Why Singapore Banks are Worried About Foreign Customers

Police raids on a criminal gang have sparked fears over money laundering

 

In August 2023, police officials in Singapore completed a raid of a criminal organization claiming large sums of cash, properties, cars, goods, and assets spread across numerous bank accounts for charges of money laundering and fraud. These assets came to a whopping estimate of around $1.75 billion as of Wednesday with the investigation still ongoing. The operations of this group of foreign nationals include organized crime which provides for scams and online gambling. In recent years, Singapore has become a hub for foreign investment and asset management as it has one of the most developed financial systems in Asia. Prior to the police raid, the Monetary Authority of Singapore proposed anti-money laundering rules for these asset management firms for family offices; the MAS proposed minimum standards for these offices including customer due diligence and transaction monitoring to prevent money laundering schemes. The scandal and foreign investment has a ripple effect on the economy in Singapore; the real estate sector has experienced jumps in both housing prices and rents. The investigation into the money laundering scheme is ongoing and casts a dark cloud over Singapore’s financial system as a safe hub for investment.

Trust and safety in financial institutions is the backbone for a stable economy. This article expresses potential issues for the economy of Singapore if trust in financial institutions and money is not secured. The case study The Face of Money: currency, crisis, and remediation in post-suharto indonesia written by Karen Strassler shows the implications of how money affects social and cultural phenomena in the case of Indonesia. In the case study, she explores the themes of money becoming a beacon of distrust in government during times of political unrest and corruption. While the main focus of this article was money being used as a social phenomenon to showcase protests against the government, there are takeaways that align with the issues in Singapore. The case showed the devaluation of the rupiah in congruence with the corruption of the government. If citizens from Singapore lose their faith in financial institutions and global investments are withdrawn, it can lead to the devaluation of currency and has poor economic implications. Additionally, if there is distrust in financial institutions it may lead to runs on banks in which everyone seeks to withdraw their money out of fear of not receiving their deposits. If this were to happen, economies shut down and many would be forced to revert back to a barter system as the United States saw with the banking panic of 1933. In times of distrust in banking systems, it is important for countries to place regulations on financial institutions such as the asset managers of Singapore to ensure the authenticity of currency.

 

Sources:

https://www.wsj.com/finance/regulation/why-singapore-banks-are-worried-about-foreign-customers-95a190f8?mod=Searchresults_pos5&page=1

https://apnews.com/article/singapore-money-laundering-asset-seizure-7640db7f784c05ac9024ef877aba1045