Singapore announces further AML reforms

The IMC review draws lessons from a major AML case discovered by police in early 2022 from examination of suspicious activity reports (SARs). It concerned the use of suspected forged documents to substantiate sources of funds in bank accounts, filed by financial institutions (FIs) and other companies. In August 2023, ten suspects were arrested in a series of simultaneous raids at multiple locations across Singapore. They were found to have registered companies and set up bank accounts for them to use USD3 billion of criminal funds. As of July 2024, all ten subjects have been convicted of money laundering and other offences, and sentenced to imprisonment of between 13 and 17 months for the offences that they had committed in Singapore. In addition, investigations are ongoing against 17 persons who are not in Singapore, involving approximately USD2 billion of seized assets.

These and other events have released a flood of new AML measures in the jurisdiction in the past two years, culminating in the passage of the Anti-Money Laundering and Other Matters Act on 6 August 2024. Among other things, it introduces amendments to enhance data sharing among government agencies, simplify processes for handling seized properties and align casino operator regulations with Financial Action Task Force (FATF) standards. It also removes the need for prosecutors to prove a direct link between the underlying criminal conduct and the monies allegedly laundered in Singapore.

However, the report by the IMC envisages further controls. It emphasises the importance of preventing criminals from misusing corporate structures; tighter controls by FIs; strengthening the regulation of intermediaries such as corporate service providers; and confiscating proceeds of crime.

The role of gatekeepers who provide client services is particularly stressed in the report. The report says that uneven implementation practices have been observed across and within sectors, despite the existing AML controls. 'We must thus strengthen the execution of these controls, and sector supervisors must provide more comprehensive guidance to gatekeepers', says the report.

New legislation will clarify the requirements for real estate salespersons, estate agencies, developers, lawyers and law practice entities to conduct customer due-diligence and ongoing monitoring of their clients. In addition to the existing Estate Agents (Prevention of Money Laundering and Financing of Terrorism) Regulations, Housing Developers (Anti-Money Laundering and Terrorism Financing) Rules 2023, Sale of Commercial Properties (Anti-Money Laundering and Terrorism Financing) Rules 2023, and Legal Profession (Prevention of Money Laundering and Financing of Terrorism) Rules, these gatekeepers will be required to identify and take reasonable measures to verify the identities of the individuals that their clients may be acting on behalf of. It is already required for them to identify and verify the identities of the ultimate beneficial owners of businesses.

Gatekeepers must also take appropriate mitigating measures, such as enhanced due-diligence, when dealing with higher-risk or suspicious clients. In cases where there are higher AML risks, they will have to identify the source of wealth that the client intends to use for transactions or deposit into a bank account. They will also have to file timely SARs if they have reasonable grounds to suspect illicit activity or origins, as well as obtaining corroborative evidence or conducting independent checks to make a reasonable assessment on the plausibility of clients' sources of wealth, with proper documentation of the assessments. 'The extent of checks and corroboration should be guided by a risk-based approach, and not unduly hinder legitimate businesses and individuals', says the report.

Another priority will be oversight of corporate service providers. The companies regulator will continue screening prospective companies on a risk-based approach when they apply for incorporation. It will also step up efforts to strike off inactive companies that could be an indicator of shell companies. Such companies will be flagged on the companies registry to alert gatekeepers to potential risks of dealing with them. The recently enacted Corporate Services Providers Act 2024 already provides the registration framework for this, as well policing of nominee directorships. However, the IMC report notes that companies will ‘generally not be struck off unless they are repeatedly non-compliant’ and they will no longer be flagged if they rectify their non-compliance.

Sources

• Singapore Ministry of Finance
• Monetary Authority of Singapore (Inter-Ministerial Committee report, PDF)
• Baker McKenzie
• STEP International News 8 August 2024: Singapore's AML Bill removes need to prove link to predicate offences