Money makes the world go around. This phrase very aptly describes the reason behind the innumerable safeguards against money laundering. Money laundering can be defined as the process of converting money obtained from criminal activities into money that appears to have been obtained from legitimate means.
The issue of money laundering has been in the public’s eye, both nationally and internationally, for quite some time. Unsurprisingly, this has translated into an international standard being promulgated and trickled down into domestic anti-money laundering (AML) regulations. Singapore, as a member of the Financial Action Task Force (FATF), an intergovernmental organization founded to combat anti-money laundering, has also been shoring up its domestic laws to combat money laundering. As a member, Singapore must comply with recommendations issued by FATF on the implementation of measure to combat money laundering and is subject to FATF’s evaluation on the adoption of these recommendations. As such, Singapore has been seeing an uptick of activities, regarding AML regulations within the legislative sphere in recent times.
This article will focus on topology of the current AML regime in Singapore; the applicable statutes, the criminal sanctions that can be imposed on individuals for facilitating money laundering and the regulations imposed on companies to prevent money laundering.
Criminal Sanctions
Although anti-money laundering rules are contained in the Corruption, Drug-Trafficking and other Serious Crimes (Confiscation of Benefits) Act (CDSA), the main focus of the Act is not money laundering. Instead, its objective is to strip criminals of their monetary gain from criminal conduct by implementing a confiscation regime. The CDSA criminalises the laundering of proceeds from drug dealing offences and serious crimes listed in the 1st Schedule and 2nd Schedule of the Act respectively .
Broadly speaking, the CDSA targets two main groups of offenders who engage in money-laundering activities: (1) criminals who conceal the proceeds of their criminal activities; and (2) those who aid a primary criminal to conceal the proceeds of his crimes or acquire those proceeds from the primary criminal.
The statutory anti-money laundering rules are found in s 43, 44, 46 and 47 of the CDSA. A breach of these sections can lead to up to a maximum of 10 years jail sentence and/or a fine of $500,000 if the offender is an individual . If the offender is a legal entity – it faces a fine of up to $1 million.
Section 43 and 44 of CDSA
Section 44 makes it an offence to enter into any arrangement if the party knows or has reasonable grounds to believe that the other’s “benefits of criminal conduct” are either (a) retained or controlled by him; (b) are used to secure funds placed at his disposal; or (c) are used for his benefit to acquire property. Here, criminal conduct is defined as doing or being concerned in, any act that that constitutes a serious offence or a foreign serious offence. For the purposes of the CDSA, it is immaterial whether said criminal conduct occurred in Singapore or in another jurisdiction. Section 43 requires the same elements as s 44 to be satisfied, but is specific to drug trafficking. To prove an offence under any s 44(1)(a), the Prosecution is required to establish that the monies involved were the proceeds of criminal conduct. To facilitate the prosecution of money-laundering offences, s 44(1)(a) of the CDSA lowered the threshold of mens rea to “reasonable grounds of believe”.
In the case of Ang Jeanette v Public Prosecutor, [1] it was held that the Prosecution was required to prove that the monies were in fact proceeds of criminal conduct. However, they only had to adduce some evidence linking the monies in question with an action that might constitute one or other offences under the Second Schedule to the CDSA.
Notably, it was held that the Prosecution did not have to prove beyond a reasonable doubt that all the constituent elements of a specific offence had been met. The court reasoned that since the very purpose of money laundering is to conceal the predicate offences from which the monies are obtained from, it follows that it would be difficult for Prosecutors to prove that the property concerned had a criminal origin. Thus, insisting on strict proof of all the elements necessary to establish such predicate offences would defeat the purpose of CDSA.
The court, further noted that while there would be circumstances where the only logical inference is that the monies involved in the arrangement are derived from criminal activity, the Prosecution did not need to prove beyond a reasonable doubt that the elements of the specific offences listed in the Second Schedule had been met.
In that case, the accused received a call from her brother saying that he was in trouble. He requested that she follow the instructions of a man named “Mike” who would contact her. Subsequently, Jeanette upon instruction from Mike met up with another man named “Aloysius” on various occasions and remitted the monies which she received from him into her DBS bank account. She was convicted on 5 counts under s 44 of the CDSA and received 9 months imprisonment.
The court held that 9 months imprisonment was appropriate because the suspicious circumstances in which she actively facilitated the retention of more than $2 million would have made it abundantly clear to her or any reasonable observer that the monies came from illegal activities. However, she refused to seek an explanation from anyone who participated in the arrangement ie. Mike or Aloysius and she did not attempt to explain her conduct to the court. Moreover, her subsequent reluctance to remit any more money after the last instance indicated to the court that she believed that she was aiding in the retention of the benefits of criminal conduct.
Section 46 and 47 of CDSA
Section 47 also makes it an offence to acquire, possess, use, conceal or transfer any property that is or represents a predicate offender’s benefits from criminal conduct. This offence can be conducted by the predicate offender or by any other third party who knows or has reasonable grounds to believe that the property stems from the predicate offender’s illegal behaviour. Section 46 requires the same but is specific to property derived from drug trafficking.
Section 59(1) of CDSA
Section 59(1) of the CDSA imposes liability on an officer of a body corporate and the body corporate itself where said body corporate commits an offence under the CDSA, with the consent or connivance of an officer (s 59(1)(a) or when said offence is attributable to the neglect on the officers’ part (s 59(1)(b)).
This means that the acts committed by the company can be attributed to its officers.
In Abdul Ghani bin Tahir v PP,[2] the Appellant was a resident non-executive director at a Singapore-incorporated company. He was charged and convicted under s47 (1)(b) of CDSA, punishable under s 47(6)(a), read with s59 (1)(b) of the same Act.
The court held that that to prove neglect under s 59 (1)(b), it has to be shown that the accused knew or ought to have known of the existence of facts which required him to take steps by virtue of his role or at the very least, he should have been put on inquiry. He would be found guilty of neglect if he failed to take any appropriate preventive action.
Section 39 of the CDSA
Pursuant to s 39(1) of the CDSA, parties who have reasonable grounds to suspect that any property which may be the proceeds of criminal conduct must disclose this suspicion if the information comes to his attention in the course of his “trade, profession, business or employment”. Failure to do so may lead to conviction and a fine not exceeding $20,000.
However, under s 39(4) of the CDSA, it is not an offence for an advocate and solicitor, legal counsel or arbitrator to not disclose any information which comes to his attention in the course of his business if it is subject to legal privilege.
Penalties outside of the CDSA
Offences for directors
Specific to directors and officers of companies, penalties can accrue under s 157(1) of the Companies Act if the director is negligent or refuses to act honestly by allowing money laundering to take place. Further to the aforementioned charges, the Appellant, Abdul Ghani in the case Abdul Ghani bin Tahir was charged separately with s 157(1) when the High Court found that he had breached his duty to exercise reasonable diligence when he failed to provide adequate supervision resulting in company in which he was a director of to receive stolen properties in violation of s 411 of the Penal Code. The Appellant was sentenced to 4 weeks for his conviction under s 157(1). Whereas, the maximum sentence for a breach of s 157(1) is a fine of $5,000 or for a custodial sentence, 12 months’ imprisonment.
Penal Code Offences
Section 411 of the Penal Code makes it an offence to dishonestly receive any stolen property if the accused knows or has reason to believe that the property was stolen. The legal test for “reason to believe” under s 411 is an objective one – the inquiry turns on whether a reasonable person, having the same knowledge and experience as the accused, in that position would have thought it probable that the property he retained was stolen (Ow Yew Beng v PP).[3]
If convicted, the offender may be punished with imprisonment for a term which may extend to 5 years or with a fine or with both.
The confiscation regime under the CDSA
Section 4 of the CDSA allows the court to impose a confiscation order on application of the Public Prosecutor if the offender has been convicted of one or more drug dealing offences and if the court is satisfied that benefits were derived by the offender from the drug dealing.
Section 5 of the CDSA allows the court to do the same where the offender is convicted on one or more serious offences (defined in the Second Schedule of the Act). Part III of the CDSA addresses the enforcement of the confiscation order through the appropriation or realisation of specific assets of the offender towards the payment of the order. This is to strip wrongdoers of their ill-gotten gains, not to deprive innocent parties of their property.
The efficacy of enforcement is balanced out by s 13 of the CDSA which is meant to protect the interests of innocent third parties by allowing them to intervene and assert his “interest”. The burden of proof is therefore on the third party intervener to satisfy the court of the following: (1) that he was in no way involved in the offender’s criminal conduct and (2) that he had acquired interest for sufficient consideration and without knowing (in circumstances which would arouse a reasonable suspicion) that the property when he acquired it derived from criminal conduct (Centillion Environment & Recycling v PP).[4]
This means that gifts may be caught by the CDSA if the gifts had been made within the six year period preceding the making of the confiscation order or the start of criminal proceedings and the gifts are traceable to the defendant’s ill-gotten gains (s 12(7) and (8) of the CDSA).
Prevention regulations on institutions
The Monetary Authority of Singapore (MAS) has also issued anti-money laundering directions and rules for financial associations. These govern day-to-day compliance. Pursuant, to s 27B(2) of the Monetary Authority of Singapore Act, non-compliance by financial institutions with any of these regulations is an offence punishable with a fine of up to S$1 million and a further fine of S$100,000 for every day the offence continues after conviction.
These include rules on customer due diligence, risk mitigation and record keeping. MAS has written guidelines for specific institutions such as Life Insurers and Financial Institutes to aid with compliance under the MAS rules.
Other professional institutions such as the Singapore Association of the Institute of Chartered Secretaries and Administrators have their own guidelines as to prevent money-laundering. These like the MAS guidelines are not necessarily binding but are a good port-of-call for due diligence.
However, some professions such as the legal profession are mandated by law to carry out specific due diligence. In particular, lawyers are governed by anti-money laundering regulations in the Legal Profession (Prevention of Money Laundering and Financing of Terrorism) Rules 2015. Pursuant to s 70G of the Legal Profession Act, disciplinary proceedings may be taken against any legal practitioner who breaches any of the rules stated above.
The Law Society of Singapore, Council’s Practice Direction 2015 – Prevention of Money Laundering And Financing of Terrorism provides further guidelines to lawyers on how to apply the rules in the LPR and undertake steps for transactions with heightened risk of money laundering and terrorist financing.
Possible new laws
On 17 July 2018, the Ministry of Law noted in its statement that it would be proposing a new regulatory regime on precious stones and metals to mitigate money laundering and terror financing risks. The proposed law requires dealers of precious stones and metals to be registered with the Ministry. Other requirements include filing Suspicious Transaction Reports and performing Customer Due Diligence for all cash transactions over $20,000. Further, dealers are required to keep records and conduct internal audits.
Conclusion
The current anti-money laundering regime increases the standards of diligence required by individuals and companies operating in their personal and corporate capacities. The use of the “reasonable belief” standard in the penal sections of the CDSA means that if one suspects that something is awry, he should not go through with the transaction. Officers of companies also face a high standard given their duties to the company under the Companies Act and the potential criminal sanctions under the Companies Act and the CDSA. Further, companies are subject to MAS rules of compliance, though aided by guidelines given by both MAS and if applicable, professional institutions. With the new law being proposed on money laundering, it seems that these strict standards will remain given Singapore’s membership in the Financial Action Task Force on Money Laundering.
[1] [2011] 4 SLR 1
[2]Abdul Ghani bin Tahir v PP [2017] SGHC 125
[3] [2003] 1 SLR(R) 536
[4] [2013] 1 SLR 444; [2012] SGCA 65
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This article is written by Andrew Lee from Peter Doraisamy LLC and edited by Saravanan Rathakrishnan from Peter Doraisamy LLC and Abigail Wong of Asian Law Students’ Association.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to a practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.