Singapore risks its reputation as Asia's 'clean hands' haven
26 January 2018. By Phoebe Seers.
Singapore could reasonably be expected to accelerate and intensify its review of corruption laws following a recent string of high-profile bribery and money-laundering scandals, and with critics of what Transparency International ranks the “least corrupt country in Asia” warning that its legal framework lacks the heft to prevent and punish serious financial crime.
Singapore’s Corrupt Practices Investigation Bureau told MLex that a review of the city-state's Prevention of Corruption Act has been ongoing since 2014, but that it was “premature” to comment on its specific details.
The scandal that has engulfed state-linked local champion Keppel Offshore & Marine is just the latest in a murky couple of years marked by revelations that hundreds of millions of dollars of 1MDB funds were laundered through Singapore, and by the downfall of the infamous “Fat Leonard” and his locally-run defense business in a booze-sodden, trousers-round-ankles scandal involving the US Navy and millions of dollars of bribes.
Indonesian investigators looking into the loss of an estimated 2.3 trillion rupiah ($160 million) from a national electronic ID card scheme have heard that some of the funds siphoned off from it were channeled into Singapore. And in a case involving projects in Thailand and Indonesia, the UK's Serious Fraud Office has published e-mails of Rolls-Royce intermediaries demanding bribes to be paid into bank accounts in Singapore.
— Small fines —
Critics of Singapore’s anticorruption regime have said that the country's maximum fine of S$100,000 (US$76,500) for each violation of the Prevention of Corruption Act is neither a punishment nor a deterrent.
Senior law minister Indranee Rajah said in parliament earlier this month that any penalty imposed on Keppel Offshore & Marine for bribes to which it had admitted in Brazil under Singapore’s current laws would have been “far less” than the $422 million the company has agreed to pay as part of a deferred prosecution agreement with the US Department of Justice.
Although Singapore took deft action in closing the local branches of two banks involved in laundering funds linked to 1MDB, the S$5.2 million fine levied on Standard Chartered Bank for 28 “serious” breaches that led to hundreds of millions of 1MDB funds moving through its accounts was a drop in the bucket compared to fines in other developed jurisdictions.
Singapore fined Swiss lender UBS S$1.3 million, UOB S$900,000 and Credit Suisse S$700,000 in the 1MDB case for inadequate due diligence and scrutiny of customers’ transactions and activities.
Singapore’s officials often proclaim that they can’t police the world, but a fine of half a million dollars — a sum that a mid-level banker might expect to take home as an annual bonus — can hardly be considered a sufficient deterrent against money laundering for a global bank.
— Freeport fears —
In its latest report, intergovernmental organization the Financial Action Task Force said gaps remained in Singapore’s understanding of the money-laundering risks posed by its position as a financial hub in Southeast Asia.
It also hosts an opaque, tax-free storage and trading platform known as Le Freeport, which allows high-value goods to be stowed “in transit” indefinitely.
The FATF says free ports pose a “unique money-laundering and terrorist-financing threat” because they are “areas where certain administrative and oversight procedures are reduced or eliminated.” In Singapore's case, it says, "the relevant authorities did not demonstrate a comprehensive understanding of what activities were being undertaken in the Singapore Freeport.”
Singapore's Commercial Affairs Department, which focuses on financial crimes including money laundering, told Bloomberg recently that it would target ill-gotten gains “more proactively,” especially those from abroad, but like the CPIB’s review, its stated aim is light on detail.
Another complaint came from Washington, which in 2016 decried the fact that Singapore had denied multiple extraditions to the United States for prosecution of money-laundering offenses due to a lack of treaty coverage, and that Singapore had at the time shown no interest in engaging in discussions to upgrade the extradition treaty between the two countries.
— DPA hopes —
As Singapore's authorities continue to keep legal and operational developments under wraps, the types of changes that may have been proposed are anyone's guess. There have been calls for better whistleblower protection and incentivization laws, and foreign bribery is not currently an offense, a position that is at odds with international best practice, issued to which Singapore officials may turn their attention.
Singapore did recently say it was considering introducing a deferred prosecution agreement system, an initiative that has been widely commended.
As things stand, it is very difficult to prosecute companies for bribery-related crimes in Singapore. Unlike in the UK, where failure to prevent bribery is an offense in its own right, prosecutors must prove that a company's chief executive or board intended to engage in bribery, which is notoriously difficult to prove.
Nevertheless, the introduction of deferred prosecution agreements in Singapore would give prosecutors more scope to hold companies to account for corruption among their employees, especially where it is unclear whether their boards were engaged in that corruption.
— Reputation on the line —
In the wake of the recent scandals, Singapore’s squeaky-clean image is now under threat. The country's relatively high profile on the world stage means that corruption related to it and its businesses gets far more attention than dodgy dealings in neighboring Malaysia or Indonesia.
Singapore's government has expressed “extreme disappointment” over the Keppel Offshore & Marine scandal. But if the government doesn’t react decisively, and quickly, to fight graft, disappointment risks becoming embarrassment for the “least corrupt country in Asia,” with other Asian jurisdictions poised to creep up Transparency International’s respected annual index.
- Additional reporting by Toh Han Shih