Singapore – Singapore’s image as a squeaky clean business hub is under scrutiny amid a massive money laundering scandal that has so far resulted in 10 arrests and the seizure of assets worth of 1.8 billion Singapore dollars ($1.3 billion).
Singapore Police last month arrested 10 foreign nationals – aged 31 to 44 – and raided residences, seizing luxury items including Hermès handbags, Patek Philippe watches, old Macallan whiskey and Bentley and Rolls-Royce cars.
The suspects are all from Fujian in eastern China, but include Cypriot, Turkish, Cambodian and Vanuatu passport holders.
Singapore police said the seized assets were ill-gotten gains from organized crime committed overseas, including scams and online gambling, whose profits were brought into Singapore and filtered through Singapore’s financial institutions. country.
The case highlighted Singapore’s reputation as a well-managed, low-crime financial center, or “Switzerland of the East”.
It’s also bad news for Singapore’s ruling party, which has been rocked by a series of rare political scandals in recent months, including a corruption investigation involving the transport minister.
For potential money launderers, the Southeast Asian city-state may be an attractive option due to its status as a major financial center offering a range of financial instruments, analysts say.
“The large volumes of financial transactions crossing our borders may make it more difficult for regulators to filter out illicit transactions,” said Woo Jun Jie, a senior researcher at the Institute of Policy Studies at the National University of Singapore (NUS ). Al Jazeera.
Strict laws, strict enforcement
Money laundering can be carried out through different channels, from real estate and cryptocurrencies to casinos and listed companies.
Mak Yuen Teen, a corporate governance expert at NUS Business School, said money laundering cases often involve entities located in the British Virgin Islands and other tax havens, where the ultimate beneficial owners do not are not disclosed.
“What worries me is that the rabbit hole is really deep and wide,” Mak told Al Jazeera.
Eugene Tan, associate professor of law at Singapore Management University (SMU), said the city-state is attractive to money launderers because funds are less likely to be viewed with suspicion once they enter in the financial system.
This is due to “our reputation as a trusted financial center with strict laws and strong enforcement,” Tan told Al Jazeera.
Similarly, drug traffickers are willing to transit through Singapore as third countries are less likely to treat passengers from Singapore with heightened suspicion given the country’s ultra-strict drug laws, a Tan said.
“Money launderers are willing to take their chances as the benefits of being able to launder money here make it easier to move funds to other jurisdictions like the UK and EU, rather than laundering money in these jurisdictions,” he said.
Singapore’s image as a “playground for the rich” may also reinforce the perception that its rules are lax, Tan said.
He said that while he was not aware of the gaping gaps in enforcement, “downstream controls appear lax” once the funds are in Singapore’s financial system.
Tan said he had heard of cases where banks accepted financial flows even though suspicious transaction reports were filed.
“In other words, some banks see this as shifting the burden to the authorities,” he said. Where authorities do nothing, some banks are willing to accept the funds in question, he added.
Mak, of the NUS, said the latest case highlighted the responsibility, if any, of other links in the money laundering chain, such as property developers, luxury car dealers, clubs golf and leisure companies, luxury watch dealers and intermediaries such as real estate agencies. real estate agents, accountants and lawyers.
The Council of Real Estate Agencies (CEA), which regulates Singapore’s real estate sector, said it was investigating real estate agents who may have facilitated property transactions linked to the case.
Mak said much of the responsibility lies with banks, which have extensive know-your-customer due diligence policies and suspicious transaction reporting obligations, but these may not be effective.
“In cases of non-compliance, the sanctions imposed are generally quite low and members of the board of directors and senior management must be held accountable. This could encourage a culture that puts profits ahead of ethics and compliance,” Mak said.
“Are we as a country more focused on growing GDP and increasing per capita income rather than doing the right thing? Are our regulators focused more on market development than regulation and enforcement? he added.
In the real estate sector, stories abound of newly arrived foreigners with suitcases full of cash, including cases of tenants paying their rent deposits up front in cash despite not having a work visa or of residence.
Attract the rich
In recent years, Singapore has celebrated its successes in attracting wealthy people to put down roots in the city-state.
The number of single-family offices benefiting from tax incentives by the Monetary Authority of Singapore (MAS) reached 1,100 at the end of 2022, compared to 700 in 2021, Ravi Menon, then managing director of MAS, said in July.
Wealthy foreigners have also been attracted to the Global Investors program, which grants a fast track to permanent residency to investors who meet the criteria for that status, although the program has recently implemented stricter requirements.
Ku Swee Yong, director of property consultancy International Property Advisor, suggested that authorities’ efforts to attract the super-rich could have resulted in “everyone getting in”.
“Because Singapore’s image has been built very well over the past five decades, people might view this money laundering case as a one-off case instead of dealing with what could be a broader problem, system-wide,” Ku told Al Jazeera.
It remains to be seen whether money laundering has “gone under the radar for years” and whether the latest case is indicative of systemic problems, said Anton Moiseienko, a law professor at the Australian National University who studies transnational and economic crime.
“Cases like this provide a litmus test of whether the Singapore government has the capacity to carry out high-level, sophisticated operations. It’s also an opportunity to go back to the drawing board and learn lessons…” Moiseienko told Al Jazeera.
“You don’t want cases to recur and Singapore to be a magnet for dirty money. »
MAS has developed a digital platform, COSMIC, to enable financial institutions to securely share information about customers who exhibit multiple “red flags” that may indicate potential financial crimes.
New rules adopted in June also require property developers to carry out due diligence checks on potential buyers and report any suspicious practices.
Victoria Ting, associate director of Setia Law and a former prosecutor, said that while it is too early to say which stakeholders might be involved in the latest case, Singapore’s regulatory framework is strong.
Singapore has a “high level of adherence” to Financial Action Task Force standards and ranks highly in various independent anti-money laundering indices, Ting told Al Jazeera.
In the 2022 Basel AML Index, which assesses the risk of money laundering and terrorist financing, Singapore ranks 100th out of 128 – where 128 is the lowest risk – ahead of other financial centers like Dubai and Hong Kong .
Ting, of Setia Law, said the current case highlights the effectiveness of Singapore’s authorities and its suspicious transaction reporting system.
“To carry out a raid of this magnitude, with a considerable degree of success, both in terms of people apprehended and property seized, demonstrates the skill and sophistication of law enforcement here,” Ting said.
Singapore authorities have “historically” demonstrated a tough stance against non-compliant entities, she said.
Singapore has previously been involved in a number of financial scandals in which banks have been fined and individuals given jail terms.
Following the 1Malaysia Development Board (1MDB) scandalMAS closed the local branch of Swiss bank BSI for serious misconduct, while former BSI banker Yeo Jiawei was sentenced to 54 months’ imprisonment for various offenses including money laundering.
SMU’s Tan said such scandals had undoubtedly tarnished the city-state’s image.
“The reality is that the scale of the transgressions has left Singaporeans wondering if this is just the tip of the iceberg… As investigations continue, more disturbing news will emerge,” he said. he declared.
Mak said the case exposed flaws in the system and authorities must ensure those arrested pay a heavy price.
“The world will be watching how we handle this situation,” he said.