Business News

Singapore banks ramp up anti-money laundering measures after $2.8 billion scandal

Banks demand more documents and take longer to open accounts

Singapore’s banks are taking longer than usual to perform due diligence on clients and closing accounts in some cases, sources said, as procedures tighten after the financial hub’s biggest money laundering scandal, which involved $2.8 billion in assets.

Banks such as OCBC, Citigroup and UOB are demanding more documents than usual in some cases to verify sources of wealth, two of the sources said. Also, wait times for wealthy individuals opening bank accounts have risen significantly from the one to three months typical before the scandal, said the sources who spoke on condition of anonymity as the matter is sensitive.

One source, a wealth manager with a Singapore bank, said after the scandal that only “high-quality clients with good profiles and substantial assets under management” could expect to get a private banking account opened within three months.

The Monetary Authority of Singapore (MAS) said in a statement that financial firms must verify customers’ identities, establish the sources of wealth and funds of higher-risk clients, and keep track of transactions. “These requirements are not new,” MAS said in response to a Reuters request for comment. “Given the attributes and size of their transactions, high net-worth individuals are often subjected to more stringent checks by financial institutions.”

Police seize assets from luxury real estate to gold bars

The changes in due diligence by banks come after police in August arrested and charged 10 foreigners, all from China, a big source of fund inflows, in Singapore’s most dramatic swoop of its kind.

Singapore banks ramp up anti-money laundering measures after $2.8 billion scandal

Authorities have seized about $2.8 billion worth of assets, from luxury real estate and cryptocurrencies to gold bars, designer handbags and funds parked in banks such as Credit Suisse and Julius Baer.

The suspects allegedly used shell companies and fake invoices to launder money from China through Singapore’s banking system. They also allegedly used the funds to buy properties in Singapore, Australia and Canada, as well as luxury goods such as Rolex watches and Hermes bags.

The police said they were investigating possible offences under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act, which carries a maximum penalty of 10 years’ jail and a fine of up to $500,000.

Singapore faces reputational risk as a financial hub

The scandal comes at a time when Singapore is experiencing a sharp jump in asset inflows from China, Hong Kong and elsewhere, drawn by its relative political stability, low taxes, and policies favourable for setting up funds.

Singapore has been ranked as one of the least corrupt countries in the world by Transparency International, and has a reputation for being a clean and efficient financial centre. However, some analysts warn that the scandal could tarnish its image and attract more scrutiny from regulators.

“The money laundering case is a wake-up call for Singapore to tighten its anti-money laundering regime and enhance its cooperation with other jurisdictions,” said Mr Song Seng Wun, an economist at CIMB Private Banking. “It also shows that Singapore is not immune to the risks of illicit financial flows and needs to be vigilant against them.”

Mr David Kuo, chief executive of The Motley Fool Singapore, a financial advisory firm, said that while the scandal was unlikely to affect Singapore’s attractiveness as a financial hub in the long term, it could prompt some investors to be more cautious.

“Singapore has always prided itself on being a safe haven for investors who want to park their money here,” he said. “But this case shows that there are some bad apples who can exploit the system and cause problems for everyone else.”

Leave a Reply

Your email address will not be published. Required fields are marked *