MONEY-LAUNDERING AND TERRORIST FINANCING ACTIVITIES (Preventive measures)

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MONEY-LAUNDERING AND TERRORIST FINANCING ACTIVITIES:

(Preventive measures): 1.

Mdm Halimah Yacob asked the Senior Minister whether there is any basis for the US State Department's allegation that Singapore is a major money-laundering country.

2.

Mdm Halimah Yacob asked the Senior Minister (a) whether there are sufficient safeguards to prevent money-laundering and terrorist financing activities; and (b) how does the Monetary Authority of Singapore ensure that banks fully comply with such measures.

The Minister for Education (Mr Tharman Shanmugaratnam) (for the Senior Minister, Prime Minister's Office): Mr Speaker, Sir, may I take Question Nos. 1 and 2 together, please?

Mr Speaker: Yes.

Mr Tharman Shanmugaratnam: The US State Department's International Narcotics Control Strategy Report for 2003, which was released on 1st March 2004, listed a range of jurisdictions as being of primary concern in respect of money laundering from international narcotics trafficking and other serious crimes. Singapore was included in that list together with the UK, France, Germany, Hong Kong, Italy, Japan, Luxembourg, Switzerland, as well as the US itself. In short, all the major financial centres of the world were included in the list.

The US State Department Report did not provide any basis for suggesting that Singapore-based financial institutions engage in transactions involving a significant amount of proceeds from

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international narcotics trafficking and other serious crimes.

However, money laundering must be a concern in every country, and especially in international financial centres which handle huge volumes of transactions on a daily basis. Singapore takes its responsibilities very seriously in this regard. We are a member of the Financial Action Task Force (FATF), the international body that develops policies and standards to combat money laundering and terrorist financing. The US State Department's Report indeed acknowledges that Singapore strongly opposes money laundering and terrorism financing and has been a key player in the regional effort to stop terrorist financing in Southeast Asia.

MAS requires all banks and financial institutions operating in Singapore to institute rigorous measures to guard against money-laundering and terrorist financing. These include the need to identify and know their customers and their customers' source of funds. They also have to maintain the records necessary to reconstruct and explain details of transactions, and to report all suspicious transactions. MAS conducts both offsite reviews and onsite inspections of banks and financial institutions to ensure that these measures are in place. External auditors engaged by banks and financial institutions are similarly required to audit for compliance with MAS regulations. Through these rigorous processes, banks have identified and filed suspicious transaction reports with the Commercial Affairs Department CAD). CAD investigates these reports and, where it finds wrongdoing, it will take firm action.

In August 2003, Singapore completed its IMF/World Bank Financial Sector Assessment Programme. The team of assessors found that Singapore has a comprehensive legal, institutional, policy and supervisory framework to combat

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money laundering and terrorism financing. They also noted that our financial institutions have a strong compliance culture for requirements to combat money laundering and terrorist financing.

Singapore will stay fully committed to the international effort against money laundering and terrorist financing. Our high regulatory and supervisory standards are recognised internationally. The integrity of our financial sector is a key asset which we intend to preserve.

Mdm Halimah Yacob (Jurong): Sir, the Minister has given a comprehensive reply to the questions. My question to the Minister is: what else can be done in order to have Singapore removed from the list in view of the fact that we have put so many safeguards and measures in place and yet we have been cited in the report since 1987?

My second question is whether the US State Department has cited any specific incidence or evidence to support their allegation that we are a major money-laundering country because Singaporeans are obviously very concerned over this label and they would like to see it removed.

My third question is what other steps have been taken in order to try and make clear our position and make the US State Department understand our position, in particular, whether we have tried to enlist the help and get our Embassy in the US to speak to the US State Department or get the American Ambassador here to do so.

My final question, Sir, is whether there has been an increase in the number of suspicious transactions reported by the banks and whether there has been any prosecution by the CAD arising from such reports.

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Mr Tharman Shanmugaratnam: I would like to thank Mdm Halimah for her useful questions. What steps can we take? It is really continuous work on the part of the banks to keep an eye out for anything that looks suspicious and to know their customers. The provisions are there not just in name. It is a real process where bank officers have to go through the full process of checking out the customers, trying to identify the source of funds and so on. It is also something which MAS takes very seriously in all its inspections of banks. It is a regular feature of the offsite review of information that is provided from the banks to the MAS, as well as the inspections we do when we go onsite to the banks themselves. We look up their records, check some transactions, speak to them about their processes, and speak to the audit committee, and so on. So it is something that we take very seriously.

There were no specifics mentioned in the latest report to justify Singapore's inclusion among the jurisdictions suspected of being money-laundering centres. But one can infer from the list of countries included that all the major financial centres, by virtue of the fact that they have a very large volume of transactions, including currency transactions, passing through their centres on a daily basis, both onshore and offshore, are vulnerable to money laundering. We should not deny that. As an international financial centre, we should take it all the more seriously and keep working at it.

Yes, we will keep up with our communication with the US State Department. I think they understand our position. They themselves have recognised in their report that Singapore is in the forefront of the fight against money laundering and terrorism financing and we will keep our line of communication with them.

Can Mdm Halimah please repeat her fourth question?

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Mdm Halimah Yacob: My fourth question is: has there been an increase in the number of suspicious transactions?

Mr Tharman Shanmugaratnam: Unfortunately, I do not have the data with me. Reporting of suspicious transactions is a mandatory requirement under the law. Failure to comply is a criminal offence. So our banks take it very seriously. You will see the number moving up and down from year to year. I do not think we see an uptrend as such. Yes, there have been prosecutions. In fact, over the last three years alone, there have been more than 10 prosecutions by the CAD.