CITIGROUP, DBS Group Holdings and other banks caught up in Singapore’s biggest money-laundering scandal are ramping up scrutiny of their wealthy customers and potential clients to avoid exposure to illicit flows, according to sources familiar with the matter.
Private bankers at several institutions are also receiving additional training to help them spot tricks used by criminals to mask their backgrounds and sources of funds, said the sources, who asked not to be identified discussing private matters.
The moves, which are voluntary, show how lenders are trying to close loopholes that enabled a group of criminals from China to launder more than S$3 billion in proceeds from online gambling through at least 16 financial institutions in the island nation. The scandal has tarnished Singapore’s image and exposed weaknesses in how local and foreign banks and brokerages screen their clients.
The Monetary Authority of Singapore (MAS) recently completed on-site inspections of some banks that were involved in the case. Lenders that had the most dealings with the criminals – through deposit accounts, loans and other financial services – are expected to face fines and other punitive measures from the financial regulator after its review concludes, some of the sources said.
The MAS will assess if the financial institutions have implemented adequate and appropriate controls against money laundering and terrorism financing and will take action if they have fallen short of requirements, as it has done in past cases, a MAS spokesperson said in response to questions from Bloomberg News. Supervisory engagements are ongoing, the spokesperson said.
After the laundering case became public in August 2023, Singapore’s government set up an inter-ministerial committee to review its anti-money laundering regime and strengthen defences in sectors including financial institutions, property agents and precious metals dealers.
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The assets seized by authorities included cash, gold bars, jewellery, cars, and residential and commercial properties. All 10 of the accused have pleaded guilty, and nine of them have been sentenced to prison for 13 to 16 months. The final one will be sentenced on Monday (Jun 10) Another 17 people are under investigation and remain at large.
The MAS inspected several banks at their premises and interviewed staffers to identify potential weaknesses in their compliance checks. The banks linked to the case did more than take deposits: some lent to the criminals’ locally incorporated businesses, arranged mortgages or helped them with investments, according to court documents.
The financial regulator also asked banks that were not linked to the case to have their know-your-customer measures reviewed by outside consultants, some of the sources familiar with the matter said.
The 10 convicted individuals were linked to accounts across 16 financial institutions operating in Singapore that held more than S$370 million in deposits and investments. The banks that held the most assets include Credit Suisse, Citigroup’s local unit and United Overseas Bank.
At Citi, wealth bankers have been given a month to complete training that covers money-laundering red flags, according to one of the sources.
The warning signs covered in the Citi training seen by Bloomberg News include clients or prospects from China’s Fujian and Guangdong provinces who do not speak English, yet carry “golden” passports from countries including Turkey, Saint Kitts and Nevis, or Vanuatu, according to Citi training materials. Other suspicious transactions include significant transfers from Hong Kong-based firms with no Internet presence that are labelled “loan repayments” to customers of the US bank.
“Citi provides regular training to all staff on various topics including anti-money laundering,” a bank spokesperson said. “We are committed to ensuring that our staff are informed of emerging risks and potential issues to better serve our clients.”
DBS is also among banks tightening their processes for vetting major transactions by clients, according to the sources. The country’s largest bank, had about S$100 million in exposure, mainly from financing property purchases.
A DBS spokesperson said anti-money laundering processes are evolving to keep up with changes in how criminals act, as well as regulatory and industry developments.
“Criminals will adapt their behaviour now that there has been discovery of their methods, so we will need to continue thinking about how to stay one step ahead,” the spokesperson added.
Fujian Gang
Several former Citi customers were among those found guilty of money laundering. They were part of the so-called Fujian Gang, as all of the accused hail from that southern province in China.
Zhang Ruijin, a Chinese national with a Saint Kitts and Nevis passport, had six accounts with the New York-based bank, and six others with Oversea-Chinese Banking, DBS and Industrial and Commercial Bank of China, according to court documents.
Zhang, who had about S$131 million in assets seized, moved his funds from mainland China to Singapore via Hong Kong and forged documents to deceive his banker at Malaysian lender CIMB Group Holdings, according to the police report. He pleaded guilty and was sentenced to 15 months in jail.
UBS Group, which acquired Credit Suisse last year, is also among banks providing additional staff training, said the sources. Vang Shuiming, who had the most assets seized in the arrests, had S$76 million at Credit Suisse in personal accounts, as well as those of his wife and related firms.
Additional checks
OCBC has implemented several measures including the enhancement of its risk-rating methodology and source of wealth review processes, said Loretta Yuen, the bank’s head of group legal and compliance.
“As part of our ongoing monitoring of customer activity, we already engage customers to seek clarification on any suspicious behaviour and consider their explanations before taking further action,” she said.
Some bankers have bristled at the additional scrutiny. The safeguards are a box-ticking exercise that may not help curb Singapore’s exposure to money laundering, some of the sources said. Banks not involved in the case had only a couple of months to hire an external reviewer, they said.
Bankers have also complained about the additional checks on new clients’ sources of funds and the extra challenges in monitoring accounts, according to some of the sources.
Intelligence and information from suspicious transaction reports filed by financial institutions had helped alert the police to illicit activities in the recent money-laundering case, the MAS said last year. BLOOMBERG
