• The “FinCEN leaks” refer to an investigation conducted into suspicious banking transactions
• US$2 trillion (S2.7 trillion) worth of suspicious fund transfers were made by banks in the last two decades
• In Singapore, about US$4.4 billion of funds considered suspicious were transferred
• Experts said that limited information makes it difficult for banks to take action on suspicious transactions themselves

SINGAPORE — Earlier this week, a group of international journalists revealed that they had received thousands of documents showing that banks around the world had been involved in US$2 trillion (S$2.7 trillion) worth of suspicious fund transfers over the last two decades.

The investigations, known as the “FinCEN file leaks”, found that some of the world’s biggest banks such as HSBC and JPMorgan had continued to facilitate possible money laundering despite being aware of suspicious activities.

Money laundering is used by groups such as criminal organisations to cover their financial tracks over drug trafficking and other illicit activities.

The investigations also revealed that US$4.4 billion (S$6.06 billion) of suspicious funds were transferred in and out of banks based in Singapore.

TODAY looks at what a suspicious transaction is, why it is difficult for banks to act on them immediately, and whether banks here should be worried about being named in the investigations.

WHAT WERE THE INVESTIGATIONS ABOUT?

The "leaked" FinCEN Files refer to a series of investigations conducted by the International Consortium of Investigative Journalists (ICIJ) into Suspicious Activity Reports — or SARs for short.

These reports, which are confidential, are submitted by banks to the United States Department of Treasury's Financial Crimes Enforcement Network (FinCEN), which deals with financial crimes.

The banks send the reports to FinCEN if they detect suspicious activities such as money laundering or fraud. They are not necessarily proof of crime.

News website Buzzfeed News obtained more than 2,100 of these reports sent to FinCEN between 2000 and 2017. These were analysed by ICIJ before its investigations were published last Sunday (Sept 20).

The transactions involved are only those in US dollars.

WHAT DID THEY UNCOVER?

The investigations found that from 1999 to 2017, banks worldwide routinely processed transactions without knowing the source or destinations of the money. ICIJ also found that there was a significant delay from the time of a suspicious transaction until a bank filed a Suspicious Activity Report.

In one example, HSBC had allowed more than US$80 million to be transferred between 2013 and 2014 to accounts controlled by Ponzi scheme scammers despite reporting suspicious activity.

The investigations found that in Singapore, nearly US$3 billion in suspicious transactions entered the country and about US$1.5 billion flowed out from 1999 to 2017.

Of the 1,781 suspicious transactions that went through the country, Singapore banks DBS and UOB each accounted for more than 500 suspicious transactions recorded, while others such as OCBC had 62.

In one instance, Ask Trading, a Singapore-registered company, was able to transfer US$4 million to a company based in the United Arab Emirates that was reportedly financing drug cartels and terrorist organisations.

BuzzFeed reported that Ask Trading claimed to have more than 200 employees, but a visit by its reporter found “a few sparsely populated cubicles” at its registered office. Between 2001 and 2016, it had moved at least US$671 million through some of the world’s leading banks.

WHAT IS A SUSPICIOUS TRANSACTION IN SINGAPORE?

In Singapore, banks are required to report suspicious transactions exceeding S$20,000 to the Suspicious Transaction Reporting Office, which comes under the police’s Commercial Affairs Department.

Some examples of suspicious transactions include:

• When a customer has a large number of accounts with the same bank and frequent transfers between different accounts

• A large amount of cash is withdrawn and immediately deposited into another account

• There are multiple depositors using a single bank account

Suspicious transactions facilitated by a bank’s operations in the US are reported to FinCEN.

WHY DON’T BANKS STOP SUCH TRANSACTIONS?

Once the reports are filed in Singapore, the Suspicious Transaction Reporting Office will analyse them to detect if any criminal activity, money laundering and terrorism financing were committed, the police told TODAY.

The office will also disseminate the relevant financial intelligence to enforcement agencies for possible investigative action.

Ms Radish Singh, a financial crime expert with consultancy firm Deloitte Southeast Asia, said that at this point, banks face a grey area in how to deal with suspicious transactions internally.

This is because banks do not have enough information to determine if the transaction is illegal. They may only have information about their clients, or the bank from which the money was deposited or withdrawn, she said.

“They won’t have enough at that point in time to really conclusively say that this activity, or this report that it made, is 100 per cent a crime and therefore it needs to take action,” Ms Singh said.

As such, it is not easy for banks to make decisions on whether to freeze a client’s assets, for example, until they hear back from the authorities, she added.

ARE THE INVESTIGATIONS CAUSE FOR WORRY?

Ms Singh said that Singapore banks being named in the investigations showed that they have done their jobs by detecting and reporting suspicious activities.

However, Associate Professor Mak Yuen Teen, an accounting professor from the National University of Singapore Business School, felt that the naming of Singapore-based banks in the investigations was worrying.

“While (the suspicious reports) do not necessarily indicate that they are illegal, a significant proportion of them may be. We have already seen in the 1MDB case that some Singapore-based banks were implicated in illegal transactions.”

Several banks in Singapore were fined or shut down in 2016 after they were found to be involved in money-laundering activities connected with 1MDB, Malaysia’s state investment fund.

Indeed, one of the key figures in the 1MDB scandal, fugitive financier Low Taek Jho, had moved S$3.3 billion in transactions flagged as suspicious by US banks, the FinCEN leaks showed. Low has repeatedly denied any wrongdoing.

In a statement to TODAY on Tuesday, the Monetary Authority of Singapore said that while suspicious transaction reports do not imply illicit transactions, it takes such reports “very seriously” and will closely study the information reported from ICIJ’s investigations.

DBS, OCBC and United Overseas Bank (UOB) told TODAY that they complied with regulations. OCBC and UOB said that they would use technology such as artificial intelligence and machine learning to detect money laundering.