Digital payments, precious metals among high-risk areas, as Singapore updates money laundering risk assessment

SINGAPORE: Precious stones and metals, and digital payments are two new areas identified as being at a higher risk of money laundering activity, revealed Singapore’s latest national risk assessment.

The report, published on on Thursday (Jun 20), also showed that Singapore’s key threats in the area stem from foreign and domestic scams – including through deepfakes and artificial intelligence – carried out by criminal syndicates typically based overseas. 

The updated Money Laundering National Risk Assessment (ML NRA) is part of Singapore’s efforts to maintain the effectiveness of its enforcement regime, amid an evolving economic and geopolitical landscape, the Ministry of Home Affairs (MHA), Ministry of Finance and Monetary Authority of Singapore (MAS) said in a joint press release.

The last report was released in 2014. The latest edition captures new risks observed in the past decade by Singapore’s enforcement agencies, its financial intelligence unit – the Suspicious Transaction Reporting Office (STRO) – and private sector entities and foreign counterparts.

Money laundering has been thrust into the spotlight in Singapore after a S$3 billion case, which involved 10 foreigners and assets such as hard cash, luxury properties, branded goods, cryptocurrency and alcohol. All of them have since been convicted and sentenced.

However, work on the latest report had begun over two years ago, even before news about the probe broke last August.

ECONOMIC AND GEOPOLITICAL SHIFTS

Economic and geopolitical shifts have only increased the risks Singapore faces as an international financial, trading and transit hub, the agencies said.

Criminals could aim to exploit its open financial system and business infrastructure to launder or move illicit funds and assets, while also using Singapore as a location to convert their ill-gotten gains to other assets, such as real estate or precious stones and precious metals, they said.

The risks are also increased with the prevalence of technology that enables rapid and large cross-border transactions.

Calling the report a cornerstone document in Singapore’s anti-money laundering regime, Mr David Chew, director of the Singapore Police Force’s Commercial Affairs Department, said the national strategy focuses on prevention, detection and enforcement.

Mr Chew is also Singapore’s head of delegation to the Financial Action Task Force (FATF). Singapore currently holds the presidency at the 40-member global money laundering and terrorism financing watchdog. Its next evaluation will be in August next year.

He said that Singapore has always remained open to clean businesses, and that it is determined to maintain trust and confidence in its financial ecosystem.

“We will take a zero tolerance stance towards money laundering. We will also do our best to prevent criminals from abusing our financial ecosystem. Upon detection, we will track them down and take them to task,” said Mr Chew.

HIGHER RISK SECTORS

Singapore remains exposed to key foreign money laundering threats, “namely corruption, tax, as well as trade-based money laundering”, said Mr Chew.

“In addition, cyber-enabled fraud – popularly known as scams – as well as foreign organised crime, are two new key money laundering threats of concern, posing significantly higher risk than that was observed in our last NRA.”

According to the agencies, the banking sector still poses the highest risks of money laundering, as banks are more easily exploited due to their role in facilitating large volumes of financial transactions.

They also serve customers who are more likely to launder money, including those from jurisdictions with more of such risks.

Among the non-financial sectors, corporate service providers pose higher risks as they could be used to carry out such crimes, such as the incorporation of shell companies with complex ownership structures to hide the identities of the criminals.

The real estate, licensed trust companies, casinos and precious stones and metals sectors also pose a higher risk of money laundering, said the agencies.

Within the financial sectors, digital payment token (DPT) services providers are also at a higher risk, along with cross-border money transfer service providers, such as remittance agents, and external asset managers.

There has been an increase in reported cases involving DPTs and the ways in which they can be exploited, said the agencies.

While DPT activities in Singapore form a small portion of global activities, local authorities are still closely monitoring the sector.

“We do note that across the years since the last (assessment), a lot of sectors actually have improved upon their controls as well as risk awareness,” said Ms Thong Leng Yeng, executive director of the Anti-Money Laundering Department at MAS.

“However, the global threats, as well as risk environment, have actually also increased in complexity. It is therefore important for industries, as well as sectors across the economy, to ensure that they pay attention to this ML NRA, and take reference from it to actually ensure that their risk assessment is up to date, as well as to ensure that their mitigating measures are effective, as well as sufficient, to address these risks.”