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Cablegate: Singapore 2006-2007 International Narcotics Control

DE RUEHGP #3547/01 3100911
R 060911Z NOV 06






E.O. 12958: N/A

REF: STATE 157136

1. Per reftel instructions, Post submits its draft 2006-2007
International Narcotics Control Strategy Report, Part II Q Money
Laundering and Financial Crimes. Part I was transmitted septel.

2. Begin text of the draft report:


As a significant international financial and investment center,
and, in particular, as a major offshore financial center
Singapore is vulnerable to potential money launderers. Bank
secrecy laws and the lack of routine currency reporting
requirements make Singapore an attractive destination for drug
traffickers, transnational criminals, terrorist organizations
and their supporters seeking to launder money, as well as for
flight capital.

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Structural gaps remain in financial regulation that may hamper
efforts to control these crimes. To address some of these
deficiencies, Singapore is beginning to map out legal and
regulatory changes to implement the Financial Action Task
Force's (FATF) recommendations on anti-money laundering (AML)
and countering the financing of terrorism (CFT).

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 in 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
absent from the expanded list.

Singapore has a sizeable offshore financial sector. As of
September 2006, there were 109 commercial banks in operation,
including five local and 24 foreign-owned full banks, 45
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. 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 private banking
and asset management. Total assets under management in
Singapore grew 26 percent between 2004 and 2005 to $450 billion,
according to MAS. Private wealth managers estimate that total
private banking and asset management funds increased nearly 300
percent between 1998 and 2004.

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, futures brokers and advisors, trust companies,

SINGAPORE 00003547 002 OF 005

approved trustees, and money changers and remitters.

Singapore is in the process of revising its AML/CFT regulations
for banks and other financial institutions. The relevant
Notices should further align certain parts of Singapore's
AML/CFT regime more closely with FATF recommendations. Among
the proposed regulations are new provisions that would
proscribe banks from entering into, or continuing, correspondent
banking relationships with shell banks; require originator
information on cross-border wire transfers; clarify procedures
for customer due diligence (CDD), including adoption of a risk-
based approach; and mandate enhanced CDD for foreign politically
exposed persons. Terrorist financing activities will also be
addressed in the Notices for the first time. As part of this
process, MAS issued for public comments draft regulations for
banks in January 2005. In August 2006, it issued for public
comments revised draft regulations for banks and new draft
regulations for other financial institutions. Singapore is also
considering regulations governing designated non-financial
businesses and professions to bring them into conformity with
FATF recommendations.

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
regulations, 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. In August 2006, MAS issued for public comments draft
regulations that would require approved trustees and trust
companies to complete all mandated CDD procedures before they
could 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.

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 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.

Financial institutions must report suspicious transactions and
positively identify customers engaging in large currency
transactions and are required to maintain adequate records.
However, there is no systematic reporting of large currency
transactions. There are no reporting requirements on amounts of
currency brought into or taken out of Singapore. Singapore is
considering legal changes that would allow for 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.

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

SINGAPORE 00003547 003 OF 005

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 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. 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 it 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 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
terrorist financing obligations. 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 600,000 foreign guest workers are the
main users of alternative remittance systems. As of September
2006, there were 395 money-changers and 95 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 August 2006, MAS issued for public
comments regulations that would require licensees to establish
the identity of all customers; currently, no such identification
is mandatory for transactions in aggregate of up to S$5,000
(approximately US$3,000). MAS would also be required to approve
any non face-to-face transactions.

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.

SINGAPORE 00003547 004 OF 005

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 1,807 registered charities as of December 2005. All
charities must register with the Commissioner of Charities
which, since September 1, 2006, has reported to the Minister for
Community Development, Youth and Sports instead of the Minister
for Finance. 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.

Singapore will implement tighter regulations under the Income
Tax Act governing public fund-raising by charities, effective
January 1, 2007. Charities authorized to receive tax-deductible
donations will be required to disclose the amount of funds
raised in excess of S$1 million (approximately $600,000),
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 or disbursement, amounts
transferred to persons outside Singapore, and names of
recipients. The government issued 36 permits in 2005 related to
fund raising 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. In force since
early 2001, the DDA 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. Singapore has not prosecuted any drug-money
laundering cases under the DDA.

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 and with India in 2005. In November 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; Thailand and Burma
signed in January 2006. The treaty will come into effect after
ratification by the respective governments. Singapore,
Malaysia, Vietnam and Brunei have ratified the treaty 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 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 held in Southeast Asia. FATF is slated to review

SINGAPORE 00003547 005 OF 005

Singapore's AML/CFT regime, most likely in 2007.

Singapore should continue close monitoring of its domestic and
offshore financial sectors. As a major financial center, it
should also adopt measures to regulate and monitor large
currency and bearer negotiable instrument movements into and out
of the country, in line with FATF Special Recommendation Nine,
adopted in October 2004, that mandates countries to 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. Singapore should lift its rigid bank
secrecy restrictions in order to enhance its law enforcement
cooperation in areas such as information sharing and to conform
with international standards and best practices.


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