A tough stance against financial crime is necessary to protect Singapore’s reputation as a clean and trusted financial centre.
Rigorous compliance and regulation
Singapore’s standing as a global transportation hub and
financial centre makes it susceptible to cross-border money
laundering and terrorist financing activities.
Internationally-oriented and cash-intensive sectors are especially
prone to such criminal conduct. In combating transnational money
laundering, Singapore has established an extensive international
cooperation network for supervision and law enforcement.
Singapore’s Anti-Money Laundering (AML) and Countering the
Financing of Terrorism (CFT) policies aim to detect, deter and
prevent money laundering, associated predicated offences and
terrorism financing. The aim is also to protect the integrity of
its financial system from illegal activities and illicit fund
flows. Singapore’s central bank, the Monetary Authority
of Singapore (MAS), is the body in charge of regulating financial
institutions. Section 27 of the Monetary Authority of Singapore Act
(MAS Act) gives the MAS the power to issues directions or to make
regulations that govern the operations of financial institutions.
Section 27B of the MAS Act specifically provides for directions or
regulations to be issued for the prevention of money laundering or
of financing terrorism.
Relying on this, the MAS has published a number of regulations and
directions in what it terms Notices on the Prevention of Money
Laundering and Countering the Financing of Terrorism (AML/CFT
Notices). The Notices impose various controls on a wide range of
financial institutions ranging from approved trustees and financial
advisers, to money changers and remittance companies. The controls
include customer due diligence, record keeping, ongoing transaction
monitoring and rigorous supervision.
Section 27B(2) of the MAS Act also states that non-compliance with
any of these regulations is an offence punishable with a fine of up
to S$1 million and a further fine of S$100,000 for every day the
offence continues after the conviction. These severe penalties were
a result of the MAS Amendment Bill in 2007, which raised the
penalties from the previous maximum fine of S$100,000. The Bill
also introduced the new Section 28B of the MAS Act, which imposes
liability on directors and officers where the contravention of the
regulations is attributable to their consent, connivance or
neglect.
Heightened penalties for criminal offences
Under the Corruption, Drug Trafficking and Other Serious Crimes
(Confiscation of Benefits) Act (CDSA), it is a criminal offence for
an individual or a company to be involved in money laundering. The
CDSA targets two main groups of money laundering offenders. The
first group – Primary Money Launderers – represents
those who hide the proceeds of their own criminal conduct. The
second group – Secondary Money Launderers – encompasses
those who assist the primary criminal to hide their criminal
proceeds, or acquires those criminal proceeds.
Primary money laundering
The provisions in the CDSA essentially state that it is an offence for any person to:
- conceal or disguise any property (or its nature, source, location, disposition, movement or ownership) which is, in whole or in part, directly or indirectly, represents, his benefits from criminal conduct;
- covert or transfer that property or remove it from the jurisdiction;
- acquire, possess or use that property.
Secondary money laundering
The above provisions also apply when the person knows, or has
reasonable grounds to believe that the property is, in whole or in
part, directly or indirectly, represents, another person’s
benefits from criminal conduct.
The provisions of Section 44 of the CDSA makes it an offence for a
person to enter into an arrangement with another person where he
knew or had reasonable grounds to believe that the other person is
engaging in or has engaged in criminal conduct, or has benefited
from criminal conduct, and where he knew or had reasonable grounds
to believe that by the arrangement,
- The retention or control of that person’s benefits of criminal conduct is facilitated (whether by concealment, removal from jurisdiction, transfer to nominees or otherwise); or
- That the other person’s benefits from criminal conduct
are used
- To secure funds that are placed at that other person’s disposal, directly or indirectly; or
- For that other person’s benefit to acquire property by way of investment or otherwise.
Primary and Secondary money launders convicted under any of the
above sections face up to ten years jail and/or a fine of
S$500,000. If the offender is a company, it faces a fine of up to
S$1 million. As with the MAS Act, the CDSA was similarly amended in
2007 which increased the penalty for money laundering from seven
years jail and/or S$200,000 fine to ten years jail and/or S$500,000
fine. The main impetus for the amendments seems to have been the
increase in the transnational threat.
At the introduction of the amended bill, Assoc. Prof. Ho Peng Kee
explained that 'Since 1999, when the Act was first introduced,
the global security climate has undergone significant changes.
There is an urgent need for us to address the increasingly complex
challenges posed by the abuse of our financial systems by
terrorists and money launderers. The devastating 9/11 attacks
underscore the urgent need for governments around the world to
implement measures to suppress terrorist financing as part of the
global effort to combat terrorism. At the same time, law
enforcement agencies worldwide are combating the financial aspects
of crime which have also become more complex due to rapid advances
in technology and the globalisation of the financial services
industry.'
Case study: Lessons to be drawn from Ang Jeanette v Public Prosecutor [2011]
In this case, the Commercial Affairs Department (CAD)
received information that funds had been fraudulently
transferred from the United States of America
into various Singapore bank accounts. The offender,
Jeanette, received a call from her brother saying he was
'in trouble'. He also informed her that one
'Mike' would contact her and asked her to follow his
instructions.
Following instructions from Mike, Jeanette met up with one
'Aloysius' on various occasions and remitted the
monies which
she had received from him. Consequently, she was charged with
five counts under Section 44(1)(a) of the CDSA for
secondary
money laundering.
At the trial, the Prosecution led evidence from one
'Michael Nail', a Special Agent with the United States
Federal Bureau of Investigation (FBI), who was the lead
investigator in an FBI investigation concerning several
fraudulent money transfers from various bank accounts
in the US to several accounts in Singapore. His
testimony, which was unchallenged, provided a compelling
narrative detailing how a few manipulative individuals
carried out an audacious banking scam and then moved the
proceeds of their crimes across the globe in a bid to disguise
the origin of the money. The offender was convicted on
all charges and sentenced to nine months’
imprisonment.
Two points are worth noting. First, the Judge stated that the
Prosecution was required to prove that the monies were in fact
benefits of criminal conduct. However, he also
stated that they could do this simply by adducing some
evidence linking the monies in question with some act that
might constitute one or other offences under the
Second Schedule to the CDSA. Circumstances could also
arise where the only logical inference to any
reasonable person was that the monies involved in the
arrangement were criminal property.
Most importantly, the Prosecution did not have to satisfy the
court beyond a reasonable doubt that all the constituent
elements of a specific offence had been met. The Judge
reasoned that 'the objective of all money laundering
transactions is to mask the predicate offences from which the
monies are derived. Often the most difficult aspect for
prosecutors is proving that the property concerned had a
criminal origin. To insist on strict proof of all
the requirements necessary to establish such predicate
offences would turn the CDSA into a charter for
rogues'.
Second, this was a case where it was not proven that Jeanette
had known that the monies were tainted by some predicate
offence. Rather, it was found that the suspicious nature of
having been asked to transfer S$2 million would have made it
abundantly clear to her as well as any reasonable observer
that the monies were tainted. Despite this, she did not
attempt to seek an explanation from either Mike or Aloysius.
It bears noting that this lowered threshold of requiring the
offender to only have had 'reasonable grounds to
believe' goes far beyond legislative baselines mandated by
the international conventions, to which Singapore had
formally acceded to.
Tightening the reins on money laundering
Recently, the MAS ordered the shutdown of the Singapore
branch of BSI Bank after a 'more intrusive' third
inspection revealed that there were multiple breaches of
anti-money laundering regulations and a 'pervasive pattern
of non-compliance' with the regulations. BSI Bank was also
fined S$13.3 million for 41 breaches of antimoney laundering
regulations. It is also understood that six members of BSI
Bank’s senior management were referred by the MAS to the
public prosecutor for possible prosecution.
Subsequently on 13 June 2016, the MAS announced that it would
be setting up two new departments and a dedicated supervisory
team. The AML Department will 'streamline the existing
responsibilities for regulatory policies relating to
money laundering and other illicit financing risks'. The
Supervisory Team will monitor these risks and carry out onsite
supervision of how financial institutions manage the above
risks, and the Enforcement Department will bring together and
strengthen MAS’ existing enforcement functions. The new
department will work with the CAD to investigate capital
markets misconduct offences. It will also be responsible for
enforcement actions arising from regulatory breaches of MAS
banking, insurance and capital markets
regulations.
The creation of these specialist departments clearly
demonstrates that the MAS intends to tighten the reins on
monetary transactions. A strong enforcement capability will
allow for greater supervision and compliance with the MAS
regulations, and allow the authorities to take swift action
against those who breach said regulations. Coupled with the
increased penalties and the lower threshold requirements for
prosecution, it is apparent that Singapore intends to spare no
effort in combating money laundering activities.
Whilst it is too early to tell if these changes will lead to
more intrusive supervision, the changes are certainly a
welcome step ahead for Singapore, which has two
casinos and continues to see a steady influx of high net
worth individuals. Given that Singapore is ever reliant on
foreign investments, a tough stance against financial crime
is necessary to protect her reputation as a clean
and trusted financial centre.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.