Cablegate: Singapore 2007-2008 International Narcotics Control

VZCZCXRO4359
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #2037/01 3170713
ZNR UUUUU ZZH
R 130713Z NOV 07
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 4394
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RUCNASE/ASEAN MEMBER COLLECTIVE

UNCLAS SECTION 01 OF 05 SINGAPORE 002037

SIPDIS

STATE FOR EB/ESC/TFS AND INL GWILLIAMS, ERINDLER AND JSHOWELL
JUSTICE FOR OIA, AFMLS, AND OPDAT
TREASURY FOR FINCEN TOTT

SENSITIVE BUT UNCLASSIFIED

SIPDIS

E.O. 12958: N/A
TAGS: KCRM EFIN KTFN PTER KSEP ETTC SNAR SN
SUBJECT: SINGAPORE 2007-2008 INTERNATIONAL NARCOTICS CONTROL
STRATEGY REPORT (INCSR) PART II, MONEY LAUNDERING AND FINANCIAL
CRIMES

REF: STATE 137250

1. (U) In response to reftel instructions, this message is Post's
draft chapter on Singapore for the 2007-2008 International Narcotics
Control Strategy Report, Part II - Money Laundering and Financial
Crimes. We also have emailed to INL the text of the draft report in
MS Word format showing changes from last year's version. Part I was
transmitted septel.

2. (SBU) Begin text of the draft report:

Singapore

As a significant international financial and investment center and,
in particular, as a major offshore financial center, Singapore is
vulnerable to money launderers. Stringent bank secrecy laws and the
lack of routine currency reporting requirements make Singapore a
potentially attractive destination for drug traffickers,
transnational criminals, terrorist organizations and their
supporters seeking to launder money, as well as for flight capital.
Structural gaps remain in financial regulations that may hamper
efforts to control these crimes. To address some of these
deficiencies, Singapore is implementing legal and regulatory
changes to better align itself with the Financial Action Task
Force's (FATF) revised recommendations on anti-money laundering
(AML) and countering the financing of terrorism (CFT). FATF will
conclude a peer review of Singapore's AML/CFT regime in February
2008.

Singapore amended the Corruption, Drug Trafficking, and Other
Serious Crimes (Confiscation of Benefits) Act (CDSA) in May 2006 to
add 108 new categories to its "Schedule of Serious Offenses." The
CDSA criminalizes the laundering of proceeds from narcotics
transactions and other predicate offenses, including ones committed
overseas, that would be serious offenses if they had been committed
in Singapore. Included among the new offenses are crimes associated
with terrorist financing, illicit arms trafficking, counterfeiting
and piracy of products, environmental crime, computer crime, insider
trading, and rigging commodities and securities markets. With an
eye on Singapore's two new multibillion-dollar casinos slated to be
operational in 2009, the list also addresses a number of
gambling-related crimes. However, tax and fiscal offenses are still
absent from the expanded list.

Singapore has a sizeable offshore financial sector. As of October
2007, there were 112 commercial banks in operation, including six
local and 24 foreign-owned full banks, 42 offshore banks, and 40
wholesale banks. All offshore and wholesale banks are
foreign-owned. Singapore does not permit shell banks in either the
domestic or offshore sectors. The Monetary Authority of Singapore
(MAS), a semi-autonomous entity under the Prime Minister's Office,
serves as Singapore's central bank and financial sector regulator,
particularly with respect to Singapore's AML/CFT efforts. MAS
performs extensive prudential and regulatory checks on all
applications for banking licenses, including whether banks are under
adequate home country banking supervision. Banks must have clearly
identified directors. Unlicensed banking transactions are illegal.

Singapore has increasingly become a center for offshore private
banking and asset management. Total assets under management in
Singapore grew 24 percent between 2005 and 2006 to S$891 billion
(US$581 billion), according to MAS.

Beginning in 2000, MAS began issuing a series of regulatory
guidelines ("Notices") requiring banks to apply "know your customer"
standards, adopt internal policies for staff compliance and
cooperate with Singapore enforcement agencies on money laundering
cases. Similar guidelines exist for securities dealers and other
financial service providers. Banks must obtain documentation such
as passports or identity cards from all individual customers to
verify names, permanent contact addresses, dates of births and
nationalities. Banks must also to check the bona fides of company
customers. The regulations specifically require that financial
institutions obtain evidence of the identity of the beneficial
owners of offshore companies or trusts. They also mandate specific
record-keeping and reporting requirements, outline examples of
suspicious transactions that should prompt reporting, and establish
mandatory intra-company point-of-contact and staff training
requirements. Similar guidelines and notices exist for finance
companies, merchant banks, life insurers, brokers, securities
dealers, investment advisors, futures brokers and advisors, trust
companies, approved trustees, and money changers and remitters.

SINGAPORE 00002037 002 OF 005

Singapore is in the process of revising its AML/CFT regulations for
banks and other financial institutions. MAS has issued new or
revised AML/CFT regulations (in the form of "Notices" and
"Guidelines") for banks and other financial institutions, most of
which took effect March 1, 2007. Affected institutions include
banks, finance companies, merchant banks, money changers and
remitters, life insurers, capital market intermediaries, and
financial advisers. New reporting requirements for originator
information on cross-border wire transfers took effect July 1. The
relevant regulations further align certain parts of Singapore's
AML/CFT regime more closely with FATF recommendations and
specifically address CFT concerns for the first time. Among the
recently implemented regulations are new provisions that would
proscribe banks from entering into, or continuing, correspondent
banking relationships with shell banks; clarify and strengthen
procedures for customer due diligence (CDD), including adoption of a
risk-based approach; mandate enhanced CDD for foreign politically
exposed persons; and additional suspicious transactions reporting
requirements. Effective November 1, 2007, Singapore increased the
maximum penalty for financial institutions that fail to comply with
AML/CFT regulations from S$100,000 (US$71,000) to S$1 million
(US$714,000). The Act also empowers MAS to prosecute financial
institution managers in cases where non-compliance is attributable
to their consent, connivance or neglect. MAS is considering new
regulations for holders of stored value facilities (SVF) to limit
the risk of their use for illicit purposes.

In addition to banks that offer trust, nominee, and fiduciary
accounts, Singapore has 12 trust companies. All banks and trust
companies, whether domestic or offshore, are subject to the same
regulation, record-keeping, and reporting requirements, including
for money laundering and suspicious transactions. In August 2005,
Singapore introduced regulations under the new Trust Companies Act
(enacted in January 2005 to replace the Singapore Trustees Act) that
mandated licensing of trust companies and MAS approval for
appointments of managers and directors. MAS issued revised
regulations that took effect April 1, 2007 that require approved
trustees and trust companies to complete all mandated CDD procedures
before they can establish relations with customers. Other financial
institutions are allowed to establish relations with customers
before completing all CDD-related measures.

Singapore amended its Moneylenders Act in April 2006 to require
moneylenders under investigation to provide relevant information or
documents. The Act imposes new penalties for giving false or
misleading information and for obstructing entry and inspection of
suspected premises. Singapore is considering further amendments to
strengthen the Act's AML/CFT provisions.

Singapore has issued additional regulations and guidelines governing
designated non-financial businesses and professions. The Internal
Revenue Authority of Singapore issued AML/CFT guidelines for real
estate agents in July 2007. The Law Society of Singapore in August
2007 amended its Legal Profession (Professional Conduct) Rules to
strengthen its AML guidelines. Among its provisions, the new rules
prohibit attorneys from acting on the behalf of anonymous clients to
open or maintain bank accounts or to hold cash or cash instruments.

In April 2005, Singapore lifted its ban on casinos, paving the way
for development of two integrated resorts scheduled to open in 2009.
Combined total investment in the resorts is estimated to exceed $5
billion. In June 2006, Singapore implemented the Casino Control
Act. The Act establishes the Casino Regulatory Authority of
Singapore, which will administer the system of controls and
procedures for casino operators, including certain cash reporting
requirements. Internet gaming sites are illegal in Singapore.

Any person who wishes to engage in for-profit business in Singapore,
whether local or foreign, must register under the Companies Act.
Every Singapore-incorporated company is required to have at least
two directors, one of whom must be resident in Singapore, and one or
more company secretaries who must be resident in Singapore. There
is no nationality requirement. A company incorporated in Singapore
has the same status and powers as a natural person. Bearer shares
are not permitted.

Financial institutions must report suspicious transactions and
positively identify customers engaging in large currency
transactions and are required to maintain adequate records. Since
November 1, 2007, Singapore has begun requiring in-bound and
out-bound travelers to report cash and bearer-negotiable instruments
in excess of S$30,000 (US$20,675), in accordance with FATF Special

SINGAPORE 00002037 003 OF 005

Recommendation Nine. Violators are subject to a fine of up to
S$50,000 (US$34,459) and/or a maximum prison sentence of three
years.

The Singapore Police's Suspicious Transaction Reporting Office
(STRO) has served as the country's Financial Intelligence Unit (FIU)
since January 2000. Procedural regulations and bank secrecy laws
limit STRO's ability to provide information relating to financial
crimes. In December 2004, STRO concluded a Memorandum of
Understanding (MOU) concerning the exchange of financial
intelligence with its U.S. counterpart, FinCEN. STRO has also
signed MOUs with counterparts in Australia, Belgium, Brazil, Canada,
Greece, Hong Kong, Italy, Japan, and Mexico. To improve its
suspicious transaction reporting, STRO has developed a computerized
system to allow electronic online submission of STRs, as well as the
dissemination of AML/CFT material. It plans to encourage all
financial institutions and relevant professions to participate in
this system.

Singapore is an important participant in the regional effort to stop
terrorist financing in Southeast Asia. The Terrorism (Suppression
of Financing) Act that took effect in January 2003 criminalizes
terrorist financing, although the provisions of the Act are actually
much broader. In addition to making it a criminal offense to deal
with terrorist property (including financial assets), the Act
criminalizes the provision or collection of any property (including
financial assets) with the intention that the property be used (or
having reasonable grounds to believe that the property will be used)
to commit any terrorist act or for various terrorist purposes. The
Act also provides that any person in Singapore, and every citizen of
Singapore outside Singapore, who has information about any
transaction or proposed transaction in respect of terrorist
property, or who has information that he/she believes might be of
material assistance in preventing a terrorism financing offense,
must immediately inform the police. The Act gives the authorities
the power to freeze and seize terrorist assets.

The International Monetary Fund/World Bank assessment of Singapore's
financial sector published in April 2004 concluded that, because
Singapore is a party to the UN International Convention for the
Suppression of the Financing of Terrorism, the country imposes few
restrictions on intergovernmental terrorist financing-related mutual
legal assistance, even in the absence of a Mutual Legal Assistance
Treaty. However, the IMF urged Singapore to improve its mutual
legal assistance for other offenses, noting serious limitations on
assistance through the provision of bank records, search and seizure
of evidence, restraints on the proceeds of crime, and the
enforcement of foreign confiscation orders.

Based on regulations issued in 2002, MAS has broad powers to direct
financial institutions to comply with international obligations
related to terrorist financing. The regulations bar banks and
financial institutions from providing resources and services of any
kind that will benefit terrorists or terrorist financing. Financial
institutions must notify the MAS immediately if they have in their
possession, custody or control any property belonging to designated
terrorists or any information on transactions involving terrorists'
funds. The regulations apply to all branches and offices of any
financial institutions incorporated in Singapore or incorporated
outside of Singapore, but located in Singapore. The regulations are
periodically updated to include names of suspected terrorists and
terrorist organizations listed on the UN 1267 Sanctions Committee's
consolidated list.

Singapore's approximately 757,000 foreign guest workers are the main
users of alternative remittance systems. As of October 2007, there
were 380 money-changers and 92 remittance agents. All must be
licensed and are subject to the Money-Changing and Remittance
Businesses Act (MCRBA), which includes requirements for
record-keeping and the filing of suspicious transaction reports.
Firms must submit a financial statement every three months and
report the largest amount transmitted on a single day. They must
also provide information concerning their business and overseas
partners. Unlicensed informal networks, such as hawala, are
illegal. In August 2005, Singapore amended the MCRBA to apply
certain AML/CFT regulations to remittance licensees and
money-changers engaged in inward remittance transactions. The Act
eliminated sole proprietorships and required all remittance agents
to incorporate under the Companies Act with a minimum paid-up
capital of S$100,000 (approximately $60,000). In July 2007, MAS
issued regulations that require licensees to establish the identity
of all customers. MAS must approve any non face-to-face
transactions.

SINGAPORE 00002037 004 OF 005

Singapore has five free trade zones (FTZs), four for seaborne cargo
and one for airfreight, regulated under the Free Trade Zone Act.
The FTZs may be used for storage, repackaging of import and export
cargo, assembly and other manufacturing activities approved by the
Director General of Customs in conjunction with the Ministry of
Finance.

Charities in Singapore are subject to extensive government
regulation, including close oversight and reporting requirements,
and restrictions that limit the amount of funding that can be
transferred out of Singapore. Singapore had a total of 1,900
registered charities as at end 2006. All charities must register
with the Commissioner of Charities which reports to the Minister for
Community Development, Youth and Sports. Charities must submit
governing documents outlining their objectives and particulars of
all trustees. The Commissioner of Charities has the power to
investigate charities, search and seize records, restrict the
transactions into which the charity can enter, suspend staff or
trustees, and/or establish a scheme for the administration of the
charity. Charities must keep detailed accounting records and retain
them for at least seven years.

Changes to the Charities (Registration of Charities) Regulations
that came into effect in May 2007 authorize the Commissioner to
deregister charities deemed to be engaged in activities that run
counter to the public interest. Singapore has also implemented
tighter rules under the Charities Act that govern public
fund-raising by charities, effective May 1, 2007. Charities
authorized to receive tax-deductible donations are required to
disclose the amount of funds raised in excess of S$1 million
(approximately $690,000), expenses incurred, and planned use of
funds. Under the Charities (Fund-raising Appeals for Foreign
Charitable Purposes) Regulations (1994), any charity or person that
wishes to conduct or participate in any fund-raising for any foreign
charitable purpose must apply for a permit. The applicant must
demonstrate that at least 80 percent of the funds raised will be
used in Singapore, although the Commissioner of Charities has
discretion to allow for a lower percentage. Permit holders are
subject to additional record-keeping and reporting requirements,
including details on every item of expenditure, amounts transferred
to persons outside Singapore, and names of recipients. The
government issued 26 permits in 2006 and 18 permits as of November
2007 related to fundraising for foreign charitable purposes. There
are no restrictions or direct reporting requirements on foreign
donations to charities in Singapore.

To regulate law enforcement cooperation and facilitate information
exchange, Singapore enacted the Mutual Assistance in Criminal
Matters Act (MACMA) in March 2000. Parliament amended the MACMA in
February 2006 to allow the government to respond to requests for
assistance even in the absence of a bilateral treaty, MOU or other
agreement with Singapore. The MACMA provides for international
cooperation on any of the 292 predicate "serious offenses" listed
under the CDSA. In November 2000, Singapore and the United States
signed the Agreement Concerning the Investigation of Drug
Trafficking Offenses and Seizure and Forfeiture of Proceeds and
Instrumentalities of Drug Trafficking (Drug Designation Agreement or
DDA). This was the first agreement concluded pursuant to the MACMA.
The DDA, which came into force in early 2001, facilitates the
exchange of banking and corporate information on drug money
laundering suspects and targets, including access to bank records.
It also entails reciprocal honoring of seizure/forfeiture warrants.
This agreement applies only to narcotics cases, and does not cover
non-narcotics-related money laundering, terrorist financing, or
financial fraud.

In May 2003, Singapore issued a regulation pursuant to the MACMA and
the Terrorism Act that enables the government to provide legal
assistance to the United States and the United Kingdom in matters
related to terrorism financing offenses. Singapore concluded mutual
legal assistance agreements with Hong Kong in 2003, India in 2005,
and Laos in 2007. Singapore is a party to the ASEAN Treaty on
Mutual Legal Assistance in Criminal Matters along with Malaysia,
Vietnam, Brunei, Cambodia, Indonesia, Laos, the Philippines,
Thailand, and Burma. The treaty will come into effect after
ratification by the respective governments. Singapore, Malaysia,
Vietnam and Brunei have ratified thus far.

In addition to the UN International Convention for the Suppression
of the Financing of Terrorism, Singapore is also party to the 1988
UN Drug Convention and has signed, but not yet ratified, the UN
Convention against Transnational Organized Crime. In addition to

SINGAPORE 00002037 005 OF 005

FATF, Singapore is a member of the Asia/Pacific Group (APG) on Money
Laundering, the Egmont Group, and the Offshore Group of Banking
Supervisors.

Singapore should continue close monitoring of its domestic and
offshore financial sectors. The government should add tax and
fiscal offenses to its schedule of serious offenses. The conclusion
of broad mutual legal assistance agreements is also important to
further Singapore's ability to work internationally to counter money
laundering and terrorist financing. Singapore should lift its rigid
bank secrecy restrictions to enhance its law enforcement cooperation
in areas such as information sharing and to conform to international
standards and best practices.

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