MAS Licensing Loopholes Aided Illicit Cash Conduits into Singapore, Sources Say

By: Andy Wong Ming Jun

Cross-border brokers each inside and out of doors of Singapore have aided cash launderers to quickly switch huge sums into the nation by an online of formal or casual remittance homes, evading controls and setting the stage for the S$1.6 billion (US$1.17 billion) scandal now engulfing the banking and finance trade, educated trade figures say. Based on the Monetary Motion Activity Drive (FATF), the intergovernmental cash laundering and terrorist financing watchdog of the Group of Seven nations, cash remittance and foreign money trade companies have been proven up to now to be each witting and unwitting members in cash laundering actions by three phases: placement, layering, and integration.

The Financial Authority of Singapore (MAS) has ordered all monetary companies within the nation to look at any probably suspicious or uncommon transactions of some 34 people made for the reason that begin of 2020, in keeping with native media. Of the 34 suspects, 10 have been arrested and named in ongoing courtroom proceedings. State investigators and prosecutors are increasing their investigation targets to incorporate the charged people’ wives and kinfolk, in addition to treasured metals and stones sellers within the nation. That is no shock given Singapore’s score as being solely “partially compliant” on buyer due diligence, regulation, and supervision of Designated Non-Monetary Enterprise and Professions (DNFBP), which embody property brokers and jewellery sellers by FATF in 2019.

There nevertheless stays a obtrusive omission when it comes to establishments presently below elevated scrutiny: remittance homes and single-family workplaces (SFO). SFOs are set as much as handle the monetary belongings owned or managed by members of the identical household, and have burgeoned lately in Singapore. Many such SFOs are managed by international entities, together with one of many 10 arrested people who’s confirmed to be a director of Golden Eagle Household Workplace in Singapore below the entrance of providing administration consulting providers.

Many of those SFOs mark the ultimate endpoint of a well-established cash laundering course of that begins with wealthy criminals shopping for into or establishing credible entrance companies abroad. These companies, usually authentic, are predominantly concerned within the import and export of bodily items, and merely function placement and layering conduits for illicit funds to be injected into them below the guise of elevated capital investments and extra illicit funds handed off as income from “new authentic prospects.”

As soon as adequate earnings have been generated by these international entrance companies and dutifully recorded into their accounting books for a sufficiently lengthy time frame with full auditing data to ascertain credibility and legitimacy, the newly-cleaned “earnings” are then shifted into these people’ household workplaces in Singapore through remittance homes, avoiding direct wiring between established predominant road banks in order to not generate a digital path. The laundered monies are sometimes held for just a few months earlier than being spent on lavish existence and luxurious purchases within the nation. All the cross-border cash laundering chain is designed to supply most authorized obstruction and opacity within the occasion of prison investigations and is partially the rationale why a few of the key cash laundering suspects have nonetheless not been apprehended in Singapore or abroad.

Since 2019, MAS laws on licensed remittance homes haven’t required them to hunt prior approval earlier than coping with new prospects with out having beforehand met with them face-to-face, enabling the cash launderers to efficiently channel funds into Singapore between 2020 to 2022, when worldwide journey was severely restricted as a result of Covid-19 pandemic. Singapore pounced on the chance to draw extra Household Places of work by giving varied tax incentives on high of the nation’s low company tax charge and 0 capital positive aspects tax, the end result being that by end-2022 there have been some 1,100 Household Places of work, up from mere 400 on the finish of 2020. While restrictions on remittance payouts are capped at S$20,000 to any particular person receiving an inward remittance transaction, there exist no restrictions or suspicious transaction report (STR) tripwire to be triggered by a number of remittances obtained in brief order to the identical recipient – on this case, the financial institution accounts belonging to the assorted household workplaces and corporations arrange in Singapore by the cash launderers.

A September 4 Straits Instances report disagreed with requires additional scrutiny on household workplaces and mainland Chinese language wealth in Singapore, stating that the difficulty was merely with “lower than supreme compliance by some intermediaries that facilitated these fund flows.” A banking trade supply who requested to stay unnamed due to the sensitivity of the continuing investigation advised Asia Sentinel that whereas usually there’s settlement within the trade that lapses have occurred in anti-money laundering compliance by brokers {and professional} intermediaries, the established tradition is considered one of viewing such self-reported checks as an administrative paperwork pace bump to be averted within the pursuit of earning money. In relation to the prospect of incomes massive commissions from facilitating such massive fund inflows and the luxurious belongings they’re used to buy outright, such “fixers” and brokers are motivated to make sure as a lot as potential that these enterprise transactions wouldn’t give explanation for them to set off suspicion and subsequently file STRs, the supply stated. Different media experiences help that perception.

Like a lot of the AML regime put in place by MAS, the onus is basically on licensees and particular person brokers to self-report any potential suspicious transactions. As an illustration, remittance homes and cash changers are solely required to nominate exterior auditors or certified consultants to evaluate the effectiveness of their insurance policies and procedures once they first conduct non-face-to-face enterprise with new shoppers, and self-submit an evaluation report back to MAS inside a yr of such enterprise contact occurring. Extra critically, while MAS requires remittance corporations to conduct due diligence checks on each sending and receiving people concerned in transactions of S$20,000 and above, such checks are exempted for both social gathering if they’re monetary establishments. Regardless of being successfully handled as monetary establishments below present laws, household workplaces are presently exempted from MAS registration or licensing merely attributable to them not dealing with third-party funds. This permits for his or her enterprise dealings with remittance corporations to largely go unnoticed.

MAS proposed in July 2022 to shut off the above AML loopholes for household workplaces in Singapore by standardizing and tightening licensing exemption standards for them. Proposed modifications embody requiring the entities to be household owned, to solely handle funds for the proudly owning household and chosen key staff, be included in Singapore, have a delegated Singapore-based worker to be the purpose of contact with MAS, and most significantly, keep a enterprise relationship with MAS-regulated banks working in Singapore. The proposals are nonetheless within the session course of till September 30 and thus have but to be formally applied. Market observers consider that these suggestions will nearly actually be launched wholesale, and that they’ll have negligible affect on Singapore’s attraction to international wealth looking for secure haven for his or her monies.