Global watchdog gives Singapore top anti-money laundering rating, but flags weaknesses in penalties, cooperation
S$3 billion money laundering case showed Singapore's appeal to criminals but also the strength of its response, says the Financial Action Task Force's periodic review.
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SINGAPORE: A global financial watchdog has given Singapore the highest rating for its anti-money laundering framework, though it also flagged shortcomings in the country's penalties and cross-border cooperation.
The Financial Action Task Force (FATF) released its Mutual Evaluation of Singapore on Wednesday (May 6), a periodic review covering the period from 2020 to July last year.
It cited the high-profile S$3 billion (US$2.36 billion) money laundering case in 2023 as "the clearest manifestation of Singapore's ongoing and active implementation of incremental and unique measures to take on those attempting to misuse Singapore's financial system".
The FATF said it showed Singapore's attractiveness to criminals, but also the quality of its law enforcement and political commitment to tackling financial crime.
The case, in which foreign nationals brought in billions derived from overseas remote gambling offences, represented one of the world's largest crackdowns on money laundering that year.
Stemming from the case, an inter-ministerial committee was set up to review and improve Singapore's approach to countering money laundering, terrorism financing and proliferation financing. It has since introduced new measures, including legislative amendments and new information and data-sharing mechanisms.
Singapore's anti-money laundering and counter-terrorism financing regime, and its policy and operational cooperation, are "likely some of the best in the world", the FATF said.
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What is the Financial Action Task Force?
The Financial Action Task Force (FATF) is the global body that sets the standards for how countries combat money laundering, terrorism financing and proliferation financing.
The 40-member organisation establishes rules to help national authorities pursue illicit funds linked to drug trafficking, arms dealing, cyberfraud and other serious crimes.
Singapore has been a member since 1992. Singaporean T Raja Kumar, currently senior adviser at the Ministry of Home Affairs, served as the body's president from 2022 to 2024.
Member countries are periodically assessed through peer reviews, known as Mutual Evaluations, to determine how well their systems measure up to FATF standards. Countries are assessed on two fronts: whether the required laws and regulations are in place, and how effectively they achieve outcomes across 11 areas, including risk management, supervision and enforcement.
Based on their results, countries are placed on one of three monitoring tracks. "Regular follow-up" is the default for those with strong systems. "Enhanced follow-up" applies where major improvements are needed. The most serious is the FATF International Cooperation Review Group process, reserved for countries requiring fundamental reform and direct FATF monitoring. This is the process that can lead to a country being greylisted or blacklisted by the body.
DONE WELL
Singapore is among the first few countries to undergo the fifth and latest round of the evaluation and emerged with a “regular follow-up” status, which applies to members that have done well, said the Monetary Authority of Singapore, Ministry of Home Affairs and Ministry of Finance in a joint statement.
It is the default level for members whose systems have been deemed to have "substantial to high levels of effectiveness and technical compliance".
The two more consequential outcomes are "enhanced follow-up", which calls for major improvements and more intensive monitoring, and the FATF International Cooperation Review Group process, which mandates fundamental improvements and direct FATF oversight.
The result affirmed that Singapore has "a robust and effective framework and process" to tackle financial crime, the three agencies said.
“This assessment is an improvement from Singapore’s fourth-round results in 2016 even though the FATF standards have been significantly enhanced in a number of areas,” they added.
This round placed greater emphasis on the effectiveness of each country's regime, assessed against its risk profile and context.
Singapore was found to have robust governance structures and a sound legal framework, strong operational coordination, a whole-of-government understanding of financial crime risks, and effective cooperation across public and private sectors and with international counterparts.
Entities obligated to safeguard against money laundering and terrorism financing are also supervised through a strong risk-focused system.
Singapore was also found to have a well-established law enforcement system supporting investigations and prosecutions, including the effective use of financial intelligence, strong asset recovery capabilities and international cooperation, the agencies said.
AREAS TO IMPROVE
As with all assessed jurisdictions, the FATF identified areas for improvement.
Money laundering penalties here were found to be low and may not sufficiently deter offenders. While the country engages in strong international cooperation, "there can be delays, and Singapore could make better use of formal cooperation channels".
While Singapore's financial institutions and virtual asset service providers generally demonstrate good awareness of proliferation financing risks, "risk awareness can be improved in certain sectors that are not traditionally subject to FATF obligations, such as representation offices of foreign flag states".
Such offices, the report found, demonstrated "a negligible understanding" of rules around proliferation financing targeted financial sanctions.
Singapore conducted over 11,000 money laundering investigations and 126 terrorism financing probes during the five-year assessment period, which the FATF described as "a very significant amount".
However, it said the country's focus on offences within its borders, while appropriate given its sphere of influence, has "limited impact on pursuing the complex transnational organisations that are targeting Singapore's citizens".
As a hub for company formation and wealth management, Singapore was found to have a "reasonably good understanding" of how domestically incorporated companies can be misused, but a "more limited understanding" of risks tied to legal arrangements, unregistered foreign companies and complex structures.
SINGAPORE WELCOMES RECOMMENDATIONS
"Singapore remains firmly committed to complying with the FATF standards, and welcomes the FATF's recommendations," the three agencies said, acknowledging that open economies will continue to face those seeking to exploit their financial systems.
They said Singapore will study the recommendations and adopt them in a risk-proportionate manner, while building on existing strengths, including expanding COSMIC, the information-sharing initiative currently involving six major banks.
The country will press on with efforts to combat financial crime, they added, to protect its standing as a trusted financial, business and trading hub while remaining open to legitimate businesses and investors.
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