Supporting Statement by Mr Alvin Tan, Minister of State, Ministry of Trade and Industry and Ministry of Culture, Community and Youth, and Board Member of MAS, on behalf of Mr Lawrence Wong, Deputy Prime Minister and Minister for Finance, and Chairman of MAS, on Singapore’s Anti-Money Laundering Regime
Mr. Speaker Sir,
1 As Minister Teo has mentioned, financial institutions (FIs) play a critical gatekeeper role to keep criminals out of our financial system. Singapore is one of the world’s leading financial centres, and our FIs handle millions of transactions every single day. The vast majority of these are legitimate transactions that support the functioning of our economand allow international trade and investments to be intermediated through Singapore.
2 The international connectedness, diversity and depth of our financial ecosystem also make us attractive to criminals, who will seek to exploit these very qualities to hide their tracks and launder their ill-gotten gains.
3 MAS is keenly aware of this risk. For decades now, MAS has been working together with our FIs to identify and disrupt such illicit activities.
- This is MAS’ priority. Singapore’s hard-earned reputation as a trusted and well-governed international financial and trade hub with a strong rule of law, is at stake. Furthermore, it is the right thing to do.
- Our dual objectives of building a dynamic, thriving financial centre on one hand, and maintaining a clean system on the other hand, are mutually reinforcing – we cannot and will not trade one against the other.
B. MAS’ AML/CFT STRATEGY
4 Minister Teo outlined the government’s three-pronged strategy to deal with money laundering risks. Let me describe how MAS applies this approach to bolster our financial sector’s defences against money laundering and terrorism financing (ML/TF) risks.
PREVENTION - Holding FIs to strict AML/CFT requirements
5 The first prong of our strategy is prevention. MAS imposes strict AML/CFT requirements on FIs. These requirements are line with the standards set by the Financial Action Task Force (FATF) and international best practices. Amongst these requirements:
- FIs must perform due diligence checks on their customers. This includes verifying their customers’ identities and monitoring customer accounts to detect suspicious customer transactions or activities.
- For higher risk customers, FIs must perform additional checks to establish if the customer’s wealth and funds are legitimate. Where an FI detects suspicious customer behaviour, it must promptly report this to the Suspicious Transaction Reporting Office (STRO) and take appropriate mitigation measures, such as placing restrictions on the account, or where warranted, terminating the customer relationship.
6 Beyond imposing requirements and expectations on FIs, MAS regularly alerts FIs to emerging risks and criminal typologies. MAS also publishes guidance papers and circulars to highlight good practices, to raise risk awareness and industry standards. MAS has also strongly encouraged our financial industry to deploy data analytics, to further sharpen their detection capabilities.
- These efforts have produced results. For example, FIs have improved their ability to pick up suspicious behaviour amongst their corporate customers, and flag specific transactions, characteristics or even networks of concern by filing STRs.
7 Ms Usha Chandradas asked about the anti-money laundering checks conducted on single family offices (SFOs) before tax incentives are granted, and whether such incentives have been granted to any of the entities associated with this case. Please allow me to explain.
- All SFOs applying for MAS’ tax incentives are required to show proof that they have opened accounts with FIs in Singapore. Before onboarding the SFOs as customers, MAS expects FIs to conduct robust due diligence checks on them.
- In addition, before granting these tax incentives, MAS screens the individuals and entities involved in the SFO against databases and other information sources for money laundering, terrorism financing and other adverse news.
8 Ongoing investigations and supervisory engagements suggest that one or more of the accused persons in this case may have been linked to SFOs that were awarded tax incentives. These SFOs were subject to the checks I just outlined. At the point of application, no adverse information of note related to the individuals and entities had surfaced. Nonetheless, MAS is reviewing our internal incentive administration processes, and will tighten them where necessary.
9 More broadly and even before this case, MAS had already in July 2023 announced plans to strengthen its surveillance and defence against potential ML risks posed by SFOs
DETECTION - Working closely with FIs and other agencies to tighten defences against major and emerging threats
10 The second prong of our strategy is detection. This involves partnering FIs and other agencies to detect bad actors and also tighten our collective defences. The efforts of individual FIs, or even individual government agencies, are not enough on their own. Criminals layer their nefarious activities across multiple FIs and other parties to evade detection. Let me elaborate on the partnerships we already have in place to thwart these illicit activities.
- As Minister Teo mentioned earlier, the AML/CFT Industry Partnership (or ACIP) is one key platform, through which we collaborate with the financial industry.
- These efforts too have borne fruit, for example, with the conviction of the former Chief Financial Officer of Agritrade International for her role in deceiving FIs to grant at least SGD$776 million in credit facilities. On 17 January 2023, she was sentenced to an imprisonment term of 20 years.
11 To strengthen our detection capabilities, we are introducing COSMIC, which stands for “Collaborative Sharing of ML/TF information and Cases”. COSMIC will augment ACIP’s efforts. I spoke about COSMIC in this House in May this year, but will reiterate to refresh Members’ memory. COSMIC is a digital platform which MAS is co-developing with six major banks in Singapore. It will allow participant FIs to share with one another information on customers whose profile or behaviour exhibits potential financial crime concerns, which they currently cannot due to customer confidentiality obligations. The bill we passed will allow participating FIs to share such information through COSMIC. One of the key risks COSMIC will target is the misuse of corporate or other legal vehicles to obscure the nature of transactions or the ownership of assets. This is a typology used by the suspects in this case. With COSMIC, FIs and authorities should be able to detect such risks more promptly.
12 Associate Professor Razwana Begum Abdul Rahim, Miss Rachel Ong and Mr Derrick Goh asked if MAS can consider expanding participation in COSMIC beyond FIs to include additional parties, as well as whether we can expedite the launch of COSMIC.
- We are working expeditiously on COSMIC and are on track to launch it in the second half of 2024, if not earlier. MAS will permit participant FIs to share information they receive from COSMIC with their local and overseas affiliates, provided certain conditions to ensure confidentiality are met. This will prevent bad actors from establishing relationships with overseas affiliates of the six banks.
- Because of the sensitivity of the information that can be shared on COSMIC, MAS is proceeding carefully with its rollout. At this stage, there are no plans to extend COSMIC to entities beyond the financial sector, or for COSMIC information to be shared directly with FIs overseas or with international counterparts. Nevertheless, MAS will review information from COSMIC as part of our overall surveillance efforts and distil key information for sharing with relevant government agencies and international supervisory counterparts, to combat risks that cut across sectors and borders.
13 Besides upcoming platforms like COSMIC, and ongoing partnerships between the public and private sectors and amongst FIs, there is also robust collaboration across government agencies. For instance, MAS and MHA co-chair the Risk & Typologies Group (RTIG).
- RTIG is an inter-agency body overseeing the identification, assessment and mitigation of money laundering and terrorism financing risks. It involves all relevant supervisory and law enforcement agencies and the Suspicious Transactions Reports Office (STRO).
- RTIG allows agencies to share information on surveillance outputs such as networks and subjects of concern for collective action.
14 These efforts to raise awareness, sharpen detection and tighten collaboration across the industry and Government have borne fruit.
- As Minister Teo mentioned, over 80% of STRs filed between 2020 and 2022 were filed by FIs. The quality of these STRs has improved over time, as STRO and MAS gave guidance and feedback to FIs. This has facilitated more timely responses to illicit activities.
- This case is a prime example of how this effort has made a difference. FIs detected many of these illicit activities, filing numerous STRs on the persons of interest prior to the case breaking publicly. These STRs helped law enforcement agencies to identify and take enforcement action against these individuals. In many instances, the FIs took additional precautions and actions, including closing these individuals’ accounts.
- Through RTIG, law enforcement and supervisory agencies were also alerted to similar criminal typologies. In April 2022, MAS issued a circular to warn FIs of these emerging typologies, and engaged major FIs to tighten their controls.
15 We saw how this close and effective cooperation made an impact on the case as the Police commenced its operations.
- For example, MAS worked closely with our FIs to rapidly identify tainted funds so the Police could seize these funds swiftly. This prevented the suspects from dissipating their ill-gotten gains. Some of the funds in this case were seized very shortly before there were attempts to move them, because of this close cooperation.
- Our FIs also responded promptly to Police orders to produce information, which helped Police build their case against these suspects.
16 Mr Desmond Choo asked how surveillance and international partnerships between MAS and other regulators have helped to disrupt money laundering activities and syndicates. As money-laundering networks frequently operate across borders, international cooperation is critical to combating them. MAS actively works with our international supervisory counterparts on common areas of concern, such as in the 1MDB and Wirecard cases.
ENFORCEMENT - Taking firm enforcement action
17 The third thrust or prong of our approach is enforcement. This complements the first two prongs of prevention and detection. Where there are breaches of MAS’ requirements, MAS takes firm enforcement action against FIs as well as key FI staff. MAS has done so before. In the 1MDB case, we imposed significant penalties for AML/CFT violations, permanently banned some individuals and senior management from working in Singapore’s financial sector, and even closed down two banks for egregious AML/CFT breaches. We will not hesitate to take firm enforcement action again against errant FIs and their key staff, should we encounter similarly material weaknesses.
18 I have explained, with examples, how the three key prongs (Prevention, Detection and Enforcement) in MAS’ strategy that underpin our financial sector’s defences against money laundering and terrorism financing (ML/TF) risks, have made an impact, including how they have led to the detection of many of these bad actors.
19 But we cannot be satisfied with these efforts alone. We must and we will do more. The fact that more than $1.45 billion in financial assets have so far been seized in relation to this case is concerning. MAS is conducting detailed supervisory reviews and inspections of the financial institutions with a major nexus to this case.
20 MAS will also take a critical look at how the suspects were able to access financial services in Singapore. Some of them have been charged for presenting forged documents to FIs. MAS will assess whether FIs had upheld robust AML/CFT practices, including performing adequate checks on their customers’ sources of wealth and funds, monitoring customer transactions to pick out suspicious ones, and taking all reasonable steps to mitigate against ML/TF risks. This will complement and feed into the work of the Inter-Ministry Taskforce to be led by Minister Indranee, which MAS will also be part of.
21 Finally Mr. Speaker Sir, Ms Foo Mee Har asked an important question about how this case has affected Singapore’s reputation as a leading wealth management hub. Indeed, there had been some speculation that this money laundering operation has hurt our standing as an international financial centre. On the contrary, I would say that this case is clear evidence of our unflinching commitment to keep Singapore clean. While criminals will vary their tactics to conceal their illicit activities, we will deploy all the resources and powers at our disposal to thwart them, bring them to justice, and continually strengthen our defences against them.
22 Sir, I believe that our approach to this case will in fact enhance Singapore’s global standing as a trusted financial centre with a strong rule of law and that we will continue to keep the trust and confidence that Singaporeans and investors have in us.