FinCEN expose cuts deep into Singapore’s claim to financial transparency

Often regarded as the hallmark of financial transparency and accountability, Singapore ranks exceptionally in Transparency International’s Corruption Perceptions Index (CPI), commonly known as TI-CPI, making it the only Asian country to reach the top 10.

In 2019, TI-CPI ranked Singapore as the fourth least corrupt country in the world out of 180 countries with a score of 85.

It comes as a major shock then that the island nation was named as host to several global banks that allegedly flouted international regulations and facilitated the movement of illicit cash, as it is strongly held that Singapore’s regulatory framework to combat money laundering strictly meets the international standards set by the Financial Action Task Force.

This is according to the findings of the International Consortium of Investigative Journalists (ICIJ), comprising leaked suspicious activity reports (SARs) from the Financial Crimes Enforcement Network (FinCEN) in the US.

SARs reflect the concerns of compliance officers and are not necessarily indicative of criminal conduct or other wrongdoings.

The FinCEN Files expose is a collaborative project with the ICIJ, BuzzFeed News, and more than 400 journalists around the world. The reports are based on the most detailed US Treasury records ever leaked.

The expose revealed files pertaining to more than US$2 trillion worth of global transactions between 1999 and 2017. The information contained in the files was flagged as suspicious by the internal compliance departments of financial institutions, and the expose details how the banks moved large sums of allegedly illicit funds for decades despite red flags.

The leak led to reports on the five global banks that appeared the most in the documents – HSBC, JPMorgan, Deutsche Bank, Standard Chartered, and Bank of New York Mellon – and sent stocks plunging on Monday amid renewed calls for legislative reform.

At least nine Malaysian banks were also linked to the dubious money trails, involving 23 transactions worth some US$18 million.

The leaked documents provide comprehensive details on a journey of crime and corruption starring despots and politicians, dictators, criminals, and financiers, as well as the crucial roles played by the bankers, accountants, and lawyers. But from the perspective of financial transparency, they also reveal the failure of banks and financial institutions to thwart the flow of illicit money.

As such, Singapore cannot afford to be linked to such activities.

The republic’s Commercial Affairs Department (CAD) publishes the number of suspicious transaction reports it receives in its annual report.

CAD noted that banks filed the most number of suspicious transaction reports – 16,314 – in 2018, followed by 4,823 reports filed by moneychangers and remittance agents.

According to the leaked files, several banks in Singapore oversaw about US$4.5 billion (S$6.13 billion) in suspicious transactions between 2000 and 2017, with DBS Bank, CIMB Bank, and Deutsche Bank among those that processed the largest sums of such funds.

DBS Bank was listed as sending US$596.8 million and receiving US$228.3 million in 461 suspicious transactions between 2000 and 2017.

CIMB Bank was noted to have sent US$250.4 million and received US$34.3 million in 294 suspicious transactions, while Deutsche Bank sent US$224.3 million and received US$62 million in 19 suspicious transactions.

Investigations show that dubious entities dispatched money to and from North Korea by way of China, Singapore, and Cambodia, using a host of shell companies to move millions through US banks, according to the SARs filed by the Bank of New York Mellon.

The bank red-flagged those transactions, including money that went to companies with abstruse ownership, and some companies registered in high-risk jurisdictions like Cambodia. It also noted a lack of clear commercial reasons for the transactions, and the fact that they were always in round figures.

The Monetary Authority of Singapore has stated that it is closely studying reports that Singaporean banks had informed US regulators of suspicious transactions.

Several Singapore-based analysts declined to comment when contacted by MalaysiaNow.

“You know, the Singapore government is very sensitive about any criticism, so I hesitate to comment,” said one.