Regulations to Monitor or Uncover Any Illicit Activities of Offshore Financial Service Providers with Offices Registered in Singapore in Light of Pandora Papers Leaks

Mr Lawrence Wong, Deputy Chairman of MAS and Minister for Finance has responded to all the Parliamentary Questions (PQs) related to the recent disclosure by the International Consortium of Investigative Journalists (ICIJ)1 of confidential information, dubbed the “Pandora Papers” together at today’s Parliament Sitting. This includes the:

(a) Oral PQs from Dr Lim Wee Kiak and Mr Patrick Tay filed for today’s Sitting;

(b) Written PQ from Miss Cheryl Chan Wei Ling filed for today’s Sitting;

(c) Oral PQ from Mr Murali Pillai filed for yesterday's Sitting.

As a global financial centre, Singapore intermediates a large volume of fund flows for investment or commercial purposes, and also provides services in financial asset management. While the vast majority of these activities are carried out by law-abiding individuals and companies, we are constantly on guard against the risk of illicit financing activities.

The Monetary Authority of Singapore (MAS) continually monitors and analyses information from a wide range of sources as part of its surveillance of money laundering and terrorism financing risks. This includes suspicious transactions reports filed by our financial institutions (FIs), information from intelligence sources, including those abroad, and publicly available information such as from independent investigations and media reports. MAS therefore takes seriously the recent disclosures in the Pandora Papers.

The ICIJ has reported that 336 prominent individuals from around the world had established offshore structures to hold assets2, assisted by 14 service providers operating in at least 38 jurisdictions3. Two of the 14 service providers are foreign-incorporated trust companies with subsidiaries in Singapore that are licensed and regulated by MAS. Some ICIJ media reports also mentioned that many of these individuals had foreign bank accounts linked to these structures, in various financial centres including Singapore.

Based on MAS’ assessment and information available thus far, the Pandora Papers have not raised significant concerns over the money laundering and counter terrorism financing (AML/CFT) controls of our FIs. Nevertheless, MAS is engaging the relevant FIs to assess if tightening of controls are warranted.

As ICIJ itself is careful to acknowledge, there are legitimate reasons to set up offshore structures, such as for investment and estate management. However, offshore structures often lack transparency and are thus vulnerable to abuse for illicit activities. Hence, MAS has clear requirements for FIs in Singapore to identify and verify the identities of persons who are beneficial owners or effective controllers of their customer accounts. FIs must understand the reasons for the use of such structures, take measures to ascertain that the assets held in these structures are not illicit, and scrutinise any unusual transactions as part of their ongoing monitoring of the account.

MAS also supervises the FIs to ensure that their boards and management have implemented robust controls against money laundering and terrorism financing. Where there are breaches of AML/CFT requirements, MAS has taken strong enforcement action.

In fact, both the licensed trust companies in Singapore mentioned in the Pandora Papers have already been subject to MAS’ supervisory or enforcement actions. One of them, Asiaciti Trust (Singapore) Pte Ltd, paid a composition penalty of $1.1 million imposed by MAS in July last year for its failure to implement adequate AML/CFT policies and procedures. The other trust company, Trident Trust Company (Singapore) Pte Ltd, was directed by MAS in September last year to remediate weaknesses detected in its risk assessment controls during MAS’ supervisory surveillance. Both companies were under intensified scrutiny by MAS before they were mentioned in the Pandora Papers.

Let me assure this House that Singapore takes the integrity of our financial sector very seriously. As a major international financial centre, Singapore will always face the risk of illicit financial flows. What is important is that we supervise our FIs well, and take strong enforcement actions where necessary to reduce this risk as much as possible. MAS has been doing this and will continue to do so.