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Singapore Money Laundering Case: Ensuring Financial Due Diligence

13 August 2024

Court sketches: Singapore money laundering case | correctcounts.com — Court sketches of some suspects involved in the Singapore money laundering case | Source: amlintelligence.com

The $3 billion dollar money laundering case is one of the biggest in Singapore’s history. The anti-money laundering investigation began in August 2023 (1) and is ongoing as authorities continue investigating persons of interest, 17 suspects on the run, and professionals like bank employees and real estate agents who did not report suspicious transactions. (6)

The case attracted global interest as it involved a complex web of foreign transactions from various countries, billions of dollars worth of assets, multiple banks, and even family offices. (5)(6).

This article briefly summarises the $3b Singapore money laundering case and explains the importance of financial due diligence in preventing money laundering.

The $3b Money Laundering Case: A Brief Summary

Police conducted a raid on 15 August 2023, arresting ten foreign suspects linked to the case. From August 2023 to June 2024, all ten suspects were charged, sentenced, and some were deported for various crimes, including forgery and money laundering. (7)

The last of the ten suspects were sentenced to jail on 10 June 2024. (2) The total value of assets involved in this case has exceeded $3 billion as of January 2024. (3) So far, $900 million in assets have been seized from the ten sentenced suspects, with the remaining $2.1 billion linked to the 17 suspects on the run. (7)

A scandal of this scale has raised questions about banks’ adherence to Singapore’s laws for anti-money laundering. There are also doubts about the accuracy and rigour of banks’ screening processes since these suspicious financial transactions had been allowed to go through despite eventually being flagged out. (4)

Above all, Singapore’s reputation as a safe financial hub in the region has also been questioned. (5)

Impact of the Singapore Money Laundering Case

1) Investigation of banks

The Monetary Authority of Singapore (MAS) conducted on-site inspections of banks involved in the scandal, including CreditSuisse, Julius Baer, and UOB. (4)

The Singapore authorities also said in September 2023 that they are investigating the internal processes of involved banks to confirm their compliance with Singapore’s rules on anti-money laundering and terrorism financing. The authorities are also investigating whether there had been any professional negligence, such as failing to take adequate measures to counter risks.

2) Increased scrutiny of customers

In the wake of this case, banks like DBS Group Holdings have begun conducting more thorough checks on their high-wealth customers and clients (due to the nature and amount of their high-risk transactions). These measures are part of efforts to step up due diligence processes.

Some measures implemented include: (17)

Requesting for additional documents to verify where money is coming from.
Increasing the waiting period for high net-worth clients to open bank accounts from 1 month to 3 months.
Closing accounts more slowly than usual.
Increasing collaboration with authorities and using technology to conduct more robust checks.

Banks have also reiterated that staff undergo regular training on detecting fraud and anti-money laundering practices. (4)

How Accountants Ensure Financial Due Diligence

Financial due diligence in accounting plays a crucial role in preventing and detecting fraud, even more so in an age of new technology, where digital assets like cryptocurrency can also be used for money laundering. (8)

Accountants, organisational boards and financial institutions all have a responsibility to detect and prevent financial crime by implementing preventive and due diligence measures.

1) Preventive Measures

Preventive measures are the first line of defence against money laundering. They’re usually implemented by accountants who oversee and process transactions involving large sums of money, such as buying and selling real estate or precious stones and metals.

Implementing preventive measures at this stage is crucial, as this is where large sums of laundered money are most likely to enter the economy.

All accountants in Singapore must adhere to the Accountants (Prevention of Money Laundering and Financing of Terrorism) Rules 2023 implemented by ACRA (Accounting and Corporate Regulatory Authority).

“Know Your Customer” (CDD) Processes

One measure is the “Know Your Customer” or customer due diligence (CDD) process. Accountants need to conduct thorough “Know Your Customer” processes when customers open bank accounts and make large transactions.

CDD typically works by doing customer background checks and verifying their identity. (11)

Obtain and review the customer’s identification documents, professional, business, and financial history.
Verify the customer’s identity by cross-checking documents with proof of identity like their Identification Card (NRIC), passport, driver’s licence and public records.
Risk assessment assesses customer risk profile by reviewing their background, behaviour, financial activity, connections to political figures, and mentions in media reports. (13) Suspicious behaviour or activity, such as refusal to provide information or seemingly false information, should be flagged in a STR (suspicious transaction report). (14)
Collect other records for additional verification, like public records, financial statements, and business activity records.
Monitor customer activity, an ongoing process that requires accountants and banks to monitor customers’ financial and business statuses and update their risk profiles when needed.

Accountants and banks will also use these verification methods as specified in the regulatory guidelines for “Know Your Customer” processes provided by MAS. (12)

Verified telephone number
Address confirmation
Confirmation of employment status
Proof of salary from a recent bank statement
Lawyer or notary public certification of ID documents
Financial due diligence for businesses

Screening Customers Against Sanctions Lists

Accountants also need to screen their clients against MAS-provided sanctions lists or other sources of information about terrorist financing or money-laundering individuals and entities.

If the client comes from a country that’s known to be high-risk, i.e. a country that doesn’t have enough legislation or measures for preventing or detecting money laundering and terrorist financing, accountants handling the transactions need to do more comprehensive checks and monitor these clients.

Under the Corruption, Drug Trafficking and Other Serious Crimes Act, accountants must flag any suspicious transactions to the STRO (Suspicious Transaction Reporting Office) under the Ministry of Law. (9)(10)

Information on identifying suspicious transactions (red flag indicators) is also publicly available for anyone – in any trade or profession – to file a report. (9)

2) Regulatory Compliance with MAS

MAS is the main regulatory and supervisory body for financial institutions in Singapore. It ensures regulatory compliance through laws, codes, directions and notices. (15)

MAS’s anti-money laundering Singapore unit is also tasked with investigating individuals and entities suspected to be involved in money laundering. (18)

MAS requires banks (their boards, directors, and senior management) to do regular financial due diligence assessments on their clients to prevent terrorism financing and money laundering. (16)

Conclusion

The Singapore money laundering case has led to several reforms in Singapore’s financial landscape and is also a lesson on the importance of financial due diligence.

Accountants and finance professionals have a duty to stay updated on tools and best practices used to detect and report money laundering activities, protecting investors’ interests.

References

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