Singapore

Last updated 18/04/2008

CENTRAL AUTHORITY FOR REPORTING

The Financial Investigation Division, Commercial Affairs Department, of the Singapore Police Force combats money laundering in Singapore. There are 3 branches in the Financial Investigation Division.*
The Financial Investigation Branch investigates money laundering and other offences under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (“CDSA”), as well as offences under the Terrorism (Suppression of Financing) Act (“TEFA”).*
The Proceeds of Crime Unit identifies and seizes proceeds of crime, managing such assets until they are restituted or confiscated under the CDSA.*
The Suspicious Transaction Reporting Office (“STRO”) receives and analyses Suspicious Transaction Reports (“STR”) from financial institutions and other parties. It provides financial intelligence information for the detection of money laundering, terrorism financing and other criminal offences.*

*Source: http://www.cad.gov.sg/topNav/abo/div/Financial+Investigation+Division.htm.

ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?

In Singapore, anti-money laundering laws fall within four broad regimes. Brief summaries of the laws, and the persons to which the laws apply, are set out below.

The CDSA and related legislation

The CDSA criminalises the laundering of benefits of “criminal conduct” and “drug trafficking” committed in or outside of Singapore (together, the “prohibited activities”). The provisions of the CDSA are applicable to all persons, including lawyers.
The CDSA has recently been amended by the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) (Amendment) Act 2007 (the “CDSA Amendment Act”), which came into force on 1 November 2007. The CDSA Amendment Act amended the CDSA for the following main purposes:
1. to extend the scope of the money laundering offences under the CDSA to the acquisition, possession, use or concealing of proceeds of crime;
2. to clarify when the duty to make suspicious transaction reports arises;
3. to provide for a reporting system for cross border movements of physical currency and bearer negotiable instruments; and
4. to increase the penalties for various offences under the CDSA.
The Notices and Guidelines on Prevention of Money Laundering and Countering the Financing of Terrorism (the “MAS Notices and Guidelines”) were issued by the Monetary Authority of Singapore (the “MAS”) to supplement the anti-money laundering provisions in the CDSA. The MAS Notices and Guidelines apply only to financial institutions and not to lawyers. However, they provide lawyers with useful examples of transactions that should arouse suspicions about a client’s involvement in money-laundering activities.
The Monetary Authority of Singapore Act, Chapter 186 of Singapore (the “MAS Act”) has recently been amended by the Monetary Authority of Singapore (Amendment No 2) Act 2007 (the “MAS Amendment Act”), which came into force on 1 November 2007. The MAS Amendment Act amended the MAS Act for the following main purposes:
1. to increase the maximum penalties which may be imposed on a financial institution (“FI”) which fails to comply with directions issued or regulations made by the MAS pursuant to Sections 27A and 27B of the MAS Act. The maximum penalties have been increased from S$100,000 to S$1 million; and
2. to extend the application of Sections 27A and 27B to the holder of a stored value facility under the Payment Systems (Oversight) Act, Chapter 222A of Singapore.

Section 27A of the MAS Act empowers the MAS to issue directions or make regulations to issue directions or make regulations concerning FIs in order to discharge any obligation on Singapore by virtue of a decision of the Security Council of the United Nations.

Section 27B of the MAS Act empowers the MAS to issue directions or make regulations concerning FIs for the prevention of money laundering or terrorism financing.

The TEFA and related legislation

The TEFA prohibits the financing of terrorism and the provision of any assistance to a terrorist, and was enacted to enable Singapore to ratify the International Convention for the Suppression of the Financing of Terrorism. The provisions of the TEFA are applicable to all persons, including lawyers.
The UN Anti-Terrorism Regulations set out offences that are substantially similar to the offences created under the TEFA, and are applicable to all persons, including lawyers.
The MAS Anti-Terrorism Regulations set out offences that are substantially similar to the offences created under the TEFA, and are applicable only to financial institutions and not to lawyers.
The MAS Notices and Guidelines also supplement the anti-terrorist financing provisions in the TEFA. The MAS Notices and Guidelines apply only to financial institutions and not to lawyers. However, they provide lawyers with useful examples of transactions that should arouse suspicions about a client’s involvement in the financing of terrorism.

The Legal Profession (Professional Conduct) Rules and related Practice Directions

The Legal Profession (Professional Conduct) (Amendment) Rules 2007 (the “LP Amendment Rules”) came into operation on 15 August 2007.
The LP Amendment Rules amended the Legal Profession (Professional Conduct) Rules by introducing Rules 11D to 11I. These Rules set out, inter alia, client due diligence requirements, suspicious transaction reporting requirements and record retention requirements, with a view towards preventing the inadvertent participation of lawyers in money laundering or terrorism financing activities.
Following the coming into operation of the LP Amendment Rules, the Council of the Law Society of Singapore (the “Council”) issued the “Council’s Practice Direction No. 3 of 2007: Prevention of Money Laundering and the Funding of Terrorist Activities” (the “Original Law Council PD”) on 15 August 2007, to provide guidance to lawyers and law practices on the application of the new Rules 11D to 11H and to set out directions on procedures to combat money laundering and terrorism financing in general.
The Original Law Council PD was superseded by “Council’s Practice Direction No. 1 of 2008: Prevention of Money Laundering and the Funding of Terrorist Activities” (the “Law Council PD”), which was issued by the Council on 15 January 2008.
The LP Amendment Rules and the Law Council PD:
1. apply to Singapore lawyers and law practices; and
2. pursuant to the Attorney-General’s exercise of his power under Section 130N of the Legal Profession Act, also apply to:
  1. joint law ventures (“JLVs”), formal law alliances (“FLAs”), foreign law firms and representative offices;
  2. foreign lawyers working in a Singapore law firm, JLV, FLA or foreign law firm; and
  3. Singapore lawyers in foreign practice in a JLV, FLA or foreign law firm.

The Casino Control Act 2006

The Casino Control Act 2006 (Act 10 of 2006), which has not yet come into force (apart from Section 2, which came into force on 1 June 2006 and which sets out the definitions of various terms used in the Act), will require a casino operator to have a system of internal controls which includes procedures to comply with prescribed anti money laundering measures. The provisions of the Casino Control Act are applicable only to casino operators and not to lawyers.

LAWS REGARDING ANTI-MONEY LAUNDERING PROCEDURES

The CDSA

There are five basic money laundering offences under the CDSA:

assisting another person to retain benefits of the prohibited activities (“illegal benefits”);
failure to disclose knowledge or suspicion that any property represents the proceeds of the prohibited activities;
concealing or transferring illegal benefits;
acquiring illegal benefits for no or inadequate consideration; and
tipping-off (i.e. disclosing information that is likely to prejudice an investigation or proposed investigation conducted under the CDSA).

The TEFA

The TEFA stipulates the following offences in relation to terrorism financing:

failure to disclose information relating to property of terrorists;
failure to disclose information relating to acts of terrorism financing;
providing and collecting property for terrorist acts;
providing and collecting property and services for terrorist purposes;
using or possessing property for terrorist purposes; and
dealing with property of terrorists.

The LP Amendment Rules

Under Section 82 of the Legal Profession Act, together with the LP Amendment Rules, there are five offences in relation to money laundering and terrorism financing:

failure to take reasonable measures to ascertain the identity of a client;
opening / maintaining accounts for, or holding or receiving monies from, anonymous sources or clients with fictitious names;
where a lawyer or law practice acts for a client in one of several specified matters, failure to obtain satisfactory evidence as to the nature and purpose of the client’s business relationship with the lawyer and with other parties to the matter;
failure to disclose knowledge or suspicion that any property represents the proceeds of “prohibited activities” (as defined in the CDSA); and
failure to retain, for not less than 5 years, documents used to identify the client and the nature and purpose of the client’s business relationship and records of transactions undertaken on behalf of the client.

IN ADDITION TO THESE LAWS, IS THERE ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS CURRENTLY IN PLACE?

The Law Council PD sets out guidelines on the application of the LP Amendment Rules. The Law Council PD also sets out directions on procedures to be followed to combat money laundering and terrorism financing in general.

Carrying out client identification and verification

A lawyer / law practice must identify a client and verify the client’s identity using reliable / independent information before starting work on any matter. If a lawyer / law practice is instructed on an urgent basis, preliminary client identification can be obtained but the law practice must as soon as reasonably practicable verify the client’s identity.
If the client is a trust, a lawyer / law practice must establish the identity of all the trustees and beneficial owners of the trust and also the nature of the trust by using reliable and independent source documents, data or identification evidence.
If the client is not a natural person, a lawyer / law practice must take reasonable measures to establish the identify of all natural persons that own and control the client by using reliable and independent source documents, data or identification evidence. This is not required where the client is a ministry or department of the Singapore government, an organ of the Singapore state or a statutory board, or a public company listed on the Singapore Exchange Securities Trading Limited or a recognised securities exchange within the meaning of the Securities and Futures Act (Cap. 289) of Singapore (together “recognised Singapore Exchange”)
A lawyer / law practice can use a third party / intermediary (e.g. search companies or credit reference agencies) to establish a client’s identity, provided that the following requirements are met:
1. the lawyer / law practice is satisfied that the third party/intermediary it intends to rely upon, whether in Singapore or abroad, is subjected to and supervised for compliance with anti-money laundering and prevention of terrorist financing consistent with the recommendations set by the Financial Action Task Force (“FATF”) and has adequate measures in place to comply with those requirements;
2. the third party / intermediary is not one which a lawyer / law practice has been specifically precluded by the Council from relying upon. As of the 18 April 2008, the Council has not specifically precluded reliance on any third party / intermediary;
3. the information that the lawyer / law practice would be required or would want to obtain from the third party / intermediary can be relayed to the lawyer / law practice by the third party / intermediary without any delay before acting in the matter;
4. the third party / intermediary is able and willing to provide, without delay, upon the lawyer’s / law practice’s request, any document obtained by the third party / intermediary which the lawyer / law practice would be required to retain under the Legal Profession (Professional Conduct) Rules or the Law Council PD;
5. When instructions are from an agent of the client, a lawyer / law practice must take reasonable measures to identify the principal client by using reliable and independent source documents, data or identification evidence. The lawyer / law practice must ensure that the agent in fact represents the principal client and has the required authority to give instructions on behalf of the principal client, and must also verify the nature of the relationship between the agent and the principal client before accepting instructions.
6. When a lawyer / law practice is engaged by another professional adviser, who has agreed to pay the fees of the lawyer / law practice to act in one of the 5 types of matters listed in paragraph 57 below, the lawyer must obtain sufficient information from the professional adviser to know the identity of its client and the nature / purpose of the business transaction for which the lawyer / law practice is instructed to give advice.

Verifying client identity

The following information must be obtained and verified during a face to face meeting with the client when opening a new file by viewing and taking a copy of the original identity card or international passport or driving licence:
1. full name (including all aliases);
2. date of birth;
3. nationality;
4. residential address; and
5. (where necessary) occupation and identity and address of employer or, if the client is self-employed, the name and place of the client’s business.
A lawyer / law practice is not required to obtain identity documents where the lawyer / law practice is satisfied on reasonable grounds that the individual client is nationally or internationally known. In such a case, the record of identification must include a file note of the lawyer’s / law practice’s satisfaction about the individual’s identity and address.
If the client is not resident in Singapore and is unable to meet the lawyer / law practice face to face, the lawyer / law practice must ask for a certified true copy of the identity document which provides the information set out in paragraph 8 above. The lawyer / law practice must take appropriate precautions to ensure that the client’s identity and particulars sent to the lawyer / law practice are adequately verified. The lawyer / law practice must not accept faxed or photocopied copies of identity documents.

Verifying client identity: Corporate clients

If the client is a corporate entity and is not a public company listed on the Singapore Exchange Securities Trading Limited or on a “recognised securities exchange”, the lawyer / law practice must be satisfied that the client is, in fact, an entity duly incorporated under the laws of the relevant jurisdiction in which it purports to have been incorporated by obtaining a copy of the certificate of incorporation, list of directors and principal shareholders (i.e. persons or entities who own more than 25% of the shares in the client).
The lawyer / law practice can apply a risk-based approach when determining the extent and nature of the enquiries to be undertaken.
Where the lawyer / law practice is satisfied that there is little or no risk of money laundering or terrorist financing and the lawyer / law practice has no suspicions of the same, the lawyer / law practice may obtain information on the identity of the client / directors / principal shareholders from:
1. a company structure chart provided by the client;
2. information available on the client’s website;
3. information available from the client’s annual reports; or
4. information available from any publicly known source that is reliable.
A lawyer / law practice is not required to verify the identities of directors / principal shareholders where the principal shareholder is a company that qualifies for simplified client identification and verification procedures (please refer to paragraphs 30 to 38 below for further details).
Where the client is a Singapore registered private company:
1. a search using the online directory of the Accounting and Corporate Regulatory Authority (“ACRA”) will be sufficient for the purpose of establishing whether the client is duly incorporated in Singapore and to obtain the directors and shareholders and its registered address;
2. the documents obtained from ACRA must verify the identities of the directors and the principal shareholders of the client;
3. if the client is a subsidiary company of an existing client in respect of which an identification check has been done recently and the lawyer / law practice is satisfied that it is up to date, then the only additional requirement is to verify the identities of the directors and shareholders of the subsidiary company.
If the checks show the principal shareholders of the company are nominee or bearer shareholders, a lawyer / law practice must determine if the nature of the transaction or its knowledge of or location of the client requires the lawyer / law practice to carry out enhanced client due diligence measures (as described at paragraphs 30 to 40 below) to determine who the beneficial owners of such shares of the company are. If a decision is made by the lawyer / law practice that any enhanced due diligence check to determine the identities of the holders of the nominee or bearer shares is not required, then a written note on why that decision was made must be put in the client file.
For overseas companies, the same procedure required for a Singapore registered private company must be followed. If the lawyer / law practice cannot obtain the necessary documents from an equivalent body to ACRA in a particular foreign country, the lawyer / law practice can have that company’s identity verified independently by a person / body responsible in that foreign country for the regulation of companies or by another professional. Companies with nominee or bearer shares could pose a money laundering risk, and if the foreign company is incorporated in a country with no or lower anti-money laundering or terrorist financing regulations than those set by FATF, enhanced client due diligence measures (as described at paragraphs 30 to 40 below) may be required.

Verifying client identity: Partnerships and limited liability partnerships

Where the client is a Singapore-registered partnership, the lawyer / law practice must verify:
1. the partnership’s trading address (by way of a search on ACRA’s online directory);
2. the identity of the partner instructing the lawyer / law practice; and
3. the identity of one other partner.
Where the client is a Singapore-registered limited liability partnership (“LLP”), the lawyer / law practice must verify whether the LLP is duly registered and the LLP’s trading address (by way of a search on ACRA’s online directory) as well as the identity of the partner instructing the lawyer / law practice.
Where the client is an overseas-registered partnership or LLP, the lawyer / law practice must verify the identity of the partner instructing the lawyer / law practice and the identity of one other partner. For an overseas-registered LLP, the lawyer / law practice must further satisfy itself that the client is an entity duly registered under the laws of the relevant jurisdiction. If the lawyer / law practice cannot obtain the necessary documents from an equivalent body to ACRA in a particular foreign country, the lawyer / law practice can have that company’s identity verified independently by a person / body responsible in that foreign country for the regulation of partnerships or by another professional.
The lawyer / law practice can apply a risk-based approach when determining the extent and nature of the enquiries to be undertaken.

Verifying client identity: Trusts

Where the client is a trust, the lawyer / law practice must identify and verify the particulars of each trustee and the nature of the trust.
Trusts are considered “high risk” and enhanced due diligence measures (as described at paragraphs 30 to 40 below) must be carried out on them.

Verifying client identity: Attorneys

Where the client is an attorney acting on the instructions of a principal, the lawyer / law practice must identify the principal as well as the attorney.
A lawyer / law practice must cease or refuse to act for a client who gives a power of attorney in favour of any person without any apparent reason and refuses to explain why a power of attorney is given and/or is reluctant to provide the identity documents with respect to the power of attorney.

Verifying client identity: Singapore charities, clubs and societies

Where the client is a charity / club / society, the lawyer / law practice must:
1. verify the registration number for the charity / club / society (via a check with the Commissioner for Charity or the Registrar of Societies, as the case may be);
2. obtain the names of all trustees and officers of the charity / club / society; and
3. identity and verify the particulars of the natural persons who have a controlling interest or exercise effective control over the charity / club / society.

Verifying client identity: Cooperative society

Where the client is a cooperative society, the lawyer / law practice must:
1. verify the registration particulars of the cooperative (via a check with the Registrar of Cooperative Societies); and
2. obtain the names of the members of the committee of management and officers of the cooperative.

Verifying client identity: Management corporations (“MCST”)

Where the client is a MCST, the lawyer / law practice must obtain the names of all officers of the management council of the MCST.

Verifying client identity: Estates

Where the client is an estate, the lawyer / law practice must have sight of the death certificate and, if applicable, the original will or certified true copy of the will of the deceased. The lawyer / law practice must also identify the executors or administrators of the deceased estate and where applicable, the original or certified true copy of the letters of administration or probate.

Risk based approach to client identification

A lawyer / law practice can perform such simplified client identification / verification procedures as the lawyer / law practice considers adequate to effectively identify and verify the identity of any client, a natural person appointed to act on the client’s behalf or a natural person who has a controlling interest in or who exercises effective control over a client.
The lawyer / law practice must take into consideration two factors when making this decision, namely:
1. the type of client; and
2. the type of business relationship / transaction the client intends to enter into.
The factors to consider in order to determine the type of client that may affect the risk of a lawyer / law practice being used for money laundering and terrorist financing include:
1. Whether clients of the lawyer / law practice are entities rather than individuals;
2. Whether clients of the lawyer / law practice are clients it never meets;
3. Whether clients of the lawyer / law practice come from countries with high levels of corruption or where terrorist organisations are known to operate;
4. Whether the clients of the lawyer / law practice are “politically exposed persons” as defined herein; or
5. Whether clients of the lawyer / law practice are unregulated persons.
The factors which may increase the levels of opportunities to facilitate money laundering or terrorist financing are:
1. Whether the transactions fall within the categories of transactions described at paragraph 57 below;
2. Whether in the transaction payments are made to or received by third parties;
3. Whether payments are made in actual cash (i.e. funds are paid in the form of notes and coins); or
4. Whether transactions involve a cross-border element.
The presence of the risk factors listed above does not necessarily mean the client or transaction will involve a risk of money laundering or terrorist financing. The Law Council PD requires the lawyer / law practice to set internal procedures to check and determine if the risk of such activity is high or low and only if it is low may a lawyer / law practice carry out a simplified “know your client” check.
The following is a non-exhaustive guide of categories of clients that qualify for simplified client identification / verification procedures unless the lawyer / law practice suspects that the client is connected with money laundering or terrorist financing:
1. A financial institution supervised by the MAS (other than a holder of a money changer’s licence or a holder of a remittance licence, unless specifically notified by the MAS);
2. A foreign government entity which is subject to mandatory compliance requirements and supervision for combating money laundering and terrorist financing consistent with the FATF recommendations;
3. A wholly owned subsidiary of an entity listed on a recognised Singapore Exchange;
4. An entity listed on a stock exchange other than a recognised Singapore Exchange that is subject to regulatory disclosure requirements compliant with the FATF recommendations;
5. A financial institution incorporated or established outside Singapore subject to requirements to combat money laundering and terrorist financing consistent with the FATF recommendations and supervised for compliance;
6. An investment vehicle where the managers are financial institutions supervised by the MAS or incorporated or established outside Singapore subject to requirements to combat money laundering and terrorist financing consistent with the FATF recommendations and supervised for compliance;
7. An individual or entity where reliable information on the identity of the client and its beneficial owners is publicly available; and
8. A partnership that is made up of regulated professionals who are subject to requirements to combat money laundering and terrorist financing consistent with the FATF recommendations and supervised for compliance.
The following categories of business relationships / transactions qualify for simplified client identification / verification procedures:
1. Transactions and matters pertaining to intellectual property rights in Singapore or elsewhere such as pre-filing searches and related advice;
2. Transactions involving a pension, superannuation or similar scheme that provides retirement benefits to employees where contributions are made by way of deduction from wages and the scheme rules do not permit the assignment of a member’s interest under the scheme;
3. General Singapore legal advice with no specific or substantial association with any transaction or matter;
4. Acting for a client in a transaction where there is no acquisition, divestment or any other dealing or management of any moneys, property, assets, securities, bank, savings or securities account with the client and any counterparty;
5. Acting for a client to apply for a grant of probate or letters of administration as a personal representative of an estate;
6. Acting for a client in a family law matter to obtain a decree of nullity or divorce or custody / access of children;
7. Acting for a MCST in the collection of management corporation dues; or
8. Where the value of the transaction does not exceed S$20,000.
The lawyer / law practice must:
1. document in writing the decision to carry out simplified client identification / verification procedures; and
2. keep a record of the checks undertaken as required under the Legal Profession (Professional Conduct) Rules for at least 5 years after the end of the matter.
The risked based approach still requires a lawyer / law practice to undertake ongoing monitoring of clients and their retainers so that the lawyer / law practice can identify and act on any suspicions.

Enhanced client due diligence

A lawyer / law practice must carry out enhanced client due diligence whenever it has suspicions of money laundering or terrorist financing or in relation to higher risk clients such as non-resident clients, legal persons / arrangement that are vehicles for holding personal assets (e.g. trusts) and companies that have nominee shareholders or bearer shares.
Appropriate enhanced client due diligence measures that a lawyer / law practice may consider include:
1. seeking further verification of the client or beneficial owner’s identity;
2. obtaining more information on the ownership and control structure of the client;
3. requesting more information on the purpose of the retainer or source of funds; and
4. conducting enhanced ongoing monitoring of the client’s matter.

Timing for verification of client identity

A lawyer / law practice must take reasonable measures to ascertain the identity of a client as soon as reasonably practicable before accepting instructions to act in the matter.
If a lawyer / law practice is unable to complete its client due diligence measures as soon as reasonably practicable, it may nonetheless establish business relations with the client before completing its client identity verification when:
1. the senior management of the law practice determines that the lawyer / law practice can effectively manage the risk of money laundering and terrorist financing;
2. the deferral of completion of the verification of the identity of the client is essential in order not to interrupt the client’s normal conduct of business and there is little risk of money laundering or terrorist financing; or
3. there is no suspicion of money laundering or terrorist financing by the lawyer / law practice.
A lawyer / law practice, prior to completion of client identity verification, must not act, provide substantial advice, draft any transaction documents for the client, receive monies for the account of the client in anticipation of completing the transaction or receive monies for the account of the client to transfer to any other party (other than payment of legal fees or disbursements). This does not apply to a lawyer / law practice that is in the process of ascertaining the legal position of the client or defending or representing a client in or concerning legal proceedings including advice on instituting or avoiding proceedings.
A lawyer / law practice should consider why there has been a delay in completing client identity verification if such delay has been caused by the client. Consideration should be given to whether that in itself gives rise to a suspicion which should be disclosed to the STRO.

Categorisation of clients

A lawyer / law practice must adopt the following 4 categorisations of clients subject to a review of the risk profile of the clients:
1. new clients;
2. existing clients who have not been in contact with the lawyer / law practice for 5 years or more;
3. existing clients who have been in regular contact with the lawyer / law practice for the last 5 years and who have not on those occasions provided formal identification on first contact; and
4. existing clients who have been in contact with the lawyer / law practice for the last 5 years and who provided formal identification on first contact.
For clients falling within categories (a) and (b) in paragraph 45 above, a full “know your client” check must be conducted.
For clients falling within category (c) in paragraph 45 above, the proprietor / partner / director of the law practice can waive the full “know your client” check subject to a risk assessment of the client if:
1. there are no suspicions;
2. the lawyer is satisfied that the client concerned is known to the lawyer and the client’s identity has been verified;
3. a note confirming that the client’s particulars have been checked must be signed by the proprietor / partner / director and attached to the client’s file. The note must give details of the length of time the proprietor / partner / director has known the client and the nature of the referral to the law practice e.g. through a friend, business acquaintance or client.
For clients falling within category (d) in paragraph 45 above, the clients need not be asked for full “know your client” details on the opening of a new matter, subject to a risk assessment of the client and provided that the lawyer / law practice is satisfied that the original identification documents were adequate.

Politically exposed persons

“Politically exposed person” (“PEP”) means an individual who has been entrusted with prominent public functions in a foreign country e.g. a head of state or government, a judicial or military official, a senior executive in a state-owned company, or an important official of a political party.
Where the client is a PEP or is subsequently discovered to be a PEP:
1. a lawyer / law practice must obtain senior management approval to act for such a client or to continue to act for the PEP;
2. the lawyer / law practice must take reasonable steps to establish the source of wealth / funds of the PEP at the time of the instruction; and
3. the lawyer / law practice must check when instructed and on an ongoing basis the nature and purpose of the business relationships of the PEP.

Dubious clients

If a client is a known or suspected triad member, drug trafficker or terrorist or has been introduced to a lawyer / law practice by any such persons and the lawyer / law practice has reason to suspect that such a client may be associated with or engaged in money laundering practices, the lawyer / law practice should not accept the retainer.

Understanding the client’s business relationships

A lawyer / law practice must obtain satisfactory evidence on the nature / purpose of the client’s business relationship with the lawyer / law practice and with any other party in the matter when accepting instructions and on an ongoing basis when instructed for the following 5 types of matters:
1. Buying or selling of any interest in land;
2. Buying or selling of any business entities;
3. Managing of the client’s monies, savings, securities or other assets;
4. Creation / operation / management of a company, partnership, society, trust or other legal entity or arrangement;
5. Any matter that is unusual in the ordinary course of business having regard to the complexity of the matter, quantum involved, any apparent economic or lawful purpose of the matter and the business and risk profile of the client.
A lawyer / law practice must take a broad view of the term “business relationships” to cover the relationship between the lawyer and the client as well as the relationships between the client and other parties to the transaction / matter.
For the 5 types of matters listed at paragraph 57 above, a lawyer / law practice must satisfy itself that it has enough information to know the nature and purpose of the business relationship of the client and any other party to the transaction for which the lawyer / law practice is instructed to act. Such information must be known not only at the time of instruction but on an on-going basis as the matter proceeds under the lawyer’s / law practice’s care.
There can be changes to instructions and/or changes to the relationship between the client and a third party that could give rise to real suspicions or risk that the lawyer / law practice is being used to launder money or finance terrorist activities. Therefore, information obtained by the lawyer / law practice must be sufficient for it to determine if there is any risk/threat that it is being used to launder the proceeds of crime or fund terrorism activities. The lawyer / law practice then may have to decide if it should cease to act, and, if it has reasonable grounds, to file a suspicious transaction report to the STRO.
Suspicions or red flags for transactions in land should arise:
1. if large cash payments are made for the purchase of interests in land whose value is far less;
2. if the method of funding is unusual e.g. funding from a third party who is not a relative or otherwise known to the buyer; or
3. if the property is owned by multiple owners or by nominee companies and there is no logical explanation for this.
Where the lawyer / law practice is instructed to create a legal entity / arrangement or to enter into any sale / purchase / merger transaction concerning a legal entity / arrangement, the lawyer / law practice must:
1. consider if information is required on the reasons for the creation of a legal entity / arrangement in a foreign jurisdiction; and
2. take particular care and exercise heightened scrutiny when dealing with offshore trusts which are registered in tax haven countries with strict banking secrecy laws and confidentiality or in jurisdictions that are blacklisted by FATF as “non-cooperative countries or territories” or do not have in place equivalent money laundering procedures.
Where the client is a legal entity and the person with the controlling interest / effective control of the client is a PEP, the lawyer / law practice must take reasonable measures to establish the source of wealth / funds of the legal entity.
A lawyer / law practice is not required to conduct extensive investigations to establish whether a person is a PEP.
If a lawyer / law practice has reason to suspect that a client is a PEP, it can use an Internet search engine to obtain news or information, or conduct an electronic search through a reputable international electronic identity verification provider.
The law practice must retain for no less than 5 years after the end of the matter, the documents used to ascertain the identity of the PEP.
A lawyer / law practice should normally establish the source of wealth / funds of a PEP by asking it questions on the source of its wealth / funds.

Ongoing due diligence

A lawyer / law practice must conduct on-going monitoring of a business relationship on an appropriate risk basis by:
1. scrutinizing the transactions undertaken throughout the course of the retainer (including where necessary, the source of funds) to ensure that the transactions are consistent with the lawyer’s / law practice’s knowledge of the client and the client’s business and overall risk profile;
2. staying alert to any suspicious circumstances that may suggest money laundering or terrorist financing; and
3. ensuring that information collected during the client due diligence process is kept up to date and relevant, especially for higher risk categories of clients and business relationships.

Implementation of policies, procedures and systems

A lawyer / law practice must put in place policies, procedures and systems to enable it to determine any relevant risk factors and carry out any necessary client due diligence before accepting instructions. A lawyer / law practice must also have ongoing staff training on the Law Council PD.
Lawyers / law practices must also pay attention to any threats of money laundering and terrorism financing that may arise from new technologies that favour anonymity and concealment of identity, and take measures to prevent the use of such technologies in money laundering and terrorism financing schemes.

Record keeping and retention procedures

A lawyer / law practice must retain documents used to verify client identity for 5 years after the last transaction with a client is completed. A lawyer / law practice should also retain records of the enquiries they made on the identity of clients and the responses that were obtained from the clients.
Where a matter falls within one of the 5 categories of matters described at paragraph 57 above, a lawyer / law practice must also retain for 5 years the documents used to establish the intended purpose / business relationship between the client and any other parties in the matter.

Client account and cash

A lawyer / law practice must not accept payments in cash (that is, funds paid in the form of notes and coins) of more than S$100,000 into a client account for any one transaction without determining the source of funds of the client.
If a lawyer / law practice does not know the source of a client’s funds, the lawyer / law practice must also assess the risks of accepting the client’s funds into the client’s account.
A lawyer / law practice must pay increased attention to transactions where large sums of money are to be paid by cash into a client account without any apparent legal reasons e.g. where the client requests the lawyer / law practice to transfer a large sum of money and the transfer is not connected with any transaction on which the lawyer / law practice has been engaged to act.
A lawyer / law practice must not open / maintain any account for, or hold and receive moneys from, any anonymous source or any client with an obviously fictitious name.

Suspicious transactions

A transaction is suspect if there is no apparent commercial justification for its existence, having regard to the following matters:
1. the complexity of the matter;
2. the quantum involved;
3. the apparent economic or lawful purpose of the matter; and
4. the business and risk profile of the client.
Where a transaction is suspicious in the context of the matters set out in paragraph 57 above, a lawyer / law practice must obtain satisfactory evidence on the nature / purpose of the client’s business relationship with the lawyer / law practice and with any other party in the matter when accepting instructions and on an ongoing basis.
A transaction must also be investigated if there is no discernible reason for using the services of the Singapore lawyer / law practice e.g. where a client is located in another country and the service required could be obtained at the same or lower cost and at an equal or better standard elsewhere.
If a lawyer / law practice is instructed by a client or deals with persons including companies and financial institutions in connection with transactions or establishing business relationships, when there is no apparent economic or lawful purpose to do so, involving persons from countries which either do not apply FATF recommendations or insufficiently apply the same, the lawyer / law practice must then as far as possible examine the background and purpose of the transaction / relationship.
Currently, the Law Council PD does not set out any specific examples of suspect transactions. However, the list of “Suspicious Transactions” set out in the MAS Notices and Guidelines, though it is directed only at financial institutions, could provide useful guidance to lawyers and law practices when extrapolated and adapted to the context of legal practice. The list of “Suspicious Transactions” in the MAS Notices and Guidelines may be found at here.

UNDER WHAT CIRCUMSTANCES IS A LAWYER UNDER THE OBLIGATION TO REPORT?

The CDSA

Under the CDSA, any person (including a lawyer) is required to make a report to a STRO when the person, in the course of his trade or profession, comes to know or has reasonable grounds to suspect that a property in whole or in part, directly or indirectly, represents the proceeds of or was used in connection with or is intended to be used in connection with prohibited activities (i.e. criminal conduct, drug trafficking or other offences under the Second Schedule to the CDSA).
Where a report is made to a STRO in compliance with the provisions of the CDSA, the person who makes the report shall enjoy the following protections:
1. the person will be granted anonymity in any court proceedings arising as a consequence of the report;
2. the disclosure will not be treated as a breach of law, contract, or rules of professional conduct prohibiting disclosure of information; and
3. the person making disclosure will not be liable in damages for loss arising out of the disclosure or loss arising out of any act done or omitted to be done as a result of the disclosure.

The TEFA

Under the TEFA, any person (including a lawyer) is required to make a report to a Commissioner of Police when:
1. the person has possession, custody or control of any property belonging to any terrorist or terrorist entity;
2. the person has information about any transaction or proposed transaction in respect of any property belonging to any terrorist or terrorist entity; or
3. the person has information that may prevent the commission of a terrorism financing offence or secure the apprehension of a person involved in terrorism financing.
No criminal or civil proceedings will lie against a person for any report made in good faith under the TEFA.

LAWYER RESPONSIBILITY/LIABILITY

The LP Amendment Rules and the Law Council PD prescribe client due diligence requirements, suspicious transaction reporting requirements and record retention requirements, as described above under the section entitled “In Addition to these Laws, is there any Money Laundering Guidance for Lawyers Currently in Place?”. In particular, under Rule 11G, it is an offence for a lawyer / law practice to fail to disclose knowledge or suspicion that any property represents the proceeds of “prohibited activities” (as defined under the heading The CDSA and related legislation above at paragraph 2).
In addition, under the CDSA and TEFA, it is an offence for a lawyer (and any other person) to do any of the following:
1. conceal, disguise, convert or remove from the jurisdiction (i) any property which represents his own illegal benefits or (ii) any property which he knows or has reasonable grounds to believe represents the illegal benefits of any person;
2. acquire any property for no or inadequate consideration if he knows or has reasonable grounds to believe that the property represents another person’s illegal benefits;
3. disclose information or any matter that is likely to prejudice any investigation or proposed investigation conducted under the CDSA, when the person knows or has reasonable grounds to suspect (i) that such investigation is or will be underway or (ii) that a disclosure has been made to a police officer under the CDSA;
4. provide or collect property, with the intention that the property be used, or knowing or having reasonable grounds to believe that the property will be used, in order to commit any terrorist act;
5. provide or collect property, or make available property or financial or other related services, intending that they be used, or knowing or having reasonable grounds to believe that they will be used, for the purpose of facilitating or carrying out any terrorist act or benefiting any terrorist or terrorist entity;
6. use any property, directly or indirectly, for the purpose of facilitating or carrying out any terrorist act;
7. possess any property if he intends to use the property, or knows or has reasonable grounds to believe that the property will be used, for the purpose of facilitating or carrying out a terrorist act;
8. deal in property owned or controlled by any terrorist or terrorist entity, enter into or facilitate any financial transaction related to dealing in such property, or provide any financial services or other related services in respect of such property to any terrorist or terrorist entity.

CLIENT IDENTIFICATION AND VERIFICATION

The LP Amendment Rules and the Law Council PD prescribe, inter alia, client due diligence requirements, as described above under the section entitled “In Addition to these Laws, is there any Money Laundering Guidance for Lawyers Currently in Place?”

LAWYERS PROSECUTED FOR MONEY LAUNDERING OFFENCES

So far, no lawyers have been prosecuted for failing to report money laundering offences under the CDSA.

HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

Yes, in September 2007, and the report was published on 29 February 2008. Singapore was found to be compliant with 11; largely compliant with 32; partially complaint with four; and non-compliant with two of the 40 + 9 Recommendations.*

*Source: http://www.fatf-gafi.org/dataoecd/41/52/40211135.pdf

Examples of Suspicious Transactions in the context of a financial institution
(as set out in the MAS Notices and Guidelines)

Transactions which do not make economic sense
1. A client-relationship that does not appear to make economic sense. For example, a client who carries out frequent large transactions which do not fit his economic background.
2. Transactions in which funds are withdrawn immediately after being deposited, unless the client’s business activities furnish a plausible reason for immediate withdrawal.
3. Transactions that cannot be reconciled with the usual activities of the client, for example, switching from purchasing only value funds to predominantly growth funds.
4. Sudden increase in intensity of transactions, without plausible reason, of what was previously a relatively inactive client trading account.
5. Unexpected repayment of a delinquent account without any plausible explanation.
6. Buying and selling of interests in funds with no discernible purpose or in circumstances which appear unusual.
Transactions involving large amounts of cash
1. Payments made via large amounts of cash. A guideline to what constitutes a large or substantial cash amount would be a cash amount exceeding S$20,000 (or its equivalent in any currency).
2. Provision of margin collaterals in the form of large cash amounts.
3. Provision of funds for investment and fund management purposes in the form of large cash amounts.
4. Frequent withdrawal of large cash amounts that do not appear to be justified by the client’s business activity.
5. Large cash withdrawals from a previously dormant/inactive account, or from an account which has just received an unexpected large credit from abroad.
6. Crediting of client trust or margin accounts using cash and by means of numerous credit slips by a client such that the amount of each deposit is not substantial, but the total of which is substantial.
7. Payments and/or deposits containing counterfeit notes or forged instruments.
8. Clients making large and frequent cash deposits but payments made from the account are mostly to individuals and firms not normally associated with their business.
9. A large amount of cash is withdrawn and immediately credited into another account.
10. Unusual settlements of transactions in cash form.
Transactions Involving the financial institution’s accounts
1. Requests for refunds of unaccountable “erroneous” payments to the financial institution’s or clients’ trust accounts by unknown persons.
2. Payment via large third party cheques endorsed in favour of the client in settlement for purchases of interests in funds, or for other financial services provided.
3. Substantial increases in deposits of cash or negotiable instruments by a professional firm or company, using client accounts or inhouse company or trust accounts, especially if the deposits are promptly transferred between other client company and trust accounts.
4. Accounts operated in the name of an offshore company with structured movement of funds and assets.
5. Purchases of interests in funds to be held by the financial institution in safe custody, where this does not appear appropriate given the client’s apparent standing.
Transactions involving transfers abroad
1. Large and regular injection of funds that cannot be clearly identified as bona fide transactions, from and to countries associated with (i) the production, processing or marketing of narcotics or other illegal drugs or (ii) other criminal conduct.
2. Cross border transactions involving acquisition or disposal of high value assets that cannot be clearly identified as bona fide transactions.
3. Substantial increases in the injection of funds by a client without apparent cause, especially if such injections are subsequently transferred within a short period of time out of the account and/or to a destination not normally associated with the client.
Transactions involving unidentified parties
1. Provision of collateral by way of pledge or guarantee without any discernible plausible reason by third parties unknown to the financial institution and who have no identifiable close relationship with the client.
2. Transfer of money and assets to a third party without indication of the beneficiary.
3. Payment instructions with inaccurate and/or incomplete information concerning the payee.
4. Use of pseudonyms or numbered accounts for effecting trading and/or investment transactions.
5. Clients who wish to maintain a number of trustee or clients’ accounts that do not appear consistent with their type of business, including transactions that involve nominee names.
6. Requests by a client for investment management services where the source of funds is unclear.
Other Types of Transactions
1. Account activity is not commensurate with the client’s known profile (e.g. age, occupation, income).
2. Transactions with countries or entities that are reported to be associated with terrorist activities or with persons that have been designated as terrorists.
3. Frequent changes to the address or authorised signatories.
4. A large amount of funds is received and immediately used as collateral for margining and/or financing facilities.