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
custo

mer 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