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#Anti Money Laundering

Terrorist financing, Singapore crime figures and cultural change afoot

International Compliance Association

2014 , APAC , CFT , ICA , Singapore , terrorist financing

This month’s APAC bulletin from the ICA looks at the massive and sudden resurgence of terrorist financing threat from the Middle East, we glimpse inside the Singaporean financial sector and comment on how APAC financial institutions could get the jump on compliance culture changes spearheaded in Europe and the US.

Terrorist financing

A new terrorist threat emerged and gained significant ground in the past month. The Islamic State in Iraq and the Levant, or ISIS, has made massive advances in June 2014, sweeping across Iraq on its campaign to restore an Islamic caliphate in the region. Naturally, anyone reading this blog will be interested how much money ISIS has at its disposal for training operatives, buying arms and tanks to wage its campaign of terror across Iraq and Syria. Observers estimate the group has amassed around USD2bn, or a quarter of the BNP Paribas fine, give or take a few hundred mill. Charitable donations to jihadists are one source, and stemming that flow is apparently encumbered by sympathies of donors in US allied countries in the Middle East who may havedual agendas in the war on terror. Aside from gifts, Isis appears to be economically self sufficient, generating its own funds by looting banks, capturing military supplies on their march, smuggling raw materials and antiquities stolen in Syria, and from the oilfields ISIS captured in 2012 which is has sold back to the Syrian government. The confusing political turmoil in Syria and Iraq looks set to continue for some time. New European Unionsanctions on 12 ministers issued in June show intent to stem power to the Assad regime.

Singapore

The Singaporean government's figures on attempted ML and has seized more than USD92m in the suspected proceeds of crime in 2013. The Commercial Affairs Department, (CAD) the government’s white collar crime agency which oversees anti-money laundering efforts, has also noticed an increase in cross-border laundering attempts looking to clean the proceeds of crimes committed in other jurisdictions through the Singaporean financial system. Anyone unfamiliar with the CAD website should bookmark the How not to make money section, a brief but look at a few Singaporean white collar crime cases which the CAD will hopefully add to in the future.

Industry insiders believe that cyber-crime will pose a larger threat to the financial sector than bad debt in the next 15 years and Asian banks are facing a skill shortage in cyber security which would increase the risks. New payment products and services entering the market rely on technological solutions, including mobile and on-line payments, digital transactions and increasingly near field communications to store and move money. Financial and non-financial institutions need to ensure that they are able to protect their client’s funds via these systems. How they do that is a major challenge to the sector. ICA has recently launched a new online qualification in Money Laundering Risk in New Payment Products and Services that examines the key risks associated with these new payment methods.

But back to a more tangible form of financial crime, one that we can all see and touch, if we are wealthy enough that is. Singapore has announced it will stop issuing and printing the SGD10,000 note from October 1 2014 in an effort to stem money laundering via bulk cash smuggling. The 10,000 note and the EUR500 note have a very efficient value to volume ratio, which makes them attractive to anyone who wants to move large amounts of cash across borders undetected by the authorities.

Cultural change afoot

Banking observers in Europe are seeing a cultural change taking root in financial institutions. It is happening slowly and subtly, but it is happening. Board level representatives of banks estimate that we will see fully restored confidence in the financial sector and a new approach to banking within half a generation. That is around 15 years before we see governance, risk, compliance and ethics running through the financial sector and championed by its employees. The APAC financial sector could learn lessons from its more established cousins and, leaning on its younger systems and less well ingrained hierarchies and culture, may be in a position to adapt to a new banking order in less time than it takes the older institutions to do so.


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