What Singaporeans need to know about money laundering

In an inaugural report on money laundering and terrorist financing risks, Singapore has said certain sectors e.g. money-changers, pawnbrokers, and others were identified for further study.

Singapore houses the regional offices of some of the region’s top financial institutions with an estimated amount of total assets under management at around S$1.4 trillion ($1.02 trillion), according to the MAS.

The report stated that "relevant controls are in place" for financial institutions, including supervision by MAS, record keeping, transaction monitoring, and rigorous customer due diligence measures.

However, it has identified remittance agents, money-changers (see below), Internet-based stored value facility holders, pawnbrokers as well as corporate service providers as sectors where "controls are relatively less robust".

"Relevant government agencies will be strengthening the legislative and supervisory framework through the year to address the risks in these sectors more effectively," it said. The Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap. 65A) (“CDSA”), is already in place.

The CDSA criminalises the laundering of benefits of “criminal conduct” and “drug trafficking” committed in or outside of Singapore (together, the “prohibited activities”).

The provisions of the CDSA are applicable to all persons, including lawyers.

This resonates with a criminal case of Regina v I K [2007] EWCA 491 the Court of Appeal, Criminal Division in London.

The court allowed an appeal by the Revenue and Customs Prosecutions Office under section 58 of the Criminal Justice Act 2003 against a previous ruling that the persons involved in the cheat obtained a pecuniary advantage as a result of criminal conduct within the meaning of section 340(2) of the UK’s Proceeds of Crime Act 2002 (POCA).

This case turned a previous decision R v Gabriel [2006] EWCA Crim 229 its head and concluded that cheating the Tax Revenue of unpaid tax and VAT (GST in Singapore) could be criminal property for ‘money laundering’ purposes.

Broadly, the facts of the case centred on a money service business called Kaz Money Exchange (“KME”) in London which was used to launder almost Sterling £6 million criminal cash. SK was the owner of KME. It was the prosecution case that his son IK assisted him in running KME.

On 6 December 2003, two men were stopped at the door of KME by investigators and one of the men was carrying a box of fruit and hidden under the fruit was Sterling £100,000 in cash. The cash had come from MR had a two-unit grocery and greengrocery shop about 100 metres away from the head office of KME.

There was evidence that the cash deposits made (totalling Sterling £200,000) were undeclared takings from trading of the greengrocery business. It was the prosecution case that MR the greengrocer had siphoned off his undeclared turnover and sent the money out of the jurisdiction via KME.

When the records of KME were analysed following the arrest of SK and MR, it was discovered that, although approximately Sterling £60 million had been deposited into the KME sterling account, a smaller sum was shown in the daily reconciliation sheets.

The case in point was whether the undeclared takings constituted a SK’s benefit from criminal conduct or whether it represented such a benefit, in whole or part and whether directly or indirectly within section 340(3)(a) of the Proceeds of Crime Act 2002 in UK.

Whilst there was no suggestion of wrongdoing by the accountant in Regina v I K [2007] above, this UK case is another possible reason for Singapore advisors to ensure that at an initial meeting with prospective clients they are informed not only of a Tax Office’s potential interest and penalty armoury for non-declared takings but also that any underdeclaration could constitute a criminal offence within Proceeds of Crime or Money Laundering Acts with the consequent implications.