If anyone thought that Credit Suisse’s collapse would prove fatal to the Swiss finance hub should take a look at what is going on in the city-state right now.
Singapore and its financial hub have been in the throngs of an unbelievably large money laundering scandal since the middle of August. It relates to billions of dollars in criminal proceeds that Chinese businesspeople shamelessly used to flaunt a flagrant lifestyle with luxury cars and property by using and washing cryptocurrencies.
This all happened over the course of a few years until ten suspects were arrested by authorities last month, some of whom had been previously listed as wanted in China.
The case is beginning to make larger waves this week. It is coming to light that more people are involved than previously thought while the volume of money laundered is reaching almost $1.5 billion. Most of the proceeds are from illegal gambling junkets in Asia that were reinvested in any luxury imaginable.
A line of banks has been involved including Singapore’s domestic institutions DBS, OCBC, and UOB. Internationally, Citi and Deutsche Bank have been caught up in it as well and all are working closely with authorities in the city-state. At this point, all remain innocent until proven otherwise. Other banks, including the Swiss, are working to figure out internally whether the case involves a selected number of people or whether this is a large-scale scheme that could involve them as well, as a number of them have indicated.
It is actually remarkable that all of this didn’t happen much earlier given Singapore’s reputation of having the strongest rules worldwide when it comes to the prevention of money laundering and other financial crime. Ostensibly, there is a big gap between what the authorities indicate and reality. This is also not something that has just come up now.
Singapore was heavily involved in the large-scale 1MDB scandal when billions of funds were siphoned out of the Malaysian government development fund called 1Malaysia Development Berhad (1MDB, image above) through a number of banks –including Swiss ones. That case led to the factual end of the large Ticino-based Banca della Svizzera Italiana (BSI) and Falcon Private Bank in Switzerland.
If that was enough, Singapore has also been in the middle of other nefarious schemes, including that of Germany’s Wirecard debacle as well as the criminal activities of commodities trader Hin Leong Trading.
All this indicates that these are not isolated instances and finance professionals in Singapore are now in agreement that the finance hub has become a victim of its own success.
Much of this is linked with efforts in recent years to be highly attractive to foreign investors, assets, and high-net-worth individuals with their family offices. Even though this was all done in parallel with more stringent AML rules, it still created an ideal environment for Chinese VIPs, institutions, and money to make their way here.
That led to a massive influx of individuals, particularly following the pandemic and the introduction of a more stringent compliance regulatory framework in China. This has led to massive price inflation that is proving even more problematic for its citizens, particularly regarding the levels of property rents.
That put the city-state on a risky path that is starting to have consequences and is beginning to hurt its reputation. Many wealthy individuals who have moved here in recent years fear that the case will damage Singapore’s reputation.
The scale of the current scandal is incomparable. Authorities have confiscated more than 100 properties worth well over $500 million. Other impounded assets include Bentleys and Rolls Royces, whiskey collections, Hermes handbags, and Patek Philippe watches.
Most of the money is allegedly from illegal gambling rackets in the Philippines and China. Authorities are accusing one of those arrested of buying an apartment in 2019 on Orchard Road, one of the city’s main shopping streets, for over $15 million. It was a so-called good-class bungalow or a two-floor 1,400 sq.m villa in one of the best areas in a highly built-up urban area in what is an extremely densely populated city.
Another favorite spot for those who were recently arrested was Sentosa. Seven properties have been frozen on the quasi island-condominium complex for the high net worth, which is also a tourist spot with a golf course and several amusement parks, including Universal Studios. It also has a large marina where you can see any number of luxury yachts berthed, some of them from Caribbean tax havens.
The scandal poses numerous problems for Singapore. The government is intent on keeping the different ethnicities in the city-state in harmony and this doesn’t help. Shameless displays of wealth and privilege, particularly if they are linked with crime, could easily breed resentment. On the other hand, the case could also raise suspicions about other high-net-worth families that have settled down here in recent years.
It is likely a coincidence that the internationally renowned head of the Monetary Authority of Singapore (MAS), Ravi Menon, announced his decision to retire at the end of 2023 this week. At the same time, the affair sheds a dark light on a body that had been trying to be the global poster child when it came to fighting financial crime.
Given that, it is somewhat surprising that Menon, who has served in a public capacity for 36 years and was elected for another two-year term just seven months ago, is throwing in the towel now.
There are many indications that Singapore will be dealing with the case for an extended period of time. Further developments could continue to erode the city’s attractiveness and reputation. Dubai is likely to be a clear beneficiary of that, as it has been experiencing a boom since the start of the Ukraine war given that it does not uphold the current Western sanctions regime against Russia.
This means that it is an ideal time for Switzerland to focus on developing its financial sector with a certain confidence, particularly given the collapse of Credit Suisse earlier this year and the subsequent creation of a new, stronger UBS.