Singapore flags money laundering risk in banking sector

The Monetary Authority of Singapore has updated its key Money Laundering National Risk Assessment to better reflect the increasingly challenging risk landscape, as the Asian banking hub moves to contain the fallout from its largest-ever money laundering scandal.

The central bank highlighted the country’s banking sector, especially the wealth management space, as posing the highest risks in terms of money laundering, given the country’s position as an international financial centre.

“Banks have higher exposure to money laundering threats and are more easily exploited by criminals due to their role in facilitating large volumes of transactions in the financial system and servicing customers with higher money laundering risks, including those from jurisdictions with higher money laundering risks,” the MAS said in a statement.

The MLNRA brings together the observations from Singapore’s law enforcement agencies, regulatory bodies and private sector entities to provide an overview of the risk landscape. This marks the first time the report has been updated since the inaugural edition was published in 2014.

Singapore is inherently exposed to money laundering due to the amount of international banking operations run out of the state, said Colin Jarraw, partner at Virtus Law (Stephenson Harwood (Singapore) Alliance).

“As at the end of 2022, total assets managed by Singapore-based asset managers amounted to S$4.9tn [$3.6tn], with 76 per cent of Singapore’s assets under management originating from outside Singapore,” he said.

The update to the MLNRA comes following a S$3bn money laundering scandal last year linked to online gambling in Asia, which led to the conviction of 10 Chinese nationals, the last of which came in June of this year. Multiple banks, including DBS, Citi, Credit Suisse and Julius Baer, were implicated in the money laundering saga, the worst of its kind in the country’s history.

Last year, the Financial Times reported that following the initial arrests in the case, banks increased their scrutiny of new and existing customers from countries including China to identify sources of wealth. The length of time to open a private bank account increased, from around one month to up to four months.

Rory Doyle, head of financial crime policy at Fenergo, says events like the conflict in Ukraine and the size of the Chinese population in Singapore are both boosting financial activity and increasing pressure on the country as a regional financial hub, with the country’s reputation as a secure destination only increasing the inflow of funds.

Referencing the MLNRA update report, Jarraw notes that individual bank accounts were used more often in domestic crime threats, while corporate bank accounts were more often exploited for foreign crimes, with risks also coming from within banks themselves.

“Bank employees themselves are also — being within the system and being familiar with the system — well placed to discover and to take…