Singapore has been urged to do more to combat money-laundering in a report by a global watchdog that highlights the reputational risk posed by the 1MDB scandal in Malaysia.
The Financial Action Task Force said Singapore was effective in tackling smaller-scale financial crime involving “money mules” who courier cash for criminals but must strengthen the capability of law enforcement agencies to identify and investigate bigger, cross-border cases.
“Singapore should more aggressively target the more complex cases expected of a sophisticated financial centre,” the intergovernmental body said.
The report, based on a review of Singapore’s measures against money-laundering conducted late last year, finds that few foreign cases were prosecuted and low amounts of criminal proceeds were confiscated.
Singapore is conducting a wide-ranging inquiry into illicit fund flows linked to the 1MDB state investment fund. The city-state’s regulator admitted in July that the scandal had dented Singapore’s reputation as a trusted financial centre, and pledged more “intrusive” inspections of banks.
Authorities have found lapses at a number of banks in Singapore that acted as conduits for flows of funds from 1MDB.
Singapore authorities said in response to Tuesday’s report that they intended to develop more sophisticated data analytics as part of a broader push to strengthen policing of financial crime.
The task force, based in Paris, also warned that the majority of Singapore’s dealers in precious stones and metals are not covered by anti-money-laundering supervision.
“In contrast with the financial sector, the financial penalty structure … is quite diverse and enforcement of the sanctioning regime for non-compliance … is at an early stage,” the report said, referring to supervision of non-financial businesses including gem dealers.
The report says Singapore’s transparency measures are insufficient to ensure that information on beneficial owners — the people who ultimately own and control companies — is available “in a timely manner”.
Singapore should be more alert to the terrorist financing risks “associated with its geographical location and its position as a financial hub”, it suggests.
Since the review was conducted, six Bangladeshi men have been jailed in Singapore on terrorist financing charges, on suspicion of planning attacks in their home country.
Malaysia’s government has been rocked by allegations that about $4bn has been misappropriated from state companies, following investigations by regulators into 1MDB. Flows of money linked to the fund are under investigation in at least six countries including the US, Switzerland and Singapore.
Najib Razak, Malaysia’s prime minister, became embroiled in the scandal when it was revealed last year that transfers totalling $681m had gone into his personal bank account. He has denied wrongdoing.
Sample the FT’s top stories for a week
You select the topic, we deliver the news.