Singapore issues Money Laundering National Risk Assessment

Cyber-enabled fraud has been on a meteoric rise, especially since the shift in behaviour prompted by COVID. As such it has been highlighted as one of the biggest money-laundering (“ML”) threats faced by Singapore’s law enforcement agencies, as outlined in its National Risk Assessment (“SG NRA”) issued by the Monetary Authority of Singapore (MAS), Ministry of Home Affairs and Ministry of Finance on 20 June 2024.

Just over ten years have passed since the last SG NRA, and whilst some of the old threats remain the same, the influence and ubiquity of technology are the key drivers behind many predicate crime statistics.

Key findings

According to the report, Singapore’s status as a shipping hub in a strategic location in Southeast Asia, coupled with its position as a leading global business and financial centre exposes the country to considerable ML threats originating from overseas.

Whilst domestic corruption and tax crimes are low, certain aspects of the country’s financial sector are conducive to ML, be it via the private banking system or exploiting the variable capital company structures. Shell companies set up in Singapore can lead to criminals moving vast sums through Singapore in a bid to evade tax in the home jurisdictions, with corruption working in a similar vein with the added conversion of funds into real estate holdings and luxury goods.

Being home to one of the largest ports in the region makes the city-state susceptible to trade-based ML. This can be in various forms such as over- or under-invoicing, round-tripping, and the manipulation of the status of financial and professional intermediaries. Consequently, there has been a notable increase in requests for cooperation from foreign governments and law enforcement agencies to address these issues.

It is important to note that Singapore is not entirely immune to domestic threats.  The free-market nature of the economy and the streamlined corporate laws can inadvertently provide an environment conducive for criminal groups to establish a presence, set up businesses and operate. Organised crime continues to be a significant ML concern, primarily driven by illegal online gambling operations based within Singapore.

But by far the largest increase in criminal activity has been in cyber-enabled fraud. This is not uniquely a Singapore problem: cyber-fraud is now a global trend. Abuse of social media platforms, malicious cyber activities such as ransomware/malware attacks, not to mention simple phishing scams has led to the number of reported cyber fraud crimes increasing by nearly 50% from just under 32,000 in 2022 to over 46,000 in 2023. The SG NRA notes in paragraph 3.5 that Singapore “together with INTERPOL and the Egmont Group, led the development of the Report on Illicit Financial Flows from Cyber-Enabled Fraud issued by FATF”.

Whilst many of the predicate cyber-enabled fraud crimes are committed outside of Singapore, money mules are still being used to launder proceeds through the Singaporean financial system, taking advantage of the vast sums of money flowing through it and the large number of transactions carried out each day.

Other threats

Singapore’s proximity to Malaysia and Indonesia poses additional threats of ML from environmental crime. The increasing significance of this issue was highlighted in the publication of a specific national risk assessment in May 2024.

Unlicensed moneylenders and payment service providers continue to operate in Singapore. The former poses particular challenges for law enforcement, as borrowers who are unable to repay illegal loans with exorbitant interest rates often become victims of exploitation. Sometimes loan agreements are secured through deception, where the borrowers believed they were working with legitimate businesses. The SG NRA found that many leaders of such organisations were working outside of Singapore, while their “subordinates” remained active within the country.

Similarly, the unlicensed money transfer agents (hawala) which enable cross-border transfers of money may appear to their users to be legitimate businesses but are often fronts for criminal organisations.

Drug offences and ML via drug trafficking are closely linked, however, Singapore prides itself on being a relatively drug-free society. The extremely tough penalties meted out in Singapore for such offences act as a strong deterrent and as such, compared to many other countries with a similar status as a geographic hub and with a comparable level of wealth, this is not such a concern from a predicate crime perspective.

What next?

The SG NRA is used to form the basis of the country’s anti-money laundering strategies, policies, and defences. It can be expected that Singapore will continue to put resources into the Anti-Scam Command Office (ASCom) and boost its counter-cybercrime activities and funding.

Cooperation with international law enforcement and other law enforcement agencies of other countries, especially those around the region will be strengthened in the light of Singapore’s perception that most of the crimes discussed are masterminded overseas.

The MAS is likely to issue further guidance to financial institutions on ways to review clients for signs of involvement in cyber-enabled fraud. This move aims to increase scrutiny on typical placement activities such as smurfing – the practice of breaking down large sums into smaller, less conspicuous amounts to avoid detection – and a renewed focus on shell companies.

Environmental crime is already subject to its own risk assessment, however, as seen with this SG NRA, Singapore’s law enforcement agencies and supervisory agencies will continue to stay vigilant and take appropriate measures against environmental crime, so it’s likely that the findings will impact ESG directives issued by the MAS.

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