MAS on alert over money laundering via shell companies

Singapore's position as one of the world's leading financial centres and a trade hub makes it particularly vulnerable to money laundering due to large cross-border flows.
Singapore's position as one of the world's leading financial centres and a trade hub makes it particularly vulnerable to money laundering due to large cross-border flows.PHOTO: ST FILE

Singapore's central bank is raising its guard against money launderers who are increasingly using onshore shell companies to mask their transactions, a senior official said.

Ms Valerie Tay, who heads the anti-money laundering department at the Monetary Authority of Singapore (MAS), said banks had closed the accounts of several onshore shell companies over the past year, after detecting unlawful transactions.

"When we looked deeper into the risks, we realised that while criminals may still be using offshore companies, actually they have shifted to using onshore companies to evade detection," said Ms Tay, adding that this trend was also noticed in other financial centres.

"And that's when we started to be concerned. Because when the modus operandi of criminals shifts to evade detection and the industry isn't vigilant enough, the criminals can get their way," she said.

Singapore's position as one of the world's leading financial centres and a trade hub makes it particularly vulnerable to money laundering due to large cross-border flows.

Traditionally, money launderers and tax evaders have used shell companies in offshore centres worldwide. But the relative ease of starting a business in Singapore renders it potentially more vulnerable to misuse of shell firms, which otherwise, have many legitimate purposes.

Ms Tay said red flags at shell companies included disproportionately large or high-velocity transactions and unusual patterns in dealings. She said MAS has told banks to "actively look for shell companies that can be abused for illicit financing, so there's a supervisory expectation for pro-active detection and disruption of illicit finance".

Data analytics and network analysis had helped banks map out relationship linkages to detect unlawful transactions at shell companies in the past year, added Ms Tay, a 20-year MAS veteran.

CHANGE IN MODUS OPERANDI

When we looked deeper into the risks, we realised that while criminals may still be using offshore companies, actually they have shifted to using onshore companies to evade detection.

MS VALERIE TAY, head of the anti-money laundering department at the Monetary Authority of Singapore, on detecting unlawful transactions.

The anti-money laundering department at MAS, set up three years ago, has grown from 20 to 30 specialists. It works closely with the Commercial Affairs Department.

In 2015, Singapore discovered that funds linked to the scandal-ridden 1Malaysia Development Berhad state fund had been laundered through its banking system. As a result, MAS shut down the local units of two private banks in 2016, froze millions in bank accounts, charged private bankers and imposed fines on banks. "It was a wake-up call for everyone," said Ms Tay.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 14, 2019, with the headline 'MAS on alert over money laundering via shell companies'. Print Edition | Subscribe