Cablegate: Singapore 2006 Incsr Submission Part Ii - Money

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 05 SINGAPORE 003509

SIPDIS

SENSITIVE

STATE FOR INL ERINDLER AND EB/ESC/TFS

JUSTICE FOR OIA AND AFMLS

TREASURY FOR FINCEN RMILLER

E.O. 12356: N/A
TAGS: KCRM PTER ETTC KTFN EFIN ECON SNAR SN
SUBJECT: SINGAPORE 2006 INCSR SUBMISSION PART II - MONEY
LAUNDERING AND FINANCIAL CRIMES

REF: A) STATE 210351 B) Singapore 3469

1. Per reftel instructions, Post hereby submits the draft
of Part II of the 2006 International Narcotics Control
Strategy Report - Money Laundering and Financial Crimes. We
have also emailed the text of the draft report, in MS Word
format and showing changes from last year's version, to INL.
Ref B provided Part I.

2. Begin text of the report:

INCSR II - Singapore - Money Laundering and Financial Crimes

3. As a significant international financial and investment
center, and in particular as a major offshore financial
center, Singapore is vulnerable to potential launderers.
Bank secrecy laws and the lack of routine currency reporting
requirements make Singapore an attractive destination to
drug traffickers, other criminals, and terrorist
organizations and their supporters seeking to launder their
money, and for flight capital. Money laundering occurs
mainly in the offshore sector, but may also occur in the non-
bank financial system, which includes large numbers of
moneychangers and remittance agencies. Singapore has been a
key player in the regional effort to stop terrorist
financing.

4. Singapore should continue close monitoring of its
domestic and offshore financial sectors. As a major
financial center, it should also take measures to regulate
and monitor large currency and bearer negotiable instrument
movements into and out of the country, in line with the
Financial Action Task Force's (FATF) Special Recommendation
Nine, adopted in October 2004, that countries implement
measures such as declaration systems, in order to detect
cross-border currency smuggling. 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.

5. The Monetary Authority of Singapore (MAS), a semi-
autonomous entity under the Ministry of Finance, serves as
Singapore's Central Bank and financial sector regulator,
particularly with respect to Singapore's anti-money
laundering and efforts countering the financing of terrorism
(AML/CFT). MAS performs extensive prudential and regulatory
checks on all applicants for banking licenses, including
whether banks are under adequate home country banking
supervision. Banks must have clearly identified directors.
Unlicensed banking transactions are illegal.

6. Singapore has a sizeable offshore financial sector. In
2005, there were 110 commercial banks in operation,
including five Singapore and 24 foreign full banks, 46
offshore banks, and 35 wholesale banks; all offshore and
wholesale banks are foreign-owned. Singapore does not
permit shell banks, in either the domestic or offshore
sectors.

7. In addition to banks offering trust, nominee, and
fiduciary accounts, Singapore has 16 trust companies. All
banks and trust companies, whether domestic or offshore, are
subject to the same regulation, record keeping, and
reporting requirements, including regarding 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.

8. Singapore's approximately 600,000 foreign guest workers
are the main users of alternative remittance systems. As of
June 2005, there were 406 money-changers and 102 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
answer questions about their business and overseas partners.
Unlicensed informal networks, such as hawala, are illegal.

9. 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 (US$60,000).

10. In April 2005, Singapore lifted its ban on casinos,
paving the way for the development of integrated resorts
with casinos; total investment in two planned resorts, both
of which are expected to open in 2009, is estimated to
exceed US$4 billion. In October 2005, Singapore released
for public comment draft legislation for the Casino Control
Act. The Act calls for creation of a Casino Regulatory
Authority and mandates certain cash reporting requirements.
Internet gaming sites are illegal in Singapore.

11. As a matter of policy, Singapore strongly opposes money
laundering and terrorist financing. Some structural gaps
remain in financial regulation, however, which may hamper
efforts to control these crimes. The Corruption, Drug
Trafficking, and Other Serious Crimes (Confiscation of
Benefits) Act of 1999 (CDSA) criminalizes the laundering of
proceeds from narcotics and 184 other categories of serious
offenses, including ones committed overseas, which would be
serious offenses if they had been committed in Singapore.
As part of amendments to the CDSA that came into effect in
September 2005, Singapore added two more categories of
offenses. Despite these changes, Singapore's current list
of designated predicate offenses does not include many of
those in line with FATF Recommendation One.

12. 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 personal customers to
verify names, permanent contact addresses, dates of birth,
and nationalities, and 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, and futures brokers and advisors.

13. In January 2005, as part of a draft revision of its
overall AML/CFT regulations for banks, MAS commenced a
review of Notice 626, which proscribes banks from entering
into, or continuing, correspondent banking relationships
with shell banks, in line with the Revised FATF Forty
Recommendations adopted in June 2003. Draft Notice 626,
which is still under review, also mandates originator
information on cross-border wire transfers, in line with
FATF's Special Recommendation Seven on wire transfers. It
also clarifies procedures for customer due diligence and
includes a risk-based approach to customer due diligence,
and mandates enhanced customer due diligence for foreign
politically exposed persons. It furthermore extends
coverage of the regulations to include terrorist financing
activities. In addition to the revised Notice 626,
Singapore is reviewing regulations governing other financial
institutions and designated non-financial businesses and
professions to bring them into conformity with FATF
recommendations.

14. Financial institutions must report suspicious
transactions and positively identify customers engaging in
large currency transactions, and are required to maintain
adequate records. There are no reporting requirements,
however, on amounts of currency brought into or taken out of
Singapore. Singapore is considering implementation of FATF
Special Recommendation Nine, which requires either a
declaration or disclosure system for monitoring cross-border
movement of currency and bearer negotiable instruments.

15. The Singapore Police's Suspicious Transaction Reporting
Office (STRO) has served as the country's Financial
Intelligence Unit (FIU) since January 2000. 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 and Japan, and continues
to actively seek MOUs with additional FIUs. To improve its
suspicious transaction reporting, STRO is developing 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 eventually participate in this system.
Procedural regulations and bank secrecy laws limit STRO's
ability to provide information relating to financial crimes.

16. In 2005, Singapore announced the detention of three
members of the regional terrorist group Jemaah Islamiya (JI)
under the Internal Security Act (ISA). As of November 2005,
36 people with links to terrorist groups were in detention.
Detainees include members of JI, who plotted to carry out
attacks in Singapore in the past, and members of the Moro
Islamic Liberation Front (MILF).

17. 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
January 29, 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.

18. 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.

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

20. MAS has broad powers to direct financial institutions
to comply with international terrorist financing
obligations. These include UN Security Council Resolutions
1267, 1333, 1373, and 1390. In 2002, the MAS issued
regulations to implement this authority. 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 which are located in Singapore. The
regulations include a periodically updated list of the
entities and individuals on the UNSCR 1267 Sanctions
Committee's consolidated list.

21. Singapore is party to the UN International Convention
for the Suppression of the Financing of Terrorism; the
Terrorism (Suppression of Financing) Act provides for mutual
legal assistance in cases where there is no treaty, MOU or
other agreement in force between Singapore and another
country that is a party to this Convention. It is also
party to the 1988 UN Drug Convention and has signed, but has
not yet ratified, the UN Convention against Transnational
Organized Crime. In addition to FATF, Singapore is a member
of the Asia/Pacific Group on Money Laundering, the Egmont
Group, and the Offshore Group of Banking Supervisors.
Singapore hosted the June 2005 Plenary meeting of the FATF,
the first time a FATF Plenary was convened in Southeast
Asia. FATF is slated to review Singapore's AML/CFT regime,
most likely in 2007.

22. To regulate law enforcement cooperation and facilitate
information exchange, Singapore enacted the Mutual
Assistance in Criminal Matters Act (MACMA) in March 2000.
The MACMA provides for international cooperation on any of
the 184 predicate "serious offenses" listed under the CDSA.
The provisions of the MACMA apply to countries that have or
have not concluded treaties, MOUs or other agreements with
Singapore.

23. 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. This was the
first agreement concluded pursuant to the MACMA. This
agreement, which entered 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.

24. In May 2003, Singapore issued a regulation pursuant to
the Terrorism Act and the MACMA 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 a mutual legal assistance
agreement with Hong Kong in 2003. In 2004, it signed a
treaty on mutual legal assistance in criminal matters with
seven other members of ASEAN -- Brunei, Cambodia, Indonesia,
Laos, Malaysia, the Philippines and Vietnam. The treaty
will come into effect after ratification by the respective
governments; to date, Singapore, Malaysia, and Vietnam have
ratified the treaty. In 2005, Singapore and India signed a
similar treaty.

25. 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 1,747 registered charities as of
December 2004. All charities must register with the
Commissioner of Charities and submit governing documents
outlining the charity's objectives and particulars on 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
charity 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.

26. Beginning January 1, 2007, Singapore will implement
tighter regulations under the Income Tax Act governing
public fund-raising by charities. Charities authorized to
receive tax-deductible donations will be required to
disclose the amount of funds raised in excess of S$1 million
(US$600,000), expenses incurred, and planned use of funds.

27. Under the Charities (Fund-raising Appeals for Foreign
Charitable Purposes) Regulations 1994, any charity or person
who 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 disbursed, amounts transmitted
to persons outside Singapore, and names of recipients. The
government issued 34 permits in 2004 related to fund-raising
for foreign charitable purposes. There are no restrictions
or direct reporting requirements on foreign donations to
charities in Singapore.

28. Any person who wishes to engage in for-profit business,
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 a 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.

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

HERBOLD

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