reporting requirements of CDTOSC and the Terrorism (Suppression of Financing) Act 2002.

Beginning in 2000, MAS began issuing a series of regulatory guidelines (“Notices”) requiring banks to apply “know your customer” standards, adopt internal policies for staff compliance, and cooperate with Singapore enforcement agencies on money laundering cases. Similar guidelines exist for securities dealers and other financial service providers. Banks must obtain documentation such as passports or identity cards from all personal customers to verify names, permanent contact addresses, dates of birth, and nationalities, and to check the bona fides of company customers.

Singapore is taking various measures to counter money-laundering activities but there is still a big room for improvement.[6] Singapore’s large, stable, and sophisticated financial center may be attractive as a conduit for laundering proceeds generated by foreign criminal activities, including official corruption. The Suspicious Transaction Reporting Office and criminal investigators are encouraged to identify money laundering that  originates from foreign predicate offenses, and use stand-alone  money laundering charges to prosecute foreign offenders in  Singapore.

The members of the Association of Southeast Asian Nations (Asean) on the US government’s list of drug money laundering countries include Singapore, Thailand, Indonesia, Cambodia, and Burma (Myanmar). In addition to that, due to the strict bank secrecy laws in Singapore, there are claims that the city-state is becoming Asia's 'Switzerland' by welcoming dirty money from corrupt politicians and businessmen in neighboring countries. The perception is that Swiss banks have concluded Switzerland is unlikely to remain a tax haven for much longer, and Singapore is the new place to do business.

Critics of the city-state have also cast doubts on its clean image amid its strong economy, saying 'dirty money' from shady politicians and dictators contribute towards Singapore's strong financial position compared to its neighbors. According to experts, as a result of the pressure on Switzerland, a lot of the client bank accounts have been shifted off to Singapore. The money laundering activities allegedly come from various entities from Burmese drug lords to Indonesian bank embezzlers, including the notorious Robert Mugabe family of Zimbabwe.

In March 2013, MAS and the Ministry of Finance vehemently denies this by highlighting that Singapore has designated a wide range of crimes as predicate offences to money laundering — including corruption, bribery and fraud. This is in line with the recommendations of the Financial Action Task Force.

Singapore has tighten safeguards against money laundering and terrorist financing, in line with recommendations by the Paris-based agency, the Financial Action Task Force (FATF). The recommendations include expanding the scope of money laundering predicate offences by including tax crimes. They also include insisting on stronger requirements when dealing with politically connected individuals and improving transparency to make it harder for criminals and terrorists to conceal their identities.

Over the past three years, Singapore has revised half of its 70 tax treaties with other countries to accommodate information exchange on possible tax dodgers. When Switzerland signed bilateral treaties with the United Kingdom and Germany on tax-related matters, MAS issued a set of guidelines as a pre-emptive step to guard against any potential inflows of illicit funds. MAS guidelines reminded financial institutions that they have a key role to play in preserving the integrity of its financial system, and safeguarding it from being used as a haven for illegitimate funds or as a conduit to disguise the flow of such funds

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[1] M Bhaskaran and Peter Wilson, ‘The Post-Crisis Era: Challenges for the Singapore Economy’ in Peter Wilson (ed), Challenges for the Singapore Economy After the Global Financial Crises (World Scientific 2011)32

[2] In year 2011, there are at least 32 prosecutions with 26 convictions for money laundering offenses.

[3] In April 2005, Singapore lifted its ban on casinos, paving the way for the development of integrated resorts with casinos. Total investment in the two resorts is estimated to exceed $4 billion. In October 2005, Singapore released for public comment draft legislation for the Casino Control Act. The Act calls for creation of a Casino Regulatory Authority and mandates certain cash reporting requirements. Internet gaming sites are illegal in Singapore. Singapore’s economy expanded 14.5 percent in 2010, boosted by two new casino resorts. Casinos are known to be a cash-intensive business with a high volume of daily transactions and this makes them vulnerable to money laundering risks. Therefore, to avoid money-laundering activities, the Casino Regulatory Authority or CRA was established two years before the casinos were opened in Singapore. An example of the regulation is that every transaction above $10,000 in the casino has to be reported. Singapore authorities have given their assurance that the country's two casinos are safe from money laundering so far. The Director of the Commercial Affairs Department of the Singapore Police Force, Ong Hian Sun says money-laundering activities have yet to be detected in the casinos at the end of the 13th Annual Meeting of the Asia Pacific Group on money laundering.

[4] Singapore’s approximately 600,000 foreign guest workers are the main users of alternative remittance systems. As of June 2005, there were 406 money-changers and 102 remittance agents. All must be licensed and are subject to the Money-Changing and Remittance Businesses Act (MCRBA), which includes requirements for record-keeping and the filing of suspicious transaction reports. Firms must submit a financial statement every three months and report the largest amount transmitted on a single day. They must also answer questions about their business and overseas partners. Unlicensed informal networks, such as hawala, are illegal. In August 2005, Singapore amended the MCRBA to apply certain AML/CFT regulations to remittance licensees and money-changers engaged in inward remittance transactions. The Act eliminated sole proprietorships and required all remittance agents to incorporate under the Companies Act with a minimum paid-up capital of S$100,000 (approximately $60,000).

[5] To counter money-laundering activities, Singapore has established strict and rigorous anti-money laundering and countering the financing of terrorism (AML/CFT) regime through its comprehensive and sound legal, institutional, policy and supervisory framework. As a member of the Financial Action Task Force (FATF), Singapore also contributes actively towards international AML/CFT standard-setting discussions at the FATF. The Monetary Authority of Singapore (MAS)[5] is also designating a broad range of serious tax crimes as money laundering predicate offences. A predicate offence is a crime that, as a matter of logic or statutory provision, is or must be part of another offence. With effect from 1 July 2013, laundering money from tax offences will become a criminal offence.

[6] Despite the series of efforts to counter and reduce money-laundering activities, Singapore is occasionally accused of being an extradition-free country for white-collar criminals from nearby countries. It is said to be an open secret that vast amounts of questionable wealth are being passed through and kept in Singapore, with much of it coming from Malaysia, Indonesia, China, Russia and the Middle East. Previously, Indonesian Defense Minister Sudarsono accused Singapore of not signing an extradition pact with Indonesia for fear it would be obliged to return money stashed away by corrupt fugitives who had fled to Singapore. Sudarsono estimated there were at least 80 Indonesian fugitives living in Singapore. Due to the seriousness of these accusations, steps should be taken to clear its name if such accusations are without merit. If there is merit to such accusation, the practice must be improved.