So, Singapore is embarrassed about the 1MDB scandal’s happening on its watch (disclaimer: I was quoted in a local periodical on the subject). As part of its response, the Monetary Authority of Singapore (MAS) issued a report trumpeting some praise from FATF:
But Has Room for Improvement in Specific Areas
Singapore, 27 September 2016…The Financial Action Task Force (FATF) has assessed that Singapore has a strong framework for anti-money laundering and countering the financing of terrorism (AML/CFT). This is Singapore’s first assessment since the FATF Standards were enhanced in 2012 to counter the increasing threat posed by money laundering and terrorism financing (ML/TF).
Singapore Has Effective Outcomes in Key AML/CFT Areas
2 Singapore has made significant enhancements to its AML/CFT regime since its last FATF assessment in 2008. The latest assessment determined that Singapore’s AML/CFT regime achieved effective outcomes in the following key areas:
- Strong regulatory and supervisory framework. Singapore has a strong framework for preventive measures, supervision, enforcement, confiscation of the proceeds of crime, and targeted financial sanctions against terrorism and proliferation financing.
- Reasonable assessment and mitigation of risks. Singapore has highly sophisticated national coordination structures for AML/CFT. These structures, driven by the National AML/CFT Steering Committee, were instrumental in coordinating AML/CFT policy development, identifying and evaluating ML/TF risks and overseeing actions to mitigate these risks. Resources are allocated in line with the identified risks. Singapore authorities work closely with the private sector to ensure a sound understanding of the government’s AML/CFT initiatives.
- Good international cooperation. Singapore has a good framework for international cooperation on AML/CFT. The authorities make high quality requests and provide high quality assistance through a wide range of channels for international cooperation, including mutual legal assistance, intelligence sharing, and extradition. Law enforcement agencies have informal channels to expeditiously assist and seek cooperation from their foreign counterparts. The assistance rendered by Singapore has supported complex transnational investigations and helped foreign jurisdictions to secure ML convictions.
- Robust supervision of financial sector. Singapore’s financial sector is robustly supervised by the Monetary Authority of Singapore (MAS) and AML/CFT obligations are clearly understood by most financial institutions (FIs). MAS’ regular engagement of the FIs has fostered a deeper understanding of AML/CFT issues within the industry. Supervisory and enforcement actions by MAS include a thorough system of follow-up to ensure that deficiencies are promptly addressed, and this has resulted in positive changes in FIs’ behaviour in implementing their AML/CFT controls.
- Prompt integration of financial intelligence in law enforcement. Singapore has in place well-functioning systems and mechanisms that enable the prompt integration of financial intelligence into law enforcement processes. Such intelligence has effectively contributed to investigations into ML and predicate offences.
- Effective regime to combat proliferation financing. Singapore promptly implements targeted financial sanctions pursuant to the relevant United Nations Security Council Resolutions against financing the proliferation of weapons of mass destruction. Singapore has in place robust information sharing mechanisms that facilitate strong coordination amongst the relevant government agencies, and ensures that the private sector has a sound understanding of their obligations to freeze assets and not provide financial services with respect to proliferation financing.
Singapore Will Take Further Steps to Strengthen AML/CFT Regime
3 The FATF assessment recommended some specific areas for improvement in Singapore’s AML/CFT regime. Singapore will take follow-up actions in these areas:
- Enhance the accessibility of information on beneficial ownership of legal persons and arrangements to law enforcement agencies and supervisors. Singapore will consider steps to enhance the transparency of information on beneficial ownership of companies, limited liability partnerships and trusts, to ensure that this information is more readily accessible to law enforcement agencies and supervisors for combating ML/TF.
- Strengthen AML/CFT regime for precious stones and metals dealers (PSMDs). Singapore will study how best to implement AML/CFT requirements for the broader PSMD sector. AML/CFT requirements have already been imposed on all pawnbrokers, and a cash-transaction reporting regime with due diligence requirements was implemented on the broader PSMD sector in 2014.
- Enhance risk assessment for all legal persons and the non-profit sector. Singapore will conduct more comprehensive ML/TF risk assessments of legal persons (i.e. companies and limited liability partnerships), non-profit organisations, and express trusts, and develop policies as appropriate to address any identified risks.
- Strengthen supervision of the non-financial sector. Sector supervisors will conduct more outreach and inspections to enhance ML/TF risk understanding and controls in the non-financial sectors (such as company service providers and accountants), building on the recent extension of AML/CFT requirements to these sectors.
- Strengthen FIs’ risk understanding and controls. MAS will step up industry engagements to strengthen FIs’ understanding of emerging risks and typologies, as well as share best practices in controls and risk management. These steps will build on existing efforts by MAS to adopt a more intrusive approach to AML/CFT supervision and take tougher actions against serious breaches.
- Pursue more cases of complex transnational ML offences. Singapore’s law enforcement agencies, who have been pursuing complex transnational ML cases, will strengthen their capabilities to identify and investigate more of such cases. The Financial Intelligence Unit under the Commercial Affairs Department will develop more sophisticated data analytics capabilities as part of this effort.
- More proactively target and pursue confiscations of criminal proceeds. Singapore’s law enforcement agencies will more proactively target and pursue the confiscation of proceeds of foreign offending, proceeds that have moved overseas, property of equivalent value and instrumentalities of crimes.
A Robust Regime to Combat Terrorism Financing (TF)
4 Singapore’s regime to combat TF was not accorded sufficient credit by FATF assessors who cited the lack of criminal prosecutions and convictions for TF offences. Singapore maintains that it has a robust regime to combat TF using the Internal Security Act (ISA) which had effectively dealt with 17 TF cases in the past without recourse to prosecution. More recently, six individuals were charged and convicted of TF under the Terrorism (Suppression of Financing) Act. However, as these convictions took place after the FATF assessment, Singapore’s demonstrated efforts were not taken into account.
5 The FATF assessment was a useful and important exercise which not only validated Singapore’s areas of strength in combating ML/TF, but also identified areas where there is scope to strengthen the regime further. Singapore has invested substantial efforts over the years to enhance its AML/CFT regime, and remains fully committed to continue doing so.
6 The FATF report is available on the FATF website at the following link: www.fatf-gafi.org/publications/mutualevaluations/documents/mer-singapore-2016.html.
it should be noted that, while the regulatory regime has been praised, its enforcement has been found somewhat lacking.