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Singapore To Strengthen Anti-Money Laundering Rules

by Mary Swire,, Hong Kong

01 November 2011

During a recent speech for the Wealth Management Institute, the Managing Director of the Monetary Authority of Singapore (MAS), Ravi Menon, said that Singapore welcomed legitimate funds from Europe, or anywhere else, seeking to be managed out of Singapore, but not illicit funds seeking shelter from scrutiny.

He considered that Singapore is seen to be the ideal base for the intermediation of that growing Asian wealth due to its political and economic stability, transparency in governance, and sound and predictable regulation, together with strong capabilities in asset management, foreign exchange and derivatives trading, coupled with deep and liquid capital markets.

However, Menon stressed that the financial sector must be kept clean.

“While cross-border crimes have become increasingly sophisticated, Singapore is vulnerable to being used as a conduit for illicit funds,” he added. “We need to guard against financial flows relating to corruption, terrorism, politically exposed persons, and weapons proliferation. More recently, efforts by various governments to strengthen tax enforcement have increased the risk of undeclared monies flowing to Singapore.”

Menon confirmed that MAS is fully committed to safeguarding the integrity and reputation of Singapore as a clean financial centre, and already has a strong legal and regulatory framework on anti-money laundering (AML) and counter financing of terrorism (CFT), in line with international standards; and a rigorous regime of supervision to monitor compliance by financial institutions.

Having reviewed Singapore’s regulations and supervisory and enforcement actions, the Financial Action Task Force assessors concluded: “Singapore’s AML/CFT sanctions regime is effective, proportionate, and dissuasive.”

Nevertheless, Singapore is now considering a tougher penalty regime for violations of AML/CFT; intends to make criminal the laundering of proceeds from tax offences to send a clear message that it neither wants nor will tolerate illicit inflows; and will step up its enforcement resources to deal with suspicious transactions reported by financial institutions.

It will also strengthen cross-border co-operation to fight trans-national financial crime, and will step up vigilance against suspicious flows of funds arising from external developments.

With regard to the latter, Menon was sceptical that Singapore is benefiting from an inflow of hot monies, “especially from Europe, supposedly following the adoption of enhanced exchange of information provisions among European Union countries,” as tales of large inflows of funds from Europe into Singapore are “vastly exaggerated.”

He pointed out that, “according to the Boston Consulting Group, European wealth is estimated at just 10% of the USD900 billion offshore assets under management in Singapore and Hong Kong. … As one banker puts it, the emergence of Singapore and Hong Kong as wealth management hubs has to do with more Asian wealth being retained in Asia rather than a flight of new funds to Asia.”

Nonetheless, he concluded that Singapore “must remain vigilant against potential negative spill-overs of illicit funds triggered by external developments. Recently, when Switzerland signed bilateral treaties with the United Kingdom and Germany on tax-related matters, MAS issued a set of guidelines as a pre-emptive step to guard against any potential inflows of illicit funds.”

MAS guidelines reminded financial institutions that they have a key role to play in preserving the integrity of our financial system, and safeguarding it from being used as a haven for illegitimate funds or as a conduit to disguise the flow of such funds. “This vigilance,” he emphasized, “should be extended to all forms of suspicious flows, be they from tax evasion or corruption.”

TAGS: money-laundering | compliance | tax | business | tax information exchange agreement (TIEA) | law | banking | Singapore | enforcement | offshore | agreements | standards | regulation

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