Current laws

Current Singapore anti-money laundering laws rely on the mens rea, or mental element, of knowledge or reasonable belief to establish criminal liability. For example, the Corruption, Drug Trafficking and Other Serious Crimes Act (CDSA) makes it an offence for a person to enter into an arrangement, knowing or having reasonable grounds to believe that that arrangement facilitates the receipt of criminal conduct. Knowledge or belief also plays a key role in forming a defence. In respect of the above offence, it is a defence that the person did not know, and had no reasonable ground to believe, that the relevant arrangement related to criminal conduct.

Similarly, the Computer Misuse Act (CMA) makes it an offence for a person to knowingly disclose his Singpass (or national digital identity) credentials for wrongful gain or unlawful purposes, or knowing that it would cause wrongful loss.

The rationale for these mens rea requirements is self-evident. Money-laundering arrangements typically involve both complexity and obscurity, which in turn suggest both understanding and ill intent on the part of persons responsible. These more culpable states of mind in turn explain why money-laundering offences should attract severe penalties, including imprisonment. Yet recent developments highlight weaknesses in the current formulation of these laws.

Recent developments

As shared by the MHA in announcing its two bills, scam cases have proliferated in Singapore. Central to their spread is the role of the money mule: an individual who hands over control of his bank accounts to criminal persons, or who employs such accounts to receive or transfer monies as directed by such criminals. A Singapore-specific variant has also emerged: individuals who provide their Singpass credentials to criminal organisations in exchange for money.

Convicting these individuals is difficult under current law. It requires proving an individual’s knowledge or reasonable belief that they were facilitating criminal activity. Money mules often need only plead ignorance regarding the criminal arrangements that they entered into, to escape prosecution. Conversely, the need to establish knowledge or reasonable belief places a heavy burden on law enforcement agencies. Of the 19,000 money mules investigated by the Singapore police from 2020 to 2022, fewer than 250 individuals were eventually prosecuted.

Legislative proposals

The proposed bills go to the heart of these problems.

The first bill, relating to the CDSA, provides that any person who rashly enters into an arrangement, which facilitates the retention or control of the proceeds of criminal conduct, or the purchase of property using such proceeds, commits an offence. “Rashly” is defined in the Singapore Penal Code to mean that a person does any act knowing of a real risk that a particular circumstance exists, yet proceeds to take that risk nonetheless. In practical terms, this provision seeks to penalise persons who realised that there was a risk that the funds they were receiving in or transmitting from their bank account were so large and frequent as to represent the probable proceeds of crime, but failed to ascertain the source or purpose of those funds.

The Bill also makes it an offence to enter into the foregoing type of arrangement negligently. “Negligently” is defined to mean that a person omits to do (or refrains from doing) an act that any reasonable person would do. It seeks to penalise persons who ignore red flags that, in the court’s view, would indicate to “an ordinary, reasonable person” that the transactions that he or she entered into involved the proceeds of crime.

The proposed bill thus places the onus on owners of payment accounts to understand the transactions that they perform or assist with. Indeed, one of the Bill’s provisions creates an offence for entering into any arrangement as described above; but instead of a mens rea, it imposes further actus reus requirements of possible omissions. These include failing to ascertain the source or destination of funds that a person deals in; failing to determine the identity of a transaction counterparty; and failing to understand the purpose of any arrangement by which he transfers control of his bank account.

This provision underscores that bank account owners are now expected to know, or take active steps to ascertain, the transactions that take place through their accounts. Implicitly, the bill also raises the standard of knowledge that the “ordinary, reasonable person” must have regarding the money-laundering risks attending the use of their bank accounts.

Pursuant to a separate bill concerning the CMA, Singpass users are expected to ascertain the identity and location of any persons to whom he or she discloses his or her Singpass credentials. Failing to do so gives rise to a presumption that the Singpass user had reasonable grounds to believe that he or she was facilitating a criminal offence.

Legal and social significance

Some might decry the weakening of the traditional mens rea requirements described in the amendments above. And indeed, the intention of the bills is self-evidently to allow money laundering offences to be made out at lower levels of culpability than present laws allow.

On the other hand, these legislative proposals are a direct response to a deplorable social phenomenon: the proliferation of scams abetted by indifferent or criminally-involved individuals, often for a fee. Communications technology and criminal organisations have combined to dramatically increase the money-laundering risks that result from the careless or reckless use of individuals’ bank accounts; it therefore seems reasonable to re-assess the responsibilities of such use. In parallel, through its public education campaigns, the government appears intent on raising public knowledge about money-laundering red flags, to align with the standard expected of individuals as proposed in the bills.

Lastly, against the risk that weaker mens rea requirements may give rise to easy convictions, it is worth considering the countervailing risk, of failing to curtail the spread of cross-border scams in Singapore. The MHA reported that scam victims in Singapore lost SGD 1.3 billion in 2021 and 2022; globally, SGD 77 billion was lost to scams in 2021 alone.

Implications for corporate entities

The proposed bills underscore the need for companies to remain alert to increasingly sophisticated scams and associated money-laundering risks.  The reduced culpability threshold proposed in the bills underscore the continuing need for companies to provide adequate anti-money laundering training to relevant staff.

Companies should also review their internal controls to ensure that employees conduct adequate due diligence of transaction counterparties – especially since the misappropriation of Singpass credentials can facilitate the creation of shell companies, with the purpose of abetting criminal activity. Lastly, internal controls should identify suspicious transactions that are inconsistent with the risk profiles of customers or other counterparties.

Conclusion

A poet noted, centuries ago, that “a little knowledge is a dangerous thing.” The proposed bills shift the costs of ignorance regarding fraudulent scams and money-laundering: from a social cost, borne by victims of scams, to an individual one, borne by those who profess ignorance.

It remains to be seen how the bills will evolve or be enforced. But at least in their initial form, they suggest a salutary legal innovation – one that recognises the gaps that social and technological changes have created in current money-laundering laws, and seeks to address them in a pragmatic way.

Authored by Nick Williams, Han Liang Lie, and Sonali Patani.