Why are money launderers leaving Singapore?

Singapore is dubbed ‘Asia’s business district’. It has also earned the dubious epithet of a ‘tax haven’. Singapore tops the choice list of many money launderers to stash their illegal money. That Singapore, for many of these launderers, is behaving a bit strangely. Many feel Singapore is no more a place to ensconce with laundered money. That’s why those who siphoned off money from their own countries now want to slip out of Singapore. Their new destinations are places like Dubai or Cyprus, where they can keep their money safe. The question is why are the money launderers leaving Singapore?

Unauthorised use of money or illegitimate use of money is a concern everywhere in the world. According to the United Nations, the amount of illegal money in the world ranges from USD 800 billion to USD 2 trillion, which is 2 to 5 per cent of total GDP of the world. One billion equals 1000 million while one thousand billion makes a trillion. Meanwhile, money in offshore accounts in Singapore is manifold compared to the country’s economy. According to the Monetary Authority of Singapore (MAS), Singapore’s GDP is USD 486 billion while the country manages wealth worth USD 4 trillion, 80 per cent of the amount comes from outside the country.  

Barack Obama in 2010 passed an important law in the United States titled ‘Foreign account tax compliance act (FATCA)’. The act was intended to stop tax evasion of US citizens. As per this act, any bank or financial institutions that are not US-based are also bound to provide information about the bank account of any US citizens. No one would be eligible to do business with the US if they do not comply with this. Many other countries made similar laws later. Meanwhile, G-20 members and 47 OIC member states in 2014 developed a ‘common reporting standard’ for automatic exchange of information to better fight tax evasion and ensure tax compliance. It was enforced in 2017. Due to such activities, even Swiss Banks and others are being obliged to provide information. Moreover, banks around the world are being penalised big sums for harboring those who evade tax.

Singapore woke up to reality mainly due to the 1Malaysia Development Berhad scandal. The state fund was created mainly for Malaysia’s economic development. A total of USD 4.5 billion was embezzled from the fund. Some individuals including then prime minister Najib Razak pocketed that money. China-born businessman Low Taek Jho is the alleged mastermind of the scam.  Low Taek Jho and Najib Razak’s stepson Riza Aziz was one of the main financiers of the production of Hollywood movie ‘The Wolf of Wall Street' in 2013. Journalists unearthed the scandal while digging about the finance of the blockbuster movie. The fund was embezzled using the banking system of six countries. Singapore was one of the countries. This led to a loss of reputation as well as internal pressure for Singapore. Later, the country started to take up a purging drive to clean it up. But it had already become known as a tax haven.

In bid to do something to steer clear of that bad reputation, the country formed The Financial Action Task Force in 2016 and passed the Anti-Money Laundering and Terrorism Financing Act in 2018.  As these laws failed in damage control, the country took up stricter laws. Singapore passed ‘New Anti Money Laundering and Terrorism Financing’ bill in 2023, with effect from 28 June. This left the money launderers of different countries harbored in Singapore—who bought properties, luxury hotels, cars --cringing.

The incident started back in 2016. Two real estate agents were fined for not providing information on suspicious transactions. One is related to the sale of a bungalow in Sentosa Cove at a price tag of 23.8 Singaporean dollars and the other is about the sale of a new condominium unit. These properties were sold to two individuals who later were found guilty. The new law, enacted after much scrutiny, is intended to stop recurrence of such incidents.

Real estate developers have been following some new rules since 28 June. As per the new rules, for now on, housing companies must carry out customer due diligence (CDD), inform the authorities concerned about suspicious transactions and keep transaction records for five years. That means details of the buyer, his/her country of origin and sources of money must be verified. Buyers must have a real identity. No properties will be sold to any unknown persons or people who wish to remain anonymous or use a pseudonym. Any violation will result in a fine of maximum 100,000 Singapore dollars. Anyone involves in these activities either voluntarily or knowingly, will face imprisonment and have their business licences suspended for maximum 12 months. A 53-page “Guidelines for Developers on Anti-money Laundering and Counter Terrorism Financing” has also been published detailing how the entire process will work. This new guidelines will also be applicable even if transactions are made before passing this law.

The Monetary Authority of Singapore, central bank of the country, is developing a digital platform, COSMIC, which stands for “Collaborative Sharing of Money Laundering/Terrorism Financing (ML/TF) Information & Cases”, together with six major commercial banks in Singapore: namely, DBS Bank, Oversea-Chinese Banking Corporation (OCBC Bank), United Overseas Bank (UOB), Standard Chartered Bank (SCB), Citibank, and HSBC.

COSMIC mainly focuses on three key financial crime risks in commercial banking. These are, misuse of legal persons, misuse of trade finance for illicit purposes, and proliferation (e.g. nuclear and chemical) financing.

This digital platform will allow financial institutions to securely share with one another, information on customers who exhibit multiple “red flags” that may indicate potential financial crime concerns, if stipulated thresholds are met. COSMIC will make it easier for financial institutions to detect and thereby deter criminal activity.

On 9 May, the Parliament of Singapore passed the Financial Services and Markets (Amended) Bill 2023, which is related to this initiative. Under this new law, persons hiding under offshore accounts or shell companies will be identified. The COSMIC will be in operation at the second half of 2024, and once it opens people who have built fortune there using the identity of other people and conducted transactions of laundered money in banks with their name or anonymously, will be in danger.

The Singapore Police Force (SPF) seized about 1 billion Singapore dollars in assets and rounded up 10 people including woman in one of the biggest anti-money laundering operations in the history of the country. Investigation is on against 12 others and eight more suspects are on the run. These people live in luxurious apartments in upscale area and led a luxurious life. Singapore police said prohibition of disposal orders were issued against 94 properties and 50 vehicles, with a total estimated value of more than 815 million Singapore dollars during these raids. Police froze more than 35 bank accounts, with over 110 million Singapore dollars. Other seizures included a huge amount of liquor and wine, 11 documents with information on virtual assets, two gold bars, more than 250 expensive bags and watches, over 120 mobile phones and computers, and over 270 pieces of jewellery and 23 million Singapore dollars in cash.

The Monetary Authority of Singapore said they will no longer tolerate the misuse of Singapore’s finance sector for illegal activities. The Commercial Affairs Department (CAD), the principal white-collar crime investigation agency in Singapore, conducted these raids. In addition to intelligence information, respective banks and financial institutions provided the Monetary Authority with information on their suspicious transactions. Bank accounts were opened using fake document and false information.

On 18 April, the home ministry and the Smart Nation and Digital Government Office (SNDGO) of Singapore recommended to take sterner stance on these issues and tougher action against those who launder money, use illegal money and help others do such things. Sources said the Singapore police investigated 1,900 people and brought 200 to book over these allegations between 2020 and 2022, and this number is likely to rise. Police said persons facing investigation are aged between 16 and 75 years.

If this becomes the situation, many people will, of course, want to flee Singapore, and this is the truth.

This report appeared in the online edition of Prothom Alo and has been rewritten in English by Galib Ashraf and Hasanul Banna