Money laundering is a serious global issue that enables criminals to conceal and legitimize illicit funds. Singapore, being a major international financial and trading hub, faces inherent vulnerabilities to money laundering activities. In recent years, authorities in Singapore have intensified efforts to detect and clamp down on money laundering, including specific activities involving gold.
Seizures and Arrests in Singapore
Ex Municipal Manager Nabbed For Spl…
In August 2023, Singapore authorities conducted a massive operation seizing assets worth S$1 billion linked to illegal activities including money laundering. The seized assets included cash, shares, motor vehicles, properties, gold, and other valuables. Concurrently, the authorities arrested 30 people so far in conjunction with this case.
This landmark operation is the largest seizure of assets in Singapore’s history and underscores the city-state’s zero tolerance towards money laundering and illicit financing. The substantial seizure, along with the arrests, sends a strong warning to criminal elements that Singapore is vigilant against money laundering and will prosecute offenders to the fullest extent of the law.
Experts have lauded the operation as a significant achievement in Singapore’s anti-money laundering efforts. By crippling key money laundering syndicates, This operation has merely disrupted the ability of organized crime groups to layer and integrate dirty money using gold and other valuable assets. The seizure of assets also deprives criminals of their illicit profits, reducing incentives for illegal activity. But I am sure there will be another ten-cases ready and waiting to be investigated in Singapore right after this one!
You only have to look at the number of apartments here that have been bought by wealthy Indonesians getting their money offshore away from the authorities and I am sure that did not come through the traditional means. Indonesian Gold exports from Surabaya, that’s a story for another Day!
Singapore has been striving to be the Switzerland of Asia but I guess they did not expect to take the money Laundering crown from Switzerland so soon! You know the same Swiss who are famous for refining and vaulting WW2 victim Gold!
Scrutiny of Banks and Financial Institutions
Along with law enforcement action, Singapore has increased supervision of banks and financial institutions to strengthen anti-money laundering controls.
In recent years, the Monetary Authority of Singapore (MAS) has come down heavily on banks that demonstrate weaknesses in money laundering mitigation. Major local and international banks fined by MAS include DBS, Citibank, and OCBC, as well as insurance provider Swiss Life. Additionally, MAS levied fines against remittance agents, money changers, payment services, and insurance providers for lapses in money laundering prevention.
The fines, some amounting to millions of Singapore dollars, underscore the regulators’ expectation for financial institutions to have robust checks and balances to detect suspicious transactions and illicit fund flows. Banks and financial service providers are expected to maintain vigilant compliance regimes with customer due diligence, transaction monitoring, and reporting of suspicious behaviour.
By punishing lapses severely, MAS aims to compel the financial sector to uplift its safeguards against money laundering. This enhances Singapore’s overall defences against money laundering while preserving the reputation of its financial system. Tough regulations and enforcement cultivate trust and confidence among international investors and institutions that Singapore’s financial sector will not tolerate abuse by money launderers.
Singapore is a Fine City! Sadly there has been no jail time for bankers, showing White collar Crime still pays!
Use of Gold in Money Laundering
Among the various money laundering typologies globally, the use of gold remains common due to its high value, liquidity, and difficulty to trace. Gold can be easily bought or sold across jurisdictions and converted into cash or other assets without generating a significant paper trail. These features make gold an appealing tool for criminals seeking to layer and integrate illicit funds.
Some typical techniques used by money launderers involving gold include:
Smuggling of Gold
One common method is to physically smuggle gold across borders. Money launderers purchase gold in one country using proceeds of crime, before sneaking it into another country illegally. The gold is then sold into the market, allowing the launderer to inject the illicit funds into the legitimate economy.
As gold is compact and valuable, it can be concealed and transported with relative ease compared to currency. This allows money launderers to evade cross-border reporting requirements and fly under the radar of customs authorities. Highly organized criminal groups have well-established gold smuggling channels that penetrate porous borders to move illicit gold seamlessly.
Purchase of Gold from Reputable Dealers
Money launderers often place orders for gold coins, bars, and jewellery from renowned gold dealers in an effort to create the appearance of propriety and mask the illicit origin of funds. By sourcing gold from legitimate suppliers, criminals add a layer of assumed integrity to their transactions.
Payments are structured carefully to avoid raising suspicion – for instance, by purchasing gold in small increments instead of large one-time orders. Some money launderers even obtain receipts for their gold purchases to create faux transaction records. Once acquired, the laundered gold provides options to liquidate it through legal markets in exchange for clean money.
Jewellery Businesses used to Launder Money using Gold
The jewellery industry is an arena commonly exploited by money launderers to integrate dirty money. Criminals can purchase expensive designer jewellery using proceeds of crime before reselling the pieces through legitimate retail channels. This enables them to successfully infuse illicit funds into the economy, now disguised as jewellery business profits.
Gold smuggled into HK from illegal mines in the Philippines gets washed by jewellery manufacturers before being added into LBMA Good Delivery refineries and layered into the system! Since the LBMA refineries only check their clients for KYC/AML they don’t get to see the clients clients!
Alternatively, money launderers may establish front companies in the jewellery business to layer illicit funds. Under the guise of a lawful trading company, they can justify large-scale transactions in gold and jewellery which actually serve to legitimize criminal profits.
Investments in Gold-backed Assets
Launderers sometimes create complex financial instruments and investment products backed by physical gold stored in regulated vaults and warehouses. By trading the associated securities repeatedly through shell companies, they can distance the assets from their illicit origins.
Obscuring the paper trail further, these gold-backed assets can be pooled into funds of funds and other multi-layered structures across different jurisdictions. This makes it extremely tough for authorities to trace assets to the original predicate crimes.
Challenges in Detection
For law enforcement, detecting money laundering involving gold poses distinct difficulties:
- Unlike cash deposits or wire transfers, there is no banking trail to flag suspicious transactions. Off-market gold deals require painstaking efforts to uncover.
- It is onerous to prove that seized gold is the direct proceeds of crime, rather than legally acquired. Launderers can disguise the origin of gold by commingling legitimate and illegal sources.
- Smuggled gold does not cross formal borders checks, avoiding documentation that helps identify irregular activity.
- Jewellery sold through front companies appears like a legitimate business, making it tough to ascertain which transactions are illicit in nature.
As a result, law enforcement agencies need to leverage intelligence sources, financial forensic capabilities, and cooperation across agencies and border authorities to effectively investigate money laundering via gold channels.
Regulating Trade in Precious Metals and Stones
Recognizing inherent risks, Singapore has reinforced regulations regarding precious metal and stone dealers as part of its anti-money laundering regime.
The Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act mandates that dealers must adhere to strict record keeping and reporting obligations. This includes verifying customer identities, scrutinizing transactions, and filing suspicious transaction reports to authorities.
Dealers must also enroll with the Registrar of Regulated Dealers, who monitors compliance with regulations. Erring businesses can have their licenses suspended or cancelled to deter abuse of precious metals and stones for money laundering purposes.
To further strengthen oversight, Singapore commenced the Precious Stones and Precious Metals Trade Platform in 2020. Dealers must conduct transactions above S$20,000 through this centralized electronic platform, allowing greater visibility of activity.
The integrated platform aims to mitigate risks such as under-declaration of transactions and help authorities detect unusual patterns indicative of money laundering. With tighter supervision, Singapore aims to purge illicit trading and funding activities exploiting precious metals like gold.
International Cooperation to Combat Money Laundering
As money laundering via gold transcends borders, international cooperation is vital to create transparency and close gaps exploited by criminal networks.
Some initiatives that Singapore collaborates on include:
- The Kimberley Process Certification Scheme – This joint government, industry and civil society initiative requires certification of origin for rough diamond trade to stem flows of conflict diamonds. By extension, this makes money laundering through the diamond trade more difficult. Singapore is one of the 82 participating countries.
- The World Gold Council’s Conflict-Free Gold Standard – This framework provides assurance that gold is mined responsibly and without funding unlawful activities. Conforming refineries must undergo stringent audits and supply chain risk assessments.
- The Financial Action Task Force (FATF) – As a member of FATF, Singapore helps set global anti-money laundering standards and monitors high-risk jurisdictions. This includes binding recommendations for regulation of precious metal dealers to combat money laundering via gold.
With transnational cooperation, governments combine strengths to introduce consistent safeguards and close loopholes in the gold trade. Information sharing also enables earlier detection and stronger action against sophisticated cross-border money laundering syndicates.
Money Laundering via Gold-Backed Cryptocurrency Tokens
A growing money laundering risk involves the use of gold-backed cryptocurrency tokens – digital tokens pegged to the value of physical gold.
The tokens are marketed as providing stability and tangible backing compared to mainstream cryptocurrencies like Bitcoin. Some companies enable investors to redeem the tokens for actual gold bars kept in insured vaults.
However, the pseudo-anonymity offered by cryptocurrencies makes gold-backed tokens attractive to criminals. By purchasing the tokens using crypto funds of illicit origin, laundering dark money into a legitimate looking asset.
The decentralized nature of cryptocurrency networks also makes it complicated to identify the buyer and seller in token transactions. This helps obscure the audit trail back to the predicate crime.
Once converted into gold-backed tokens, the launderer can cash out into fiat currency via cryptocurrency exchanges, or request physical gold to be redeemed from the issuing vault.
Some warning signs authorities look out for include unusual activity like:
- Frequent transactions moving funds from high-risk exchanges to gold token platforms.
- Large or irregular gold redemptions from token issuers.
- Potential front companies with no clear business activities transacting heavily in gold tokens.
As cryptocurrencies gain mainstream traction, regulators worldwide are crafting legislation to contain risks. Singapore has proposed regulating payment token service providers under the Payment Services Act. This seeks to apply anti-money laundering and countering financing of terrorism policies to cryptocurrency businesses.
With greater regulatory oversight and collaboration across government agencies, Singapore aims to stay ahead of new typologies including the use of gold-backed cryptocurrency tokens for money laundering.
In conclusion, Singapore faces money laundering threats being a major financial and precious metals trading hub, including risks associated with gold. Authorities have proactively responded through major enforcement actions, stricter regulations, closer industry oversight and international cooperation.
Despite these measures, Singapore must remain vigilant given the ingenuity of criminal elements and the inherent challenges in detecting money laundering via gold. Law enforcement, regulators and financial institutions need to stay abreast of the latest trends and typologies to craft effective countermeasures. With sustained efforts, Singapore can maintain its hard-earned reputation as a clean financial center and protect itself.