Financial Crime World

Singapore’s Financial Industry Shines, But Not Without Risks: A Look at Financial Crime and Economic Vulnerabilities

Singapore, the tropical “city-island” and global financial hub in Southeast Asia, has come a long way since its early days. The following sections provide an overview of the financial crime vulnerabilities and economic risks in Singapore.

Singapore: From Humble Beginnings to a Robust Financial Sector

  • Singapore’s impressive social indicators include high scores in life expectancy, education, and personal safety (Geographical location: Low, Economy: High, Context: Medium).
  • Despite initial lack of natural resources and turbulent beginnings, Singapore has developed into a highly-developed economy fueled by extensive trade and a robust financial sector.
  • Singapore ranks among the Four Asian Tigers and boasts an impressive international standing with an 12th place on the UN Human Development Index and an AAA sovereign rating from major rating agencies.
  • However, Singapore’s financial system has faced scrutiny for its Anti-Money Laundering (AML) compliance.

Singapore’s AML Compliance: Past Challenges and Current Regime

  • In the past, Singapore received poor ratings from the Financial Action Task Force (FATF) for its AML regulations (2008 mutual evaluation report).
  • Since then, Singapore has taken significant steps to strengthen its AML regulations and is now recognized as a leading authority on financial crime enforcement in Asia with one of the continent’s most stringent regulatory regimes.

Financial Crime Risks in Singapore: An Overview

Bribery and Corruption

  • Singapore has minimal corruption, ranking as the fifth least corrupt country in the world (Transparency International).
  • The success can be attributed to rigorous audit controls.

Money Laundering

  • Singapore, as a substantial international financial and investment hub, has an elevated risk of money laundering.
  • Transnational organized crime, corruption, and predicate offenses in neighboring territories are significant risk factors.

Drug and Weapons Trafficking

  • Singapore’s role as a transit hub and strategic location make it susceptible to drugs and weapons trafficking, despite harsh penalties.

Environmental Crime

  • Singapore is exposed to environmental crime, including wildlife trafficking, and serves as a passageway for illegally traded goods.

Modern Slavery and Human Trafficking

  • Despite strong anti-corruption and anti-trafficking measures, foreign work permit holders remain at risk of being trafficked.

Cybercrime

  • The number of reported scam and cybercrime cases in Singapore rose significantly in 2022, with losses reaching over $660 million.

Fraud

  • Fraud cases have increased with the rise of smartphone e-commerce and app-based shopping platforms.

Terrorist Financing

  • Singapore is vulnerable to terrorist financing due to its proximity to terrorist activity and status as a regional financial hub.

Tax Crime and Financial Secrecy

  • Singapore’s provisions for tax havens and financial secrecy offerings make it a target for tax abuse, with potentially billions lost annually.

Gold Smuggling and Trade-Based Money Laundering

  • Singapore’s role as a major transit hub and key location on a vital global trade route for commodities like gold makes it susceptible to trade-based money laundering.

Organized Crime Groups

  • Singapore’s ease of establishing companies makes it susceptible to organized crime groups.

Singapore’s resilience against financial crime is noteworthy, but there is always room for improvement. Continued cooperation from law enforcement, international partners, and the government is crucial to maintaining Singapore’s status as a world-class financial hub with a strong stance against financial crime.