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Singapore Designates Tax Crimes As Money Laundering

by Mary Swire,, Hong Kong

11 October 2012

Reiterating its commitment to align its legal and policy regime with global requirements, the Monetary Authority of Singapore (MAS) has issued a consultation paper on the designation of tax crimes as money laundering (ML) ‘predicate offences’ in Singapore.

It was confirmed that Singapore is fully committed to safeguarding its financial system from being used to harbour proceeds from tax crimes. In particular, in September 2011, the MAS reminded financial institutions (FIs) in Singapore to remain vigilant against any suspicious inflow of funds in anticipation of agreements between foreign jurisdictions to resolve outstanding tax issues, whilst plans were announced in October last year to criminalize the laundering of proceeds from serious tax offences.

As part, it was said, of those efforts to protect the integrity and reputation of Singapore as an international financial centre, the MAS has now also confirmed that a broad range of serious tax crimes will be made ML offences in the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act from July 1, 2013. “Wilful and fraudulent tax evasion are serious tax crimes,” it was said, “involving omissions, falsifications or fraudulent conduct perpetrated with wilful intent to evade tax or to assist others in evading tax.”

The range of tax crimes, covering both direct and indirect taxes, will be comparable to the practices of other OECD jurisdictions and key financial hubs that have designated tax offences, such as Australia, Hong Kong, the Netherlands and the UK.

With the designation, FIs will have to apply the full suite of the Anti-Money Laundering/Countering the Financing of Terrorism measures, as contained in the relevant MAS Notices, to prevent the laundering of proceeds from serious tax crimes in Singapore.

This involves the conduct of rigorous customer due diligence and transactions monitoring, as well as proper reporting of suspicious transactions. FIs must adequately identify and assess tax-related risks and take action to appropriately manage and mitigate those risks. The consultation paper proposes that FIs must develop and implement policies, controls and procedures to effectively detect and deter the laundering of proceeds from wilful or fraudulent tax evasion through the financial system.

That will include supplementing existing client acceptance and ongoing transactions monitoring with tax-specific red flag indicators, as well as critically reviewing existing clients to assess the tax legitimacy of assets booked. FIs should also establish proper escalation policies for managing high-risk clients, including appropriate senior management approval procedures.

The MAS has invited interested parties to provide feedback on the implementation framework, as well as suggestions to facilitate practical and effective implementation. Comments should reach the MAS by December 9, 2012.

TAGS: money-laundering | compliance | tax | tax compliance | law | banking | financial services | Singapore | enforcement | legislation | standards | legislation amendments | services

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