Dirty Money Targeting Singapore Residents

Dirty Money Targeting Singapore Residents

Singapore-incorporated shell companies and its residents have been used as fronts for channeling illicit money flows, according to local regulators.

Numerous corporate services firms in the city-state offer Singapore residents as directors of Singapore-incorporated companies for as little as S$250 a month, and/or a suite of corporate secretarial services for under S$3,000. 

Under local regulations, any company looking to register its business in Singapore is required to have at least one local director. To provide customers with a one-stop solution, many professional service firms in Singapore also bundle services to incorporate a company, get a Singapore nominee director and corporate secretary, plus digitize official letters coming through a Singapore registered address. 

Vulnerable to Criminal Abuse

While such affordable directors-for-hire services and corporate services are legitimate, regulators note that the country's openness to businesses meant it is vulnerable to money-laundering and terrorism-financing threats.  

«While they may have legitimate purposes, shell companies are a structure that can be vulnerable to criminal abuse,» said Valerie Tay, head of the anti-money laundering department at MAS, who was quoted in the «Business Times» (behind paywall).

Using Shell Companies

Foreign criminals have turned their attention to using Singapore shell companies for nefarious activities in recent years. Data provided by the Commercial Affairs Department (CAD) showed that Singapore nominee directors have been prosecuted for their roles in aiding money laundering offenses in recent times.

Last year, Singapore saw two directors being charged in separate cases by acting as directors of locally incorporated companies that are discovered to be fronts for fraudulent wire transfers. In one case, Chua Lee Eng served as a director of two companies that received more than US$1.6 million in fraudulent wire transfers into the companies' bank accounts in 2010. As a result, she was fined S$4,000 while her recruiter was fined S$6,000. Both were disqualified from being a director for three years.

Regulators Sharpen Detection

«We have in the past few years sharpened our capabilities to detect these illicit activities in our system,» Tay said in the paper. In 2017, the MAS and the CAD have set up a partnership with eight banks here and the Association of Banks in Singapore to work to meet higher standards in anti-money laundering and in countering the financing of terrorism activities, known in the industry globally as AML/CFT.

The Singapore collaboration, known as ACIP – the AML/CFT Industry Partnership – has meant a platform through which MAS can send a system-wide view of STRs to individual ACIP banks. The banks will go through their specific banking network to shut down entities' accounts that are suspected to be channeling dirty funds.