Singapore Warns International Banks Over Money-Laundering

Financial regulator slaps second biggest collective fine in history on nine institutions, bans 4 people

By: Toh Han Shih

Singapore has put international banks on notice that the island republic is not going to allow itself to be used as a bolt-hole for dirty money, introducing new and stronger laws against money laundering, as well as levying the second largest collective fine for money laundering in Singaporean history. The action was taken in relation to a massive S$3 billion (US$2.4 billion) money laundering scandal which broke out in August 2023 when authorities arrested 10 mainland Chinese and seized their assets, as Asia Sentinel reported on August 18, 2023.

“My experience with the Singapore authorities is that once they got their teeth into something like this, they will not back off, said Steve Vickers, the chief executive officer (CEO) of SVA, a Hong Kong-based political and corporate risk consultancy. “So there is a warning for foreign banks that if you have been caught or if you have imported staff from other institutions that have had problems, you’re probably importing a culture of such abuse into your own organization.”

“Singapore is especially stringent on money laundering activities in order to protect its reputation as a financial center,” an ex-banker told Asia Sentinel. Globally, he said, large fines have become normalized as an incentive to compliant behavior by banks in preventing money laundering.

“MAS will work closely with financial institutions to promote more consistent implementation of AML/CFT (Anti-Money Laundering/Counter Financing of Terrorism) measures,” said Ho Hern Shin, Deputy Managing Director of the Monetary Authority of Singapore (MAS). “Where there are serious failings by FIs (financial institutions) and their employees, MAS will not hesitate to take firm action.”

On July 4, MAS announced it slapped fines totaling S$27.45 million (US$21.5 million) on six banks and three other financial institutions in relation to the 2023 money laundering case. The regulator has banned four people from Singapore’s financial sector for three to six years and reprimanded several other individuals.

The S$27.45 million fine is the second largest collective financial penalty which Singaporean authorities have imposed for money laundering, behind the S$29.1 million in penalties meted out to eight banks for their role in an international money laundering case involving 1MDB in 2017. 1MDB is a defunct Malaysian sovereign wealth fund from which billions of dollars were embezzled and laundered.

Most of the nine financial institutions fined on July 4 are the Singapore branches of foreign financial institutions, namely Trident Trust, Citibank, Julius Baer, LGT Bank (controlled by the royal family of Liechtenstein), Credit Suisse, and UBS. Credit Suisse and UBS are now one combined Swiss bank. The local financial institutions which were fined are United Overseas Bank (UOB), UOB Kay Hian, and Blue Ocean Invest Pte. Ltd. (BOIPL). Three current executives of BOIPL and one former executive of BOIPL are banned from Singapore’s financial sector for three to six years, including its CEO Tsao Chung-yi and chief operating officer Wong Xuan Ling.

“Mr. Tsao and Ms. Wong had failed as senior managers to ensure that the AML/CFT policies and controls in BOIPL kept pace with significant growth in its business in the three years since the company was set up. They failed to develop and implement adequate policies and controls in multiple areas,” MAS said.

None of the nine detected or adequately followed up on significant discrepancies or red flags noted in the information that should have cast doubt on some customers’ purported source of wealth and which indicated an increased risk of money laundering, MAS said. In some cases, there was no corroboration of significant aspects of the source of wealth, the regulator added.

“A number of foreign banks were quite lax in this process and focused more on generating as much revenue as they could from sales as opposed to aggressively stamping on money laundering,” Vickers explained. “The limited budgets applied to KYC (know your clients) in the commercial area have resulted in less senior people spending less money and doing less work on money laundering, Many institutions have these problems.”

UBS, the largest Swiss bank, is a repeat offender in money laundering. In 2016, MAS fined the bank S$1.3 million for not doing enough to prevent money laundering related to 1MDB. In December 2021, a Paris court upheld a verdict that UBS was guilty of promoting illegal banking services and money laundering and ordered it to pay €1.8 billion (US$2.1 billion) of penalties, less than the original fine of €4.5 billion. In May 2024, the Swiss finance ministry fined UBS CHF50,000 (US$62,940) for failing to report red flags in connection with accounts held by the Yemeni ex-president Ali Abdullah Saleh.

“Ultimately, Singapore banks try to learn from their money laundering-related mistakes. However, as they are profit-driven entities, the executives must continue to find and execute business to justify their salaries and bonuses,” said the ex-banker. “No matter how much effort and money is spent on internal compliance at banks, money laundering-related infractions will always threaten to occur because of the incentive-based compensation at profit-driven banks and financial institutions.”

If a lawsuit against Standard Chartered’s branch in Singapore succeeds, it will result in the largest ever financial penalty on a bank in Singapore. On June 30, liquidators of 1MDB from US financial services firm Kroll said it has filed a US$2.7 billion lawsuit in Singapore’s High Court, seeking to hold the bank accountable for its role in allegedly enabling fraud to be committed against 1MDB.

On July 1, Standard Chartered issued a statement saying it would “vigorously defend against the lawsuit,” noting that “the liquidators acting for these companies have publicly stated that these were shell companies which did not engage in any legitimate business, and were linked to fugitives Low Taek Jho and his associate Eric Tan… They operated under false pretences and acted as a conduit for funds misappropriated from 1MDB to launder monies.”

The transactions at issue date back to 2010, Standard Chartered said, adding that “we reported the transaction activities of these companies, both before and at the time we shut their accounts in early 2013, and fully cooperated with the investigating authorities.” In December 2016, MAS fined Standard Chartered S$5.2 million over the 1MDB scandal.

Stronger laws against money laundering

The Singapore Parliament passed a new and tougher anti-money laundering law, The Anti-Money Laundering and Other Matters Act, on August 6, 2024. Certain provisions in the Act came into effect on November 14, 2024, announced by the Singapore Ministry of Home Affairs one day earlier. The new provisions reduce the requirements for the prosecution to prove beyond reasonable doubt that the money launderer knew he was dealing with criminal proceeds, making it easier to prosecute money launderers, the ministry explained. The new provisions enable the Singapore government to better deal with absconded suspects, through depriving them of the financial gains of their money laundering activities, if they refuse to return to Singapore, the ministry said.

“The Act reflects Singapore's unwavering commitment to tackling financial crime. Through improved inter-agency data sharing and other measures, the Act is expected to strengthen Singapore's existing anti-money laundering regime. Going forward, organizations may need to refresh their compliance strategies and ensure that robust systems are in place to align with the updated regulatory framework,” said a report of Baker McKenzie Wong & Leow, on October 1, 2024.

A report by Norton Rose Fulbright, a global law firm, on September 2024 said, “The AML Act is but one example of the latest steps taken to strengthen Singapore’s AML/CFT landscape; it sits amongst a swathe of recent legislative and regulatory changes and developments targeted at tightening the city-state’s AML/CFT laws and controls while, at the same time, not being unduly restrictive towards business.

“Singapore’s efforts to ensure that its AML/CFT regime keeps pace with evolving trends, standards, and typologies are ongoing and continuous. Relevant stakeholders should therefore actively monitor and be attuned to key developments in this space,” Norton Rose Fulbright added.

Toh Han Shih is a Singaporean writer in Hong Kong and a regular contributor to Asia Sentinel