The Singapore financial regulator recounts successes in fighting money laundering and flagged where next moves are coming from.

Singapore’s financial regulator has lauded financial institutions in the Asian city-state for helping to fight money laundering and warned that crypto-currencies and other new channels present new threats.

“Going forward, combatting proliferation financing will remain a priority risk area for Singapore. Sanctions evasion methods continue to rise in sophistication and complexity, and FIs must evolve their detection capabilities in tandem. We have observed during our inspections a number of successes in banks detecting and deterring such illicit behaviour,” Ho Hern Shin, assistant managing director (banking and insurance), Monetary Authority of Singapore, told a conference yesterday.

In one case, Ho Hern Shin referred to ship-to-ship transfers, which can be entirely legitimate but also used to conceal transportation of sanctioned goods. She said that a bank succeeded in using “non-traditional data” to spot illicit deals. In this case, the bank, having financed an oil shipment involving a port that posed higher risks, conducted checks with the International Maritime Bureau. The checks revealed that the vessel veered close to the territorial waters of a sanctioned country, and subsequently, IMB could not verify the discharge of cargo at the port that was listed on the trade documents provided. From these red flags, the bank filed an STR and terminated the transaction.

Cryptos
Turning to the crypto-currency issue, Ho Hern Shin said the recently enacted Payment Services Act will introduce a regulatory framework for digital payment token services. 

“Such services, while still nascent in Singapore, can present significant ML/TF risks due to the anonymous and borderless nature of the transactions they enable,” she said.

Setting up AML and other requirements will create more legal and regulatory certainty for this fast-growing area, she said, and foster legitimate innovation. She went on to say that the regulator said it is also carrying out thematic checks on firms to keep track of abuses of “shell corporations” and other structures set up to launder money.

“Shell companies in particular have recently come under increased global scrutiny, as they have featured in several high-profile cases,” she said.

Ho Hern Shin gave some real-life examples of where these tests had brought problems to light.

“One bank noted that a customer had no clear economic purpose for maintaining a bank account in Singapore. Further due diligence by the bank revealed that the director of the customer was connected to several other corporate accounts, which similarly belonged to foreign-owned companies without an operating presence here,” she said. “Further, there were suspicious transactions such as flow-through transactions, as well as frequent wire transfers to companies in high-risk jurisdictions, which were not in line with the bank’s understanding of these customers. These companies also had superficial corporate websites that seemed inconsistent with the scale of business implied by their transactions. Because the bank was not able to obtain a satisfactory explanation about these transactions, it filed STRs [suspicious transaction reports] based on the numerous red flags observed and subsequently exited these relationships,” she said. 

“In another example, a bank’s rigour in checking a corporate customer’s sources of funds uncovered that the company had been funded by a problematic company set up by this company’s previous director. There was also adverse news that this previous director was involved in setting up multiple shell companies to evade sanctions. The bank was concerned that the directorship had been changed to mask the previous director’s continued association with this company, as well as several other companies. With further indication that this company could also be a shell company, an STR was filed, and the relationship exited,” Ho Hern Shin said. 

MAS has been at the centre of one of the largest illicit money sagas of recent times. In May 2016 it removed bank licences from Switzerland's BSI and Falcon Private Bank because of these firms' serious failings in handling transactions linked to scandal-hit 1MDB, the Malaysian state-run fund.