Singapore Banks Raise Checks of Chinese With Other Passports

Singapore banks are increasing scrutiny of some Chinese-born clients with other citizenships, following last month’s crackdown on money laundering involving more than S$2.4 billion ($1.8 billion) worth of assets that has rattled the Asian financial hub.

(Bloomberg) — Singapore banks are increasing scrutiny of some Chinese-born clients with other citizenships, following last month’s crackdown on money laundering involving more than S$2.4 billion ($1.8 billion) worth of assets that has rattled the Asian financial hub.

Some lenders have been reviewing new account openings and transactions with clients of Chinese origin carrying investment-linked passports, people with knowledge of the matter said. At least one international bank is closing some accounts of clients with citizenship from countries including Cambodia, Cyprus, Turkey and Vanuatu, one of the people said, asking not to be identified as the information isn’t public.

Other lenders in the city-state have started to evaluate whether to take fresh funds from clients with similar profiles on a case-by-case basis, said the people. The process is taking longer and more questions are being asked, the people added.

The moves, part of an extension of Singapore’s existing anti-money laundering framework, are happening after the Aug. 15 island-wide raids that saw 10 wealthy people of Chinese origin arrested and charged. Police investigations unveiled more than S$2.4 billion worth of assets that have been seized so far, including cash, cryptocurrencies and properties.

That includes bank accounts with a value of more than S$1.13 billion, cryptocurrencies of over S$38 million, as well as luxury watches, bags, jewelry and gold bars, according to a police statement on Wednesday. Prohibition of disposal orders were also issued against more than 110 properties and 62 vehicles worth more than S$1.24 billion, the statement said.

Judges have denied bail for the people after prosecutors cited flight risks related to their multiple passports. While they reside in Singapore, many are also alleged to be running illegal gambling businesses in other countries, according to the prosecution. Some of the suspects speak only Chinese but carry many travel documents including from Cambodia, Vanuatu, Cyprus and Dominica.

At least 10 local and international banks in Singapore are embroiled in the high-profile scandal that put the spotlight on their effectiveness in countering ill-gotten gains in the system. Parliamentarians in the country raised more than 30 questions in the House this week, from how rigorous their vetting processes are, to suspicious transaction reports and the reputation impact on Singapore as a wealth hub. 

Credit Suisse and Julius Baer Group Ltd., which had accounts totaling S$125 million with one of the suspects, declined to comment.  Citigroup Inc., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., where some of the individuals held funds or were creditors to firms related to them, said the banks work with the authorities and are committed to fighting against money laundering.

DBS Group Holdings Ltd. said Singapore’s regulatory regime obliges all banks to manage anti-money laundering risk to high standards, but does not oblige them to deny banking facilities or services to clients – new or existing – of any specific origin merely because they hold certain passports. Other risk factors have to trigger before suspicion is warranted, according to a spokesperson. 

While banks have to ascertain clients’ nationality to assess jurisdictional risks, “it’s not that simple for banks to know that a customer holds more than one nationality, unless there are additional data points leading them to believe otherwise,” said Radish Singh, Ernst & Young’s financial services risk management leader for Asean.

In parliament, one question was how offenses of such magnitude happened despite the city’s robust laws and anti-money laundering frameworks. Another asked how the government will step up checks on those from high-risk “golden passport” jurisdictions, and other questions focused on the procedures for investment entities that receive tax incentives.

Minister of State for Home Affairs Sun Xueling told parliament these will be answered in a ministerial statement in October.

DBS Chief Executive Officer Piyush Gupta last week compared the process of identifying illicit transactions to looking for a needle in a haystack, even with the use of technology. “No country can achieve zero crime,” Gupta said at a Reuters Newsmaker event. 

The Monetary Authority of Singapore, the central bank, is having supervisory engagements with the financial firms identified with the potentially tainted funds, it said Aug. 16. The regulator will take firm action against those found to have breached requirements or with inadequate controls against money-laundering risks.

Intelligence and reports filed by banks had earlier alerted the police to suspicious activities, the MAS said at the time.

China is among countries that do not allow dual-citizenship. Holders of a Chinese passport can travel visa-free to 80 destinations, according to Henley & Partners’ Passport Index, less than the 180 places for passport holders of Cyprus, part of the European Union.

(Updates with more details of seized assets in fifth paragraph, outside comment in 10th paragraph)

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