The Singaporean financial regulator reacts to a major report into its controls against dirty money.

The Monetary Authority of Singapore, the Asian city-state’s regulator, has played down some shortcomings of its anti-money laundering and national risk assessment frameworks as stated by a global body.

In a joint statement issued by the Monetary Authority of Singapore, the Ministry of Finance and the Ministry of Home Affairs, the regulator boasted the strength of its framework on the back of “satisfactory” grades for a majority of its undertakings. However, the FATF recently voiced concerns over exposure of Singapore to international financial crime and the need for some institutions to raise their game. (FATF is the Financial Action Task Force, a group set up by major countries to fight dirty money.)

In its report, FATF said: “Singapore has a strong legal and institutional framework to fight money laundering (ML) and terrorist financing (TF). Singapore’s AML/CFT coordination is highly sophisticated and inclusive of all relevant competent authorities. Authorities have a reasonable understanding of their ML/TF risks, and are taking steps to mitigate them.”

But the report went on to warn that “the level of understanding of the ML/TF risks varies among financial institutions and DNFBPs [designated non-financial businesses and professions] with the latter generally demonstrating a less mature understanding of ML/TF risks”. The report urged the city-state to perform risk assessments on money laundering/terror finance for “all types of legal persons (private companies, public companies, foreign companies, etc.) and legal arrangements”.

The fight against money laundering is a hot issue in the region. In May this year, the MAS moved to revoke a banking licence from BSI’s Singapore business, citing gross misconduct around handling of money linked to 1MDB, the state-run fund in Malaysia. The watchdog is also probing failings of a number of banks over the same issue (UBS, DBS, Standard Chartered and Falcon Private Bank). Punishments are likely. 

The FATF has subsequently denied any linkage between such affairs and the pre-arranged and periodical assessment it carried out for the report. 

The group blamed MAS’s poor performance grading of its enforcement capacity on unfortunate timing of the assessment, noting a number of penalties it had recently issued against banks over complex fraud cases, thereby contradicting the report’s conclusions.

Although ratings in the report gravitate around satisfactory, and although MAS’s AML/TCF coordination framework was lauded as being "highly sophisticated and inclusive", FATF said it has found gaps in MAS’s capacity to act on the information passed on by banks.

“Singapore has prosecuted few foreign predicate ML cases outside of wire transfer frauds involving money mules/shell companies, and has confiscated low amounts of proceeds,” the report argued, giving the performance of the authority a “low” rating.

MAS, however, said the FATF’s findings, due to the timing of the FATF’s onsite visit (17 November - 3 December 2015 with final conclusions presented to the executive body of the institution in June 2016) did not account for sanctions such as the highly publicised action in the BSI case. MAS said the report also did not take account of recent probes into other banks, which MAS deems of significant complexity.

Singapore legal and regulatory authorities announced on 21 July they had found “control failings” and other shortcomings at DBS, Standard Chartered, Falcon Private Bank, Singapore Branch, and UBS as a result of investigations into possible laundering of money connected to the fraudulent Malaysian state-run fund 1MDB, as reported earlier.

Recommendations
The FATF’s 2012 recommendations, which serve as international standards for the global public servant community, say countries should ensure a range of “effective, proportionate and dissuasive sanctions, whether criminal, civil or administrative, available to deal with natural or legal persons…that fail to comply with AML/CFT requirements”.

However, this news service notes that the FATF does not seem to define in any publicly available documents the notions of effective, proportionate and dissuasive sanctions, leaving authorities to do this in its place.

The FATF was not available to reply to this news service’s questions on the matter and may update in due course.

Among other improvements expected from MAS is that its national risk assessment should reflect the relatively high exposure Singapore has to money laundering, terror finance and arms proliferation crime.

“The nexus between transnational threats, the inherent risk faced by Singapore as one of the world’s largest financial centres, and vulnerabilities within the system is not sufficiently reflected in Singapore’s NRA,” the report stated.

Among those inherent vulnerabilities specific to the state, the size and foreign exposure of Singapore’s private banking and asset management industry coupled with the territory’s position as an international trade and transportation hub got first mention.

“Given the complexity and large volume of trade financing services offered in Singapore, this banking sub-sector is also exposed to a higher level of ML/TF risk,” the report contended.

Singapore’s location in a region where several terrorist groups operate actively and have carried out attacks in the last 10 years made the territory even more appealing for perpetrators, the report said.