Singapore said digital payment token service providers, also known as virtual asset service providers, stand out as a high-risk category within the financial sector.

The updated Money Laundering National Risk Assessment (MLNRA) for Singapore has spotlighted the increasing risks and vulnerabilities posed by digital payment token (DPT) service providers within the Anti-Money Laundering (AML) landscape. This comprehensive 126-page report identifies new risk sectors, particularly focusing on DPT service providers and precious stone and metal dealers, which were not included in the previous 2014 report.

Key Findings and High-Risk Sectors

Financial Sector
The banking sector, especially wealth management, is marked as having the highest money laundering risks. Banks are susceptible to criminal exploitation due to their role in facilitating large transaction volumes and servicing high-risk customers. Within the financial sector, DPT service providers, also known as virtual asset service providers, are identified as a high-risk category. The MLNRA reports an uptick in money laundering cases involving DPTs and notes various methods of exploitation.

Other High-Risk Sectors
- Payment Institutions: Those offering cross-border money transfer services are considered high-risk.
- External Asset Managers: These are also flagged for their susceptibility to money laundering activities.

Common Money Laundering Threats

The report identifies several key threats contributing to money laundering risks in Singapore:
- Fraud: Particularly cyber-enabled fraud.
- Organized Crime: Activities by organized criminal groups.
- Corruption: Corrupt practices leading to illicit fund flows.
- Tax Crimes: Evasion and related tax offenses.
- Trade-Based Money Laundering: Illicit financial flows disguised as trade transactions.

Money Laundering Methods

Typical methods used for laundering money in Singapore include:
- Bank Accounts: Hiding illegal funds in Singapore bank accounts.
- Fake Companies: Using shell companies to obscure the source of funds.
- Valuable Assets: Investing in real estate, precious metals, and now digital payment tokens.

Regulatory and Supervisory Insights

The MLNRA draws from the insights of Singapore's supervisory and law enforcement agencies, such as the Financial Intelligence Unit, and incorporates feedback from private sector entities and foreign authorities. This collaborative approach ensures a comprehensive understanding of the AML landscape and the emerging threats.

Government Response and Regulatory Measures

In response to these findings, Singapore’s authorities are taking steps to mitigate the identified risks:
- Enhanced Supervision: Authorities are closely monitoring DPT activities, despite their relatively small portion of global transactions.
- Regulatory Amendments: In April, the Monetary Authority of Singapore announced amendments to the Payment Services Act. These changes aim to expand the scope of regulated services concerning digital payment token providers.

Conclusion

Singapore’s updated MLNRA underscores the evolving risks in the AML landscape, particularly highlighting the vulnerabilities associated with digital payment tokens and other high-risk sectors. The country’s proactive measures and regulatory updates aim to bolster its defenses against money laundering, ensuring the integrity of its financial system as an international hub.

This comprehensive approach reflects Singapore's commitment to maintaining robust AML standards and adapting to the dynamic threats posed by new financial technologies and practices.