SINGAPORE — Funds in bank accounts that are seized in money laundering cases do not belong to the banks involved, and the sum of these funds should not be linked to the banks’ culpability in such cases before investigations are complete, Mrs Josephine Teo said. 

The Second Minister for Home Affairs was responding in Parliament on Tuesday (Oct 3) to a question from Mr Leong Mun Wai, Non-Constituency Member of Parliament, who had asked if fines imposed on banks in money laundering cases are proportional to the amount of profit they could make from holding these funds. 

When asking the question, Mr Leong from the Progress Singapore Party had mistakenly thought that a S$3.8m fine mentioned by Mrs Teo in her earlier speech was in relation to the most recent money laundering case, which involved 10 suspects and more than S$2.8 billion in assets seized or issued with prohibition of disposal orders. 

However, Mrs Teo clarified that the S$3.8m fine was in relation to the Wirecard fraud case — the biggest fraud case in German history.

It surfaced in 2020 after its auditor could not verify 1.9 billion euros (S$2.7 billion) supposedly held abroad in escrow by third-party partners. Money held in escrow typically means that it is being held by an independent agent on behalf of negotiating parties.

The German payments firm filed for insolvency that year and its former boss Markus Braun went on trial in December 2022. 

Two men linked to the case had claimed trial in Singapore in July to charges of falsifying documents related to millions held in escrow accounts.

DBS, OCBC, Citibank and Swiss Life banks were fined a total of S$3.8 million after being found to have inadequate controls against money laundering and terrorism financing. 

The following is an excerpt of the exchange between Mrs Teo, Mr Leong as well as Mr Alvin Tan, Minister of State for Trade and Industry, edited for length.

Mrs Teo: This money (S$1.45 billion seized from bank accounts) does not belong to the bank. (It is) certainly not the bank’s profits that you should use to weigh against the responsibility that we hold them to.

This S$1.45 billion has to be properly sorted out in terms of ownership. They just happen to sit in the bank accounts. They do not belong to the banks.

Mr Leong: When you want to uphold zero tolerance in money laundering, you have to suppress the profit motive of the people involved.

Although the S$1.45 billion does not belong to the bank(s), the fact is that S$2.8 billion has been placed in our system and most of it in the banking system.

Maybe you’ve frozen the funds so the funds cannot be used by the bank(s) anymore. But in the process of allowing these funds to come into our banking system, that is a huge amount of money the banks have made.

If we do not take away that amount of money by imposing a fine equivalent to the amount of money they make… But in terms of the amount of money we are talking about in this case, do you know how much money the banks potentially have been making? 

Mrs Teo: Nobody disputes that our financial institutions have a responsibility to uphold the strict measures that we will take against money launderers. Nobody is also saying that if they were to breach their obligations, they shouldn’t be taken to task.

What I seem to be hearing Mr Leong say is that, a-ha, you have found these amounts in your system and therefore, it must point to some action on the part of the financial institutions in facilitating this and helping to make this happen. 

I’m saying that until we get to the bottom of things, this is not the right way to think about it. The correct way to think about it is that the entire machinery that we have put in place was able to uncover such a weapon.

Mr Tan: If there is wrongdoing, we will be firm with that as we have done so in the past. Fines are one, but we have invoked other measures including banning financial institutions, revoking their licences, as well as holding senior management to task. So there’s a variety (of penalties) and there’s a spectrum of it.

Investigations are ongoing. We cannot and ought not to prematurely attribute any guilt or offence on the banks prematurely until investigations have been completed. 

Mr Leong: To clarify, I did not say that our banks have facilitated money laundering. What I’m saying is that with all the good intentions and the measures that our banks have taken and the Monetary Authority of Singapore have asked our banks to take, we still ended up with this case.

So we have to demonstrate to our gatekeepers, most of which are the banks, that they must do their job properly.

And in relation to the amount of money that has come into our system and the potential amount of profits that the banks can make from it, we must have penalties that are proportional to the potential profits.