Anti-Money Laundering Regulations and Your Business: What You Need to Know

Last updated on December 11, 2020

Businessman and criminal laundering money in machines

Singapore adopts a firm stance against money laundering and terrorism financing, with strict obligations for businesses to comply with.

This article will provide business owners with a brief overview of Singapore’s Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) rules. It will cover:

What is Money Laundering or Terrorism Financing?

Money laundering is the process of making money from illegal sources and appearing to have a legitimate source for such money in order to avoid regulatory scrutiny, typically by transferring it through a series of legitimate businesses.

For instance, a drug syndicate could seek to launder its illegal profits by purchasing properties from unsuspecting persons, and then renting out these properties for “clean” cash.

Terrorism financing is essentially the illegal act of supporting terrorist actions, for instance, by transferring money to a terrorist organisation. This also includes dealing with or entering into transactions with a terrorist, which often involves money laundering.

For more information on counter-financing of terrorism, you may refer to our article on the penalties for financing terrorist operations in Singapore.

What AML/CFT Regulations Does My Business Need to Comply with?

The main legislation that governs money laundering related offences is the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA).

The CDSA provides a general obligation for all businesses to report to a Suspicious Transaction Reporting Officer (STRO) whenever they have reasonable grounds to suspect money laundering. This may be done via the SONAR portal managed by the Singapore Police Force.

Businesses in certain industries may also have specific requirements (such as filing of reports upon receiving cash transactions that exceed a certain amount) which they need to fulfil when dealing with clients. A list of such industries may be found here.

Businesses are also strictly forbidden from assisting or benefiting from money laundering, or tipping off money launderers as to possible police investigations into their activity.

It is important to note that the CDSA requirements apply to all businesses, even smaller ones. For example, in the case of Ang Jeanette v Public Prosecutor, a small business owner was convicted of money laundering for receiving over S$2m and remitting it overseas from a third-party on the instructions of her brother, who had claimed to be in trouble.

The court held that the accused had had reasonable grounds to believe that she was dealing with criminal proceeds due to the suspicious circumstances in which she received the money, and yet did not seek an explanation from her brother or anyone involved.

Accordingly, the accused was convicted for assisting to retain criminal monies and sentenced to 9-months’ imprisonment. The case illustrates how even small businesses can become involved in money laundering and suffer harsh consequences as a result.

Hence, all businesses should take their CDSA obligations very seriously and carefully scrutinise any suspicious transactions.

What Offences Can I/My Business be Charged with If Found Guilty of Money Laundering?

There are a number of possible offences which a person can be charged with in relation to money laundering. These offences will be discussed briefly.

Assisting others to retain drug monies/criminal monies

A person can be guilty of knowingly assisting others to retain drug or criminal monies where he knows or has reason to believe that the other person is a drug dealer or criminal.

If convicted, such a person could be fined up to S$500,000 and/or imprisoned up to 10 years, while a business can be subject to a fine of up to S$1m or twice the laundered amount, whichever is higher.

Dealing in drug monies/criminal monies

A person can be guilty of acquiring, possessing, using, concealing or transferring any property which he knows or has reasonable grounds to believe to be drug or criminal monies.

If convicted, such a person could be fined up to S$500,000 and/or imprisoned up to 10 years, while a business can be subject to a fine of up to S$1m or twice the laundered amount, whichever is higher.

Tipping off suspected drug-traffickers/criminals

A person can be guilty of tipping off any person (such as a suspected drug trafficker or criminal) if he has reasonable grounds to suspect the occurrence of a money laundering-related investigation and discloses any information to that suspect so as to be likely to prejudice the investigation.

If convicted, such a person could be fined up to S$250,000 and/or imprisoned up to 3 years.

Failure to disclose suspicious transactions

The mere failure to disclose suspicious transactions can itself be considered an offence. This is regardless of whether the transaction is eventually discovered to have involved criminal proceeds or not.

If convicted, such a person could be fined up to S$250,000 and/or imprisoned up to 3 years, while a business can be fined up to S$500,000.

What constitutes a suspicious transaction depends on the business and context. For instance, a jewellery chain was fined $9,000 for failing to file a suspicious transaction report as required by law when a customer purchased over S$20,000 worth of jewellery in a single cash transaction.

In a separate case, an international trust company was fined for its failure to implement sufficient safeguards against money laundering, including its failure to independently corroborate the identities and sources of funds of clients.

How to Avoid Getting Involved in Money Laundering

To avoid getting involved in money laundering transactions, businesses are strongly recommended to set up a robust system of customer due diligence and internal records, preferably after consulting an experienced lawyer on the same.

Such a system will allow businesses to evaluate the identity of the client as well as his/her source of funds. If suspicious facts are revealed, a suspicious transaction report should be filed immediately.

This system should be customised to account for your business’ day-to-day activities, instead of being a generic procedural framework, in order to prevent lapses. The system should also be reviewed and updated on a regular basis.

If you wish to obtain legal assistance in designing a due diligence system or have been charged with any money laundering offences, please feel free to consult our corporate lawyers for advice.

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