Singapore regulator steps up scrutiny as dirty money targets residents

Thousands of Singapore-incorporated shell companies that are fronts for channeling illicit money flows are paying as little as S$250 a month to use Singapore residents as directors, the local regulator as warned as it steps up efforts to crackdown on money laundering.

Numerous corporate services firms in the city-state offer Singapore residents as directors of Singapore-incorporated companies for as little as S$250 a month, and/or a suite of corporate secretarial services for under S$3,000. 

While such affordable directors-for-hire services and corporate services are legitimate, regulators note that the country's openness to businesses meant it is vulnerable to money-laundering and terrorism-financing threats.  

"While they may have legitimate purposes, shell companies are a structure that can be vulnerable to criminal abuse," saidValerie Tay, head of the anti-money laundering department at MAS, who was quoted in the Business Times.

Under local regulations, any company looking to register its business in Singapore is required to have at least one local director. To provide customers with a one-stop solution, many professional service firms in Singapore also bundle services to incorporate a company, get a Singapore nominee director and corporate secretary, plus digitize official letters coming through a Singapore registered address. 

She said banks had closed accounts of several onshore shell companies over the past year, after detecting unlawful transactions. "When we looked deeper into the risks, we realized that while criminals may still be using offshore companies, actually they have shifted to using onshore companies to evade detection," Tay told Reuters, adding that this trend was also noticed in other financial centers.

"And that's when we started to be concerned. Because when the modus operandi of criminals shifts to evade detection and the industry isn't vigilant enough, the criminals can get their way," she said.

Traditionally, money launderers and tax evaders have used shell companies in offshore centers worldwide. But foreign criminals have turned their attention towards using Singapore shell companies for illicit activities in recent years. Data provided by the Commercial Affairs Department (CAD) showed that Singapore nominee directors have been prosecuted for their roles in aiding money laundering offenses in recent times.

She added MAS has told banks to "actively look for shell companies that can be abused for illicit financing. So there's a supervisory expectation for pro-active detection and disruption of illicit finance."

The MAS' anti-money laundering department, set up three years ago to conduct functions that were carried out by different units, has grown to 30 specialists from 20. 

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