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Asia Pacific: Singapore

Singapore is continuing the implementation of its anti-money laundering and counter-terrorism financing regime in compliance with international standards.

Overview

Singapore continues to develop as an international financial centre. It is generally seen as having sound economic and financial fundamentals and a legal and regulatory environment that is conducive to business. This, together with its strategic location, skilled and educated workforce, and high standards of infrastructure, have led to it being used as a regional hub for many multinational corporations, including a large number of financial institutions. For example, as at October 2007, there were 112 financial institutions (six local and 106 foreign) holding commercial banking licences in Singapore. The importance of the financial services sector to Singapore's economy has meant that the Singaporean Government has given high priority to money laundering issues.

Singapore was assessed under the IMF/World Bank Financial Sector Assessment Programme (FSAP) in August 2003. The FSAP report noted Singapore as having in place a sound and comprehensive legal, institutional, policy and supervisory framework for anti-money laundering (AML) and counter-terrorist financing (CTF).

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Statutory AML/CTF regime

Legislation

The AML and CTF regime is contained in the following statutes:

Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act

The Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDTOSC) criminalises money laundering, provides for confiscation of proceeds of crime and imposes record keeping and reporting obligations on financial institutions.

The money laundering offences are contained in sections 43 to 47 of CDTOSC, which make it an offence for any person to:

  • enter into, or be otherwise concerned with, an arrangement that allows another person to retain, control or invest the benefits of drug trafficking or criminal conduct where the person knows or has reasonable grounds to believe the other person was a drug trafficker, engaged in criminal activities, or benefited from drug trafficking or criminal conduct and did not disclose this information to an authorised officer;
  • acquire, possess, use, conceal, disguise, convert, transfer or remove from Singapore any property that represents the person's benefits from drug trafficking or criminal conduct;
  • conceal, disguise, convert, transfer or remove from Singapore any property that represents another person's benefits of drug trafficking or criminal conduct, knowing or with reasonable grounds to believe the property represents the benefits of the other person's drug trafficking or criminal conduct; or
  • acquire property for no or inadequate consideration, or have possession or use such property in circumstances where the person knows or has reasonable grounds to believe the property represents the benefits of drug trafficking or criminal conduct.

For each money laundering offence, the penalty for individuals is a fine of up to S$500,000 or seven years' imprisonment, or both, and for non-individuals a fine of up to S$1 million.

The reporting obligation contained in s39 of CDTOSC requires any person who knows or has reasonable grounds to suspect that any property:

  • represents the proceeds of;
  • was used in connection with; or
  • is intended to be used in connection with,

an act that may constitute drug trafficking or criminal conduct and who obtains that information in the course of their trade, profession, business or employment, to disclose that information to a Suspicious Transaction Reporting Officer. The penalty for failure to report these suspicions is a fine of up to S$20,000.

Additionally, s37 of CDTOSC imposes an obligation on financial institutions to retain records of financial transactions for five years.

The CDTOSC can be found at http://statutes.agc.gov.sg/

Terrorism (Suppression of Financing) Act 2002

The Terrorism (Suppression of Financing) Act makes it an offence to:

  • provide or collect property that will be used to commit any terrorist act, knowing or having reasonable grounds to believe that the property would be used for this purpose – s3;
  • collect property, provide or invite a person to provide, or make available property, or financial or other related services, intending that it will be used for a terrorist act, or knowing or having reasonable grounds to believe it will be used for a terrorist act or for the benefit a person carrying out a terrorist act, or to benefit any terrorist or terrorist entity – s4;
  • use or possess property that will be used for terrorist purposes – s5;
  • deal in any property that is owned or controlled by a terrorist or terrorist entity – s6(1)(a);
  • enter into or facilitate any financial transaction that relates to property of a terrorist or terrorist entity – s6(1)(b); and
  • provide any financial or other related services for the benefit , or on the direction, of any terrorist or terrorist entity – s6(1)(c).

For each offence the penalty is a fine not exceeding S$100,000 or a prison term not exceeding 10 years, or both.

Section 8 of the Act imposes reporting requirements. Any person who has in their possession, custody or control any property belonging to any terrorist or terrorist entity, or who has information about any transaction or proposed transaction relating to terrorist property, must inform the Commissioner of Police.

Failure to notify is an offence punishable by a fine not exceeding S$50,000 or to a prison term of up to five years, or both.

The Act can be found at http://statutes.agc.gov.sg/

Monetary Authority of Singapore (Anti-Terrorism Measures) Regulations 2002

The Monetary Authority of Singapore (Anti-Terrorism Measures) Regulations 2002 apply CTF measures specifically to all branches and offices of financial institutions incorporated in Singapore (whether located in Singapore or elsewhere) or incorporated outside Singapore but located in Singapore. The Regulations prohibit those financial institutions from providing or collecting funds, resources or services for terrorists and from dealing with terrorist property.

The Regulations also require financial institutions that have possession, custody or control of terrorist property, or that have information about any transaction or proposed transaction relating to terrorist property, to report that fact or information.

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Financial sector guidelines

The Monetary Authority of Singapore (MAS) regulates most aspects of financial licensing and has issued a series of regulatory guidelines (Notices) that cover AML requirements, such as know-your-customer, verification of identity, and reporting and record keeping.

For banks, the main notice dealing with AML/CTF matters is MAS Notice to Banks No. 626, last issued in July 2007. Notice 626 requires banks to carry out a number of customer identification measures, including:

  • prohibit anonymous accounts and relationships with 'shell' banks;
  • verify the identification of customers using reliable documents or other means;
  • assess the risk of money laundering or terrorist financing posed by financial services and customers that do not involve face-to-face contact and implement specific and effective customer due diligence (CDD) measures to address those risks, ensuring that CDD measures for non-face-to-face customers are as stringent as those performed where there is face-to-face contact;
  • take additional verification measures, if necessary, where checks fail to verify identity or give rise to the suspicion that the information provided is false;
  • understand ownership and control structures of a customer (if a legal person);
  • identify directors of corporate customers;
  • identify and verify beneficial owners;
  • obtain satisfactory evidence of the identity of applicants and authorised signatories who are acting on behalf of another person;
  • review the adequacy of identification information on existing customers on the basis of materiality and risk, and perform CDD on existing customers at appropriate times;
  • obtain and maintain information on the purpose and intended nature of the business and perform ongoing monitoring of business relations and transactions;
  • apply simplified CDD measures where the risk of money laundering or terrorist financing is low;
  • apply enhanced CDD measures to politically exposed persons and other higher risk persons;
  • pay special attention to business relations or transactions from, or in, countries with inadequate AML/CTF measures;
  • ensure that intermediaries who perform CDD are themselves AML/CTF compliant;
  • obtain information about the business, reputation, and AML/CTF controls of any correspondent bank and obtain senior management approval before establishing new correspondent banking relationships; and
  • identify and verify occasional customers, particularly those who engage in transactions above S$20,000.

Notice 626 sets out the timing for completion of CDD measures and the consequential steps to be taken if CDD measures cannot be satisfactorily performed.

It incorporates an element of risk sensitivity. Simplified CDD measures will be permitted, but enhanced CDD will be required in other situations where the risk of money laundering and terrorist financing is higher.

It also requires banks to maintain appropriate records, including in relation to wire transfers, implement adequate systems for identifying, detecting and reporting suspicious transactions and implement appropriate AML policies, procedures and training that take into account money laundering threats from new and developing technologies. Banks incorporated in Singapore are required to put in place measures to prevent money laundering and terrorist financing at overseas branches and subsidiaries.

Similar MAS Notices apply to other financial services providers. Notice 824 applies to finance companies, Notice 1014 applies to merchant banks and other Notices apply to life insurers, investment advisers, money changing and remittance licensees, approved trustees and trust companies and capital market services licensees and holders of stored value facilities.

MAS Notice no 626 and other Notices can be found on the Monetary Authority of Singapore website.

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Lawyers and Accountants

Lawyers and accountants in Singapore are subject to the reporting requirements of CDTOSC and the Terrorism (Suppression of Financing) Act 2002.

The Law Society of Singapore has recently amended the Legal Profession (Professional Conduct) Rules to require all advocates and solicitors to comply with new AML/CTF Rules. These AML/CTF Rules (which are contained in Chapter 11D to 11I of the Rules) require lawyers to carry out CDD, maintain records, report suspicious transactions, and implement and maintain an AML/CTF Program. The Law Society has also issued a Practice Direction, Prevention of Money Laundering and the Funding of Terrorist Activities, which sets out how a lawyer/law practice should apply the new Rules.

The Institute of Certified Public Accountants has also issued a guide for auditors on money laundering and terrorism financing (ED/SAP 19 Guidance to Auditors on Money Laundering and Terrorism Financing). This can be found at the Institute of Certified Public Accountants of Singapore website or by contacting the Institute.

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