US embassy cable - 05SINGAPORE1706

UNCLAS SECTION 01 OF 04 SINGAPORE 001706 
 
SIPDIS 
 
STATE FOR INL, EB/ESC, EAP/PMBS, AND L 
TREASURY FOR DAS DANIEL GLASER AND ADRIANNE JOVES 
USDOJ FOR INTL AFFAIRS 
FINCEN FOR RMILLER 
 
SENSITIVE 
 
E.O. 12356: N/A 
TAGS: ETTC, KTFN, KCRM, EFIN, PTER, SNAR, SN 
SUBJECT: Financial Action Task Force Scenesetter: 
Singapore's Slow Steps Toward AML/CFT Implementation 
 
REFS: A) SINGAPORE 126 B) 04 SINGAPORE 3540 C) HOROWITZ- 
 
DEGARABEDERIAN EMAILS D) 04 State 241413 
 
1.  (SBU) Action request and summary.  Singapore is 
beginning to make some progress in mapping out legal and 
regulatory changes to implement the Financial Action Task 
Force (FATF) Revised 40 Recommendations on anti-money 
laundering (AML) and Special 9 Recommendations on countering 
the financing of terrorism (CFT).  In anticipation of the 
upcoming FATF Plenary, which Singapore will host June 8-10, 
we offer the following overview of where Singapore stands in 
this regard.  We request that U.S. FATF delegates raise 
points in para 7 in their discussions with Singapore 
counterparts.  We are particularly interested in ensuring 
that Singapore adopts the best possible AML/CFT regime to 
govern cash couriers and casinos, fully implements 
cooperation under the recently concluded Financial 
Intelligence Unit (FIU) Memorandum of Understanding (MOU), 
and concludes a Mutual Legal Assistance Treaty (MLAT).  We 
also request the Department's assistance in responding to 
AML/CFT questions raised by GOS officials (para 6).  End 
Action Request and Summary. 
 
Bogged Down: Draft Revised AML/CFT Regulations for Banks 
--------------------------------------------- ----------- 
 
2.  (SBU) In January 2005, the Monetary Authority of 
Singapore (MAS) released for public comment (closed February 
18) its revised draft Notice on Prevention of Money 
Laundering and Countering the Financing of Terrorism (Ref 
A); the text, which is directed at banks, can be viewed at: 
 
http://www.mas.gov.sg/masmcm/bin/pt1Anti_Mone y_Laundering_an 
d_Countering_The_Financing_of_Terrorism.htm 
http://www.mas.gov.sg/masmcm/bin/pt1Reports). 
 
On May 24, MAS officials said Singapore's interagency FATF 
implementation team was "bogged down" by a number of 
technical issues, but asserted that the new regulations 
should be issued in the next one to two months.  One 
stumbling block, MAS explained, was how to implement new 
customer due diligence (CDD) requirements for banks, in 
particular the proper level of inquiry for account holders 
such as corporate clients.  MAS is considering dividing the 
Notice into two parts, one listing mandatory requirements, 
the other providing guidelines and supplementary 
information; it has not yet discussed this idea with banking 
sector representatives. 
 
3.  (U) Once in force, the new regulations should bring 
Singapore into conformity with several FATF recommendations 
for banks.  In addition to clarifying procedures for CDD 
(Recommendation V) and the introduction of a risk-based 
approach to CDD, the Notice includes provisions that cover 
the following: 
 
-- new CDD requirements for politically exposed persons 
(Recommendation VI); 
 
-- new requirements for correspondent banking relationships 
(Recommendation VII), including those that proscribe banks 
from entering into, or continuing, correspondent banking 
relationships with shell banks (Recommendation XVIII); and, 
 
-- revised regulations concerning the performance of CDD by 
intermediaries (Recommendation IX). 
 
Wire Transfers 
-------------- 
 
4.  (U) The Notice will also, for the first time, require 
banks to obtain originator information for domestic and 
cross-border wire transfers per FATF Special Recommendation 
VII.  MAS noted that, while it did not anticipate any 
substantive changes to the draft text, it would include 
language pertaining specifically to cross-border wire 
transfers in the final Notice only after FATF members 
resolved the issue of threshold reporting requirements.  MAS 
emphasized that its thinking on a threshold limit was in 
line with our own, i.e., that lowering or eliminating the 
threshold with respect to identification and verification of 
originators might drive economically legitimate transactions 
underground (Ref D). 
 
After Banks: Next Steps on the AML/CFT Agenda 
--------------------------------------------- 
 
5.  (U) After the Notice to banks comes into effect, 
Singapore will focus on broader implementation of several 
FATF recommendations, among them: 
 
-- Other Financial Institutions: 
 
MAS will issue new or revised sector-specific notices after 
the Notice to banks enters into force, including a new 
Notice for trustee entities (MAS will begin regulating trust 
companies in the near future).  MAS officials said that this 
process should be completed before the end of 2005.  MAS 
added that it might not request public comments since it had 
already received them from several non-bank financial 
institutions during the January - February comment period 
for banks. 
 
-- Designated Non-Financial Businesses and Professions: 
 
Although the GOS interagency FATF implementation group has 
begun drafting applicable AML/CFT measures, MAS explained 
that it was "proceeding cautiously" since implementation in 
other countries, it observed, had not gone very smoothly. 
 
-- Casinos (Recommendation XII): 
 
Lifting a forty-year prohibition, the GOS in April announced 
its decision to allow development of at least two integrated 
resorts with casinos; total investment in the projects is 
estimated at US$ 4-5 billion.  To address AML/CFT concerns, 
the Ministry of Home Affairs (MHA) will establish a Casino 
Regulatory Authority that will begin operating at least one 
year prior to when the casinos open in early 2009.  Minister 
for Home Affairs (MHA) WONG Kan Seng told Parliament on 
April 18 that casinos will be required to record 
transactions above S$5,000 (US$3,000), and to report any 
transactions above S$10,000 (US$6,000) to the regulator; all 
records must be kept a minimum of seven years. 
 
In a May 31 meeting, MHA officials said that the GOS is 
currently studying the casino regulatory environment in a 
number of jurisdictions, in particular those in Australia, 
and to a lesser extent, Nevada and New Jersey.  They noted 
that the GOS was prepared to implement AML/CFT regulations 
that were more stringent than those recommended by FATF. 
 
-- Cash Couriers (Special Recommendation IX): 
 
MHA is currently considering implementation of FATF Special 
Recommendation (SR) IX, adopted in October 2004 at the FATF 
Plenary in Paris, concerning the physical cross-border 
transportation of currency and bearer negotiable 
instruments.  MHA said it was inclined to develop 
regulations based on a disclosure rather than a declaration 
system, and wanted to discuss further the advantages and 
disadvantages of each system to ascertain which of the FATF 
options other jurisdiction were considering.  Unlike the 
majority of FATF recommendations, in which Singapore can 
undertake regulatory changes to effect implementation, MHA 
has determined that SR IX will require amendments to 
existing laws.  MHA noted that implementation of SR IX will 
require considerable consultation beforehand, and that 
relevant laws and regulations therefore would not be in 
place before 2006. 
 
-- Predicate Offenses (Recommendation I): 
 
Singapore is revising its list of predicate offenses that, 
by law, can serve as the basis for money laundering or 
terrorist financing charges, and expects to issue a final 
list by the end of 2005.  The Corruption, Drug Trafficking, 
and Other Serious Crimes (Confiscation of Benefits) Act of 
1999 (CDSA) criminalizes the laundering of proceeds from 
narcotics and 183 other serious crimes.  Many offenses 
included in the expanded FATF list of designated predicate 
offenses, such as "counterfeiting and piracy of products" 
and "environmental crime," however, are not on Singapore's 
current list. 
 
GOS Queries and Information Requests 
------------------------------------ 
 
6.  (U) Action Request:  Post requests Washington's 
assistance in providing responses to the following GOS 
queries and requests for information (Ref C): 
 
-- Beneficial Owners and Customer Due Diligence: 
 
MAS said that one of its biggest issues in finalizing the 
draft Notice to Banks pertains to the identification of 
beneficial owners.  MAS would appreciate information about 
how the USG has dealt with this issue; how home institutions 
have undertaken the tracking of beneficial owner 
information; and USG opinions about what the realistic 
expectations of this FATF recommendation might be. 
 
-- Correspondent Banking and Securities: 
 
MAS is finding it difficult to draw up AML/CFT 
implementation guidelines as they pertain to correspondent 
banking and securities/stock brokering, and requests 
additional information about equivalent requirements and 
guidelines used in other financial sectors. 
 
-- Designated Non-Financial Businesses and Professions: 
 
The GOS is concerned about implementation difficulties 
encountered in other jurisdictions, including the United 
Kingdom, and would appreciate more information about how the 
USG is implementing relevant regulations. 
 
-- Grace Periods and E.O. Designations: 
 
The GOS questioned whether the Executive Order (E.O.) 
designation system includes a grace period during which 
financial institutions are not penalized for failing to 
immediately identify a newly designated terrorist or 
terrorist organization.  The GOS wants to learn more 
about how regulators have dealt with, or are prepared to 
deal with, this type of scenario. 
 
Discussion Topics 
----------------- 
 
7.  (SBU) Action Request:  Post would appreciate it if 
members of the U.S. FATF delegation could focus on the 
following issues in discussions with Singapore officials 
responsible for AML and CFT issues: 
 
-- Cash couriers:  Singapore has no regulations on physical 
cross-border transfers of cash.  Underscore the need for the 
GOS to implement on an urgent basis Special Recommendation 
IX concerning cash couriers to address this deficiency, and 
to adopt a declaration rather than a disclosure system. 
(Note:  Bulk currency transfers are one of the most common 
forms of money laundering in the Southeast Asia region.  End 
Note.) 
 
-- Casinos:  Singapore has decided to go ahead with 
development of two multi-billion dollar integrated resorts 
with casinos.  GOS efforts thus far to establish a casino- 
related regulatory regime appear uncoordinated, as evidenced 
by the number of separate but similar GOS queries for 
information made to our law enforcement representatives. 
Urge the GOS to adopt international best practices in 
tracking suspicious transactions and combating money 
laundering related to casinos.  Press for greater government- 
to-government cooperation and coordination at the 
interagency level to ensure smooth implementation of the 
many regulatory and legal changes that the GOS will need to 
undertake with regard to casino operations. 
 
-- FIU MOU:  The USG and GOS signed an MOU in December 2004. 
Seek Singapore's strong support in fully implementing FIU 
cooperation under this agreement. 
 
-- MLAT:  The USG (State L Bureau and DOJ International 
Affairs) and the GOS had two rounds of MLAT talks in 
November 2003 and April 2004.  U.S. negotiators have been 
frustrated, however, by Singapore's insistence on limiting 
the set of crimes for which assistance may be rendered, 
among other issues.  Underscore the need for a comprehensive 
Mutual Legal Assistance Treaty with the U.S. 
 
LAVIN