EVIDENCE has surfaced to show that countries in South-east Asia are being used by the likes of Russia and Iran, and their proxies, for illicit money flows and terrorist financing, a senior official from the US Treasury Department said on Tuesday (May 7).
Speaking to reporters at the US Embassy in Singapore, the official said widespread sanctions on Russia have made the country “increasingly desperate” and it is now reaching out farther from home to source for materials it needs to build its defence industrial base.
He is visiting Singapore and Malaysia primarily to discuss two topics – Russia’s war against Ukraine, as well as countering terrorist financing by Iran and its proxies.
Russia, which is now “shut out of many of their traditional supply chains”, is turning to more places like South-east Asia to “find what they need”, the official warned.
“We want to make sure that companies and financial institutions in the region are aware of the risks of doing business with the Russian war machine,” he said. “Russia is not and will never be a good partner, they are simply not worth the risk.”
In response to a question on whether there was substantial evidence that Russia has succeeded in sourcing supplies from South-east Asia, the official said the department has “indications” that the country is successfully sourcing some critical components from the region.
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Russia is also trans-shipping some of the critical components that it requires either for the battlefield or to beef up its military industrial base from South-east Asia.
“Typically, we see that for major financial centres, as well as major transshipment points. Obviously, Singapore plays both of those roles, so it has a significantly important role to play in identifying and then helping us prevent that type of abuse of the financial system here,” he added.
He said meetings have been held with several private sector players in Singapore – including the local maritime association, as well as domestic and international financial institutions that have a large presence in the city-state.
On the public front, the official has also met with the Monetary Authority of Singapore (MAS) to talk about the supervision and management of anti-money laundering and combating the financing of terrorism risks.
Over in Malaysia, the public and private sectors have also been engaged for such discussions.
In response to a query on how discussions with the local banks in Singapore panned out, the official said the local lenders were “very receptive”. A key area for discussion was the creation of better feedback loops.
He also warned that there has been a “concerning up-tick” in terrorist financing attempts by Iran and its proxies, including Hamas, to raise and move money in South-east Asia.
“It’s appalling that they seek to take advantage of the outpouring of support for the Palestinian people to syphon money for their violent and destabilising activities,” he said.
One of the ways the Iranian regime raises money is through the illicit oil sales to buyers in East Asia. The official said many of these shipments traverse the waters around Singapore and Malaysia.
These shipments are loaded up on what the department reckons are “questionably seaworthy vessels” – which creates “significant environmental and safety risks”.
“We’re particularly concerned about anyone providing bunkering services to these ships, especially as they conduct ship-to-ship transfers of that illicit oil that can lead to disastrous spills threatening the coast even if they occur in international waters,” he said.
On whether South-east Asia is appearing to be a weak link in the global sanctions regime, he said this is not necessarily the case.
“Bad guys – they always go to wherever they think there’s the least amount of oversight and the most opportunity to do whatever crime they are seeking to do,” he noted.
He added that South-east Asia, based on its location, the nature of significant flows of goods through the region, as well as the importance of the financial systems in countries like Singapore, is an area for global authorities to pay particular attention to.
The US Treasury Department on May 3 said two of its officials – undersecretary for terrorism and financial intelligence Brian Nelson and general counsel Neil MacBride – will travel to Singapore and Malaysia from May 6 to 9.
The duo will advance the Treasury’s work in countering terrorist financing and revenue generation by Iran and its proxies, as well as discuss the implementation of sanctions and export controls against Russia, the department said in a press release.
