Singapore Banks to Monitor Shell Companies Large or Unusual Transactions

Singapore’s central bank is focusing its efforts on combating money laundering via the use of local shell companies in the city-state in order to conceal illicit transactions.

The Head of the Anti-Money Laundering Department (AML) at the Monetary Authority of Singapore (MAS) said that banks had recently has to close the accounts of several onshore shell companies over the financial past year, after unlawful transactions had been detected.

When officials examined the source of the risks, it became evident that while criminals may still be using oversea shell companies. A pattern seems to have appeared to be shifting to using local shell companies to fly under the radar. (A trend which is not unique to Singapore and has been noticed in other jurisdictions as well, which is particularly concerning).

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

Traditionally, money launderers and tax evaders have used shell companies in offshore centers 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.

The MAS have advised banks to “actively look for shell companies that can be abused for illegal financing. Accordingly, there’s a supervisory expectation for pro-active detection and disruption of illicit finance.”

 

What will the Central Bank be looking for? 

Banks actively red flag shell companies for the following actions:

  • Transferring or holding disproportionately large or high velocity transactions.
  • An unusual transaction pattern or dealings.

Data analytics and network analysis have helped banks calculate relationship linkages in order to detect unlawful transactions at shell companies in the previous financial year.

Additionally, the MAS’ anti-money laundering department, a team established to conduct functions that were carried out by different units, has grown exponentially since the departments creation three years ago.

In 2015, Singapore discovered that funds linked to illicit dealings regarding a fund, namely 1Malaysia Development BHD, had been laundered through its own banking system. As a result, MAS closed down the local units in two private banks back in 2016; freezing accounts holding millions and imposed fines accordingly.

This was a huge spectacle for Singapore and the first of its kind in terms of sheer size for scandals; both the government and the banking sector alike don’t want to repeat such compliance related humiliation again.


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