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Singapore’s Money Laundering Syndicate Scandal

Scandals and crisis are two great indicators of regulatory change. The global financial crisis in 2007 resulted in the biggest shakeup of the financial industry in living memory, possibly ever, and sparked the fintech revolution across the world.  

So, what will happen in the wake of the S$2.8 billion money laundering scandal that has rocked Singapore’s financial market? Recent years have not been kind to the Malay Archipelago, with Malaysia’s 1MDB suffering losses of $4 billion through embezzlement and much of that money being funnelled through Singaporean banks.  

But the MAS (Monetary Authority of Singapore)’ no-nonsense approach to financial crime – most recently evidenced by the imprisonment of a Wirecard AG facilitator, was not enough of a deterrent for at least one group of criminals. A syndicate that manipulated Singapore’s financial system and has taken advantage of its position as one of the least corrupt financial hubs in the world. 

What’s Happened in Singapore? 

In mid-August 2023, Singaporean authorities carried out an island-wide raid and apprehended 10 individuals for anti-money laundering (AML) and fraud activity. A syndicate had been formed across a class of foreign nationals operating in Singapore’s financial hub. They were a curious group which even the most cursory of know your customer (KYC) checks would have revealed.  

The syndicate was multi-national, but many possessed passports from jurisdictions which either have or have had passport-for-sale schemes such as Vanuatu and Cyprus. Something that would have been a red flag indicator for banks but may have appeared innocuous due to the spread of the syndicate’s activities across multiple banks.  

Understanding the interdependencies of different businesses is a challenging element of the KYC process. Using comprehensive and unique Client Lifecycle Management (CLM) technology across businesses, could have helped banks spot the illicit activity of the syndicate sooner by making clear the client relationships that the individual syndicate members had with each other.  

The raid resulted in an initial S$1 billion of illicit money being identified but as Singapore’s authorities continued to investigate the number soared even higher and reached S$2.8 billion at time of writing. The assets seized comprised, cash, luxury goods, frozen funds, and crucially, houses. 

For those unfamiliar with Singapore’s real estate market, houses are hard to come by. And staggeringly expensive. All 10 of the syndicate members were arrested in what are known locally as GCBs – Good Class Bungalows and high-class condominiums.  

GCBs are buildings no more than two storeys high in a country with little real estate space. There are approximately 2800 GCBs in the entire country, coming with a nine-figure price tag in Singaporean dollars on average. 

The syndicate was funnelling money from unlicensed money lending and illegal online gambling activity in China. Crucially, this differs from the 1MDB scandal that is fresh in the memory of MAS and financial operators in the region as there is no misappropriation of public funds at play. However, gambling is prohibited in mainland China, suggesting a potential organized crime link, one that would make sense given the sophistication of the syndicate’s operation in Singapore.  

Prior to the raid, Singaporean authorities reached out to an array of banks to verify information they had compiled on the syndicate. The financial institutions had to pull together the client overview manually rather than being able to access a single client view that gathered that information automatically and on an ongoing basis which detailed their relationships with the various businesses.  

Had the banks possessed a way to observe a single view of their clients and their relationships in place they may have been able to reveal the syndicate’s activities faster and spotted the illicit financial flows. 

How Do Criminals Slip Through the Net? 

Falsified documents.  

That’s the short answer. Criminals use falsified documents to evade KYC checks and know your business (KYB) checks by the banks that onboard them by taking advantage of the lack of a coherent understanding of the high-risk customer profile. There was no failure to carry out basic or even enhanced checks. Those would have been carried out as a matter of standard. The problem is that many current processes are unable to dive into the complex nature of how related entities and businesses that appear legitimate transact and interact with each other to gradually layer illicit funds to seem clean so that the money can be extracted.  

The syndicate members spun up shell companies to funnel illicit cash through small businesses incorporated in Singapore, pulling apart these companies and their activities revealed that the syndicate members were operating together and had strong ties to each other. These relationships were run through multiple banks across Singapore and the business activity would not have been immediately suspicious.  

It’s important to note that the banks are not considered complicit in the syndicate’s activities. And nor should they be. Onboarding a business owned by a high net worth individual should be a simple process and it can be simplified using CLM to understand not just the customer being scrutinized but also their relationships with others.  

Unfortunately, that’s only the case if client data can be properly leveraged. Data is endlessly powerful in the right environment. It can provide clear oversight of who clients are, how their money is being used, and understanding suspicious interrelationships between multiple parties.  

The MAS has responded well to the scandal and immediately begun investigating the wider story, but that means multiple banks are now being brought before the regulator to answer how this happened in the first place.  

The Fallout and Potential Regulatory Change 

Financial institutions are suffering because of this event. The banks that supplied the services to the shell companies were not wrong to do so based on the information they had to hand. But technology can provide banks with a deeper understanding of client information that is presented via a single overview rather than piecemeal information that appears inconsequential on its own but is revealed as part of a criminal picture when set against related activities. 

Banks and other financial institutions in Singapore are likely to be expected to cross-reference client and business data across multiple trustworthy sources that operate in real-time. Digitalization of financial infrastructure is going to become an integral part of Singapore’s financial landscape, and this scandal has given the MAS all the ammunition it needs to make it happen.  

The banks moved quickly to respond to Singaporean authorities’ request for information, but delivering it was no easy task as individual syndicate businesses needed to be compiled rather than being able to hand over one file that had the entire overview per syndicate member. Using CLM banks would have been able to convey all the businesses attached to an individual in one easy process rather than having to operate on an entity-by-entity basis 

Illicit financial flows such as the ones conducted by the syndicate should be spotted and stopped in their tracks long before billions are able to pass through the financial system. Technology such as CLM will provide financial institutions  with a clearer view of client data, enabling them to respond to the regulators faster.  

The entire scandal is indicative of the need for change and the MAS is aware of the need to overhaul the market to require a CLM approach to onboarding customers. Structural market shifts such as these are making innovative technology approaches a non-negotiable in the fight against financial crime.  

Read how to handle this challenge here