Stepping Up the Fight Against Money Laundering

Truthfulness is a critical building block for responsible business practices. As a member of the Financial Action Task Force (FATF), an international intergovernmental body developing policies to combat money laundering and terrorist financing, Singapore has in place a regime for certain sectors that ensures the integrity and stability of its financial system.

With the increasing complexities of global transnational flows, the Monetary Authority of Singapore (MAS) has announced its stepping up the fight against money laundering and illicit financing activities with the formation of two new dedicated departments to strengthen enforcement.

What is money laundering?

Money laundering is a process that makes proceeds from business crime and other criminal activities look clean or legitimate. Banks, financial institutions and other service providers have often been used by criminals to launder their ‘dirty’ money. Relating to such fund flows is terrorism financing, the process of sponsoring or facilitating terrorism using funds received from legitimate or illegitimate sources.

Money laundering activities have also migrated to alternative ‘underground’ banking facilities as well as to the professional industries such as law and accounting. The recent Panama Papers leak for instance, has exposed how money laundering and tax avoidance were facilitated by an “offshore” service provider.

Why are AML/CFT measures important for Singapore?

AML/CFT is short for Anti-Money Laundering and Countering Financing of Terrorism. AML/CFT regulations are put in place by countries to address corruption and money laundering. This is necessary in order for them to continue competing at a regional and global business level.

Like all major international financial and business centres, Singapore faces the risk of being used as a conduit for such activities. The city-state takes a serious view on any such instances with its host of anti-money laundering legislation with acts including the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act, the ACRA Act, the Terrorism (Suppression of Financing) Act, as well as guidelines and notices from ACRA and MAS.

Protecting the integrity of Singapore’s financial system

In accordance with these regulations, financial institutions in Singapore are required to establish robust controls to detect and deter illicit funds flows and to thoroughly know and theck their clients, including their ultimate beneficial owners. This means taking steps to identify and verify the identity of customers, to conduct regular account reviews, and to monitor and report any suspicious activity.

Action will be taken against financial institutions and service providers that fail to comply. For instance, BSI Bank Limited, a wholly-owned subsidiary of Swiss-based BSI SA bank operating in Singapore, was ordered to shut down for serious breaches of anti-money laundering requirements, such as lapses in performing sufficient client due diligence, poor oversight and staff misconduct.

Latest initiatives towards AML supervision in Singapore

To combat money laundering and reduce the risk of illicit transactions in Singapore, two new dedicated departments announced and set up by the MAS will further strengthen Singapore’s enforcement capability.

MAS’ new Anti-Money Laundering department will streamline the existing responsibilities for regulatory policies relating to money laundering and other illicit financing risks, while its new Enforcement department will be set up to monitor these risks and carry out onsite supervision of how financial institutions manage these risks.

Singapore’s whole-of-government approach has also dedicated other resources towards AML supervision and enforcement. For instance, ACRA will soon require corporate service providers to undergo a new training programme aimed at reducing their vulnerability to illicit activities such as money laundering and terrorism financing. In addition, while being named in the Panama Papers is not evidence of wrongdoing, supervisory authorities in Singapore such as MOF and IRAS are also currently checking on the Singapore taxpayers and entities named.