11 October 2006

See Anything?

I will give you excerpts from three separate articles and let you figure out the connections, if any. The first article about the high number of very rich people in Singapore:
ST Oct 11, 2006
1.5% of adults in Singapore have assets exceeding US$1m
Republic's concentration of the wealthy is far higher than global, Asia average, survey shows

By Finance Correspondent, Lorna Tan

IF YOU are looking for a millionaire, it is rich pickings in Singapore - which has the highest concentration of well-heeled people in Asia.

A new report estimates that there are 55,000 people who each have net assets, excluding their main home, above the magic US$1 million (S$1.6 million) mark.

That is a concentration of 1.48 per cent of its adult population, far higher than the global average of 0.22 per cent and Asia's average of 0.1 per cent.
The next excerpt is about the high number of very rich Indonesians or ex-Indonesians in Singapore:
ST Oct 11, 2006
A third of millionaires here of Indonesian origin

ONE in three millionaires in Singapore is Indonesian in origin, according to a report from Merrill Lynch and consultant Capgemini.

It estimates that at the end of last year, Singapore had 55,000 people with net assets of at least US$1 million (S$1.6 million), excluding their main home.

Of these, 18,000 were Indonesians who have become either Singapore citizens or permanent residents here.

The third article concerns an ex-Morgan Stanley analyst's private views about Singapore and rich Indonesians:
“... [some] were competing with each other to praise Singapore as the success story of globalisation. Actually, Singapore’s success came mainly from being the money laundering centre for corrupt Indonesian businessmen and government officials. Indonesia has no money. So Singapore isn’t doing well. To sustain its economy, Singapore is building casinos to attract corrupt money from China.”
See anything?

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38 comments:

moomooman said...

I felt it tough to believe that a Senior Economist has access to information on such things. They afterall deal with analysing the economies and present those reports to the advisers who have direct knowledge of their customer's wealth.

It's open knowledge that the earlier wealthy Indonesians have gotten most of their wealth bribing indonesians officials. However the end entity are usually legal businesses.

The money that derived from these business are mostly brought out of Indonesia and placed it in Singapore.

Is that Money Laudering?

In China, where they have yet to have a proper tax system and where most wealth gotten thru legal businesses are undeclared and they bring it out of China illegally because China do not allow gains to be taken out of China....

Is this Money Laudering?

Are money taken out illegally thru legal businesses and then pass thru the casino network to become official money....

known as Money Laudering?

ted said...

Would the moomooman like to offer HIS definition of money laundering then?

moomooman said...

Well, I have very vague understanding of money laudering.

My understanding of it is to pass off money gotten thru ill-gains and pass it thru the casino operations to make this legal money.

Most triads worldwide are involved in such operations.

They may not necessary lauder thru casino operations but also involving in very complex banking transactions to by-pass detections thru multiple shell companies.

My earlier post is intended to gain more knowledge rather than to confront the article.

I understand bankers go thru courses on money laudering and I hope some of the bankers could enlighten this more.

Anonymous said...

Shanghai started as a money laudering hub for chinese gangster and colonial power...

Hong Kong started as a money laudering hub for british opium trade...

perhaps alex should comment on places closes to his home first...

Legal Layman said...

I'm no finance nor legal expert, just my 2cents logic.

For all of the money-laundering questions you've asked, the answer is "YES" from certain perspective.

E.g. 1. Legal Indonesian biz, brought $ out of Indonesia to place in SG. Such transactions may be questionable from the Indonesian govt's perspective about monetary policy to control inflow/outflow of capital? E.g. Recent speculations about Thaksin's secret flight of $$$ flouting Thailand's capital outflow control. Were the relevant taxes paid on the exiting $?

E.g. 2. From China govt's perspective, under-declaring income/wealth is tax evasion! For such $ to become "washed" in another shore is a loss to China.

E.g. 3. See points 1 and 2 above.

The only factors protecting these people from facing prosecution back in their homeland are perhaps (a) banking secrecy in Singapore and (b) extradiction agreements between Singapore and their home country.

Legal Layman said...

Hmm, which brings to mind...

Maybe that's why these rich choose to become citizens, and give up their homeland's citizenship. That way, their homeland govt cannot request for extradiction of someone who is no longer their citizen!

Hmm, just a guess, I'm no legal eagle.

Mr Wang Says So said...

I just wanted to point out that the Morgan Stanley person is hardly the only person who thinks that Singapore is a money laundering centre for Indonesians. See here.

Rowen said...

Singapore is a good place to launder money.

It is easy to setup a company in singapore selling expensive high end stuff (such as art galleries, antique shops, curios shops) which nobody actually can afford to buy and pumping in money to the biz from illegal sources. All the while stating that the money is legitimately obtained from sales and that paying taxes to the IRAS.

IRAS would not bother people who pay taxes, only those who do not.

Moreover, profits from transactions in the stockexchange or commodities are tax free.

Another way people can launder money is to pay people who won lottery tickets with ill-gotten cash.

Another way people can launder cash is to go onto the cruise ship and gamble........ see why singapore needs casinos on land now???

zonked said...

Facts are necessary inputs for one to form an opinion of sorts. Individuals observe and take in raw factual information, process these inputs, personalised it with their set of values and principles before finally re-introducing them as opinions.

From the 3 articles, these facts are apparent:

What is the subject matter - money;
Where is itsorigin – Indonesia;
Who are the parties involved - rich Indonesians;
How did they go about it - by doing what they do in Indonesia;
Where is the destination - Singapore;
Why this destination - because the geopolitical climate, regulators, and the financial institutions have together, fostered an environment that facilitates and welcomes them.

To help put things into perspective, it might help to state the definition of money-laundering without having to go into too much details - Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source and destination of the money in question (http://en.wikipedia.org/wiki/Money-laundering).

So as not to confuse things for the layperson, we'll further assume 'money-laundering' is only used in the context of wealth obtained by means of engaging in illicit activities. That said, if this hadn't been the case for rich Indonesians, then putting these 3 articles together would at most, statistically suggest that of the 1.5% of affluent adults in Singapore, approximately 18,000 Indonesians make up this number. This would then render the ex-Morgan Stanley analyst's private views invalid.

So the question then, really, would be - how did this group of Indonesians become rich?

vainbugger said...

Some information for moomooman here:

http://money.howstuffworks.com/money-laundering.htm

boon said...

I think many people saw that connection - it jumped out at me when I read the ST article. Hey that Andy Xie wasn't far off the mark after all.

The real issue for me, however, is not money laundering.

It's how our entire wealth management industry is built on a weak foundation. The WM is flourishing, not because Singapore is a financial hub with more expertise than, say Shanghai or HK.

It's because we turn a blind eye to the origins of the money. When we are eventually forced to tighten up the loopholes in accordance with international regulations, the money will flow out straight away.

And there'll be a whole batch of WM specialists facing retrenchments.

So if you're one of the many contemplating doing a WM course and having a switch in career, do think twice.

Anonymous said...

As with all the hubs we try to establish.

We don't have what it takes, whether skills or competitive advantage. We use the quick fix way ... so sad.

Mr Wang Says So said...

Some time back, BT reported a peculiar trend:

sales of private property rose sharply;

but resales of HDB flats were falling.

This is odd because normally, the same trend would apply for both types of properties.

Well now we can guess at least part of the answer. Rich Indonesians don't like HDB flats.

zonked said...

Influx of wealth feeds immediately into the economy. With ample inflow, it will throw a nation’s natural state of progress into disequilibrium; drives up consumer prices and standards of living, with the poor failing to catch up and suffering the brunt of their high lives. This will create a greater divide between the rich and the rest. And as pointed out by Mr Wang, the heterogeneous movement in housing prices is a likely manifestation of this.

ritz-not-rich said...

Ha ha, i am a bit amazed that there are so many rich Indonesians in Sg, as 18k is a big number. Wow, u guys, quickly assume it's money laundring. Hmm, it depends on which angle we see. Well, they prefer to put the money in SG as we do not believe in Indonesian banking system.

Poor me :-(. I'm just a struggling indonesian living in SG and not knowing any of those 18k rich HNWI here. Anyone wants to give 'donation' to me?

whybegay said...

One would only have to pay $50 to set up a company name in Singapore.

Of course money launderers would like that.

Anonymous said...

Here's a link on how money laundering works:

http://money.howstuffworks.com/money-laundering.htm

zonked said...

In Singapore, Money-laundering is a criminal offence under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act. To constitute money-laundering, a person's act of amassing wealth must first be illegitimate.

The problem lies in ascertaining that, and unless you can prove its illegitimate origins, the rich man stays clean.

Sometimes in life, one has to learn to accept their lot.

Lau Min-tsek said...

The housing price imbalance could just be a kink in the system. Only time could tell.

If this is going to be a permanant feature, a better explanation (vs conspiracy theories) is that the effect of the income gap between the rich and the poor is being felt now. If this is true, this effect should become more apparant as time goes by, assuming all other factors remain the same.

Actually there is nothing illogical about this phenomenum. Public housing, being (in THEORY, I stress IN THEORY) for the poor, this would imply that prices should not boom as much as private prices, since the market (IN THEORY) caters to the poor. As a matter of fact, prices may even fall (which it has for larger HDB units but not for smaller units, again reflecting the trend that poorer people would go for smaller and cheaper flats).

The "boom" of public housing price during the 80s and early 90s leading to "asset enhancement" of our general population looks more like a bubble to me. Seriously, can anyone tell me which country experiences public housing price boom as much as in Singapore?

Hehe..... I am in danger territory here since I am no property expert. But property prices in relation to HDB is influenced by many factors other than supply and demand.

Do note that there are a lot of restrictions on ownership of HDB flats, and government policies has in the past influence the price of HDB flats greatly.

Other unusual factors may play a part:

Eg, buying property has social trends: eg, having a child (or more children), getting married, nuclear families instead of living with parents, the fad of buying 2nd property for rental or for investment, job security, the desire for "asset enhancement", the trend of upgrading etc. Changes in property prices may reflect changes in these trends.

The clearing of surplus new HDB flats (almost all gone now!) may also have made resale HDB flats unattractive for the past few months.

Do note that many private properties have foreign ownership restrictions. These restrictions are there to stop speculation, cap inflation and to "help" "poorer" Singaporeans own properties at cheaper prices. So the relationship between Indonesians buying properties and our property prices is not so direct.

Put this another way: when prices in Singapore are low for the past years, why aren't foreigners grabbing all the deals and driving prices up? Especially since I have read that many analysts felt that properties are priced quite low and are good buys during that period?

Again, I am no property expert. But I do note that property prices are affected by many variables.

Lau Min-tsek said...

Oh, three more observations.

(1)

One need to resist the temptation that just because they are rich and has money to last 3 generations does not mean that the money is necessarily dirty. (as some comments have stated)

Otherwise you would fall into the trap of thinking like some of the anti-Chinese people in Indonesia when they accuse the Chinese of stealing the nation's wealth without any proof -- just because there are rich Chinese with obscene amount of money in Indonesia.


(2)

The Indonesian government has on many occassions voiced their displeasure with the Singapore government over Indonesians who sent their assets to Sinagpore to escape corruption investigations. Oh, and there are a few fugitives who are hiding in Singapore too. The Singapore government has always ignored the Indonesian authorities, citing lack of extradition treaties, lack of any treaties on fighting money laundering etc etc etc.

When the Indonesians captured some JI terrorists some 2 years back, the Singapore government requested to extradiate them or at least interogate them.

PAYBACK TIME! The Indonesian authorities did not grant these requests (at least at that time), using the SAME reasoning as given to them by the Singapore authorities, and has stated that if Singapore does not want to help them, they would help Singapore. If you read some of the statements in the foreign media, one could not help but detect a certain smugness in the Indonesian response.

Moral of the lesson: Now we may enjoy money of unknown origin coming into Singapore from Indonesia and we do not want to return them. But there will be one day when we need the same favour from the Indonesians. Do you think they will help?

(3)

There are many who said that major finance centres in the world will always attract dirty money and in their own interest they will always keep quiet.

Well..... true...... unless you ask Switzerland. They are slowly (stress SLOWLY) realising that they do have a moral responsibility. And has recently returned ill gotten money from the nazis, dictators and such to governments and individuals who claim them back.

As I understand it, some changes in their banking and finance laws are in the cards (some probably already made into law). Small steps. And plenty more to do. But important first steps.

So where do Singapore position in regards to Switzerland's example?

Anonymous said...

Reading through the comments, I can summarize the following thoughts:

1) It is easy to launder money in Singapore;

2) It is easy to set up companies to launder money;

3) The Wealth Management Industry in Singapore is extremely lax in taking in accounts;

4) The increase in private property sales, coupled with the fall in HDB resales, can be inferred to come from wealthy Indonesians who have possibly derived their wealth through ill-gotten means.

However, I would like to point out the following :

a) It is NOT easy to launder money in Singapore. There are processes in place that will flag the money launderers. These processes are NOT apparent because making this information public would help these criminals finds ways around them;

b) The Wealth Management industry is NOT indiscriminate about where their clients derive their wealth. That's why the (legitimate) wealthy tend to have a group of private bankers chasing them.. Also see point (a) above;

c) There is no disconnect between the higher private property sales and the lower HDB resales. While I do not have access to actual numbers, I have observed a substantial increase in purchases made by foreigners of all nationalities, and all usually in districts 9-11 or on Sentosa itself. Ironically, the Indonesians seem to have slowed in their property purchases in Singapore.

Think it's premature to jump to conclusions. Not all foreigner are Indonesians.

Anonymous said...

The banking secrecy here cannot be done away with as it has got implication on the issue of transparency of the operations GIC

lee hsien tau said...

Money laundering covers a very broad spectrum, involving elements of tax avoidence/planning.

The most important part of Andy Xie's e-mail is:

"ASEAN has been a failure. Its GDP in nominal dollar terms has not changed for 10 years. Singapore’s per capita income has not changed either at $25,000. China’s GDP in dollar terms has tripled during the same period."

Cost him his bonus.

Rowen said...

The main objective of money laundering is to make illegal money to legal money.

Therefore, if there is a portion of the money going into the paying of taxes to enable this process to be undetected by the government, these people with illegal cash would do it. As i have stated IRAS and the government only would make trouble for people who do not pay taxes.

Therefore, if there is a shop or a company set up selling curios, works of art, furniture, antiques, jewellery and stuff, there can be much transactions in cash and in high value. It may not necessary state that who the items are sold to where the items go to and so on and so forth. There may not be even any goods or goods movement at all. only the inflow of cash into the company. the company declares this influx of cash to the IRAS. IRAS will tax them accordingly. The company and cash stay clean.

See easy rite.

Open nite clubs, KTVs, states high profits thru cash. pay the IRAS their dues. illegal money becomes clean money.

See easy rite.

In the case of casino and declaration of winnings. Going on a cruise ship with a large amount of cash. declare that you have won the cash on the ship. Pay taxes accordingly. Cash the money into the bank. Money becomes legal.

See easy rite.

Find people who won the TOTO or Lottery, Buy their tickets at 1.5 times their winning price, claim the money from singapore pools. illegal money becomes legal.

See easy rite.

What i mean in singapore you can work within the system and still you can launder money easily.

That is why there are accusations that singapore is the top spot for drug lords, criminal elements, business men to park their ill-gotten cash.

Ananda Rajah said...

I'm not sure this necessarily addresses the conundrum Mr Wang may have had in mind. The issues are complex, and I don't think we have sufficient empirical evidence to decide one way or another.

The issues are complex. While extremely wealthy non-Singaporeans (including PRs) may want to 'park' their money here or acquire physical assets of various kinds, this is quite a different matter from money laundering. There are several considerations to take into account:

1. We have legislation which provides for the equivalent of the 'Mareva Injunction'. I believe this was originally argued for by Jayakumar in relation to drug-trafficking. Given how legislation is drawn up and passed in parliament, it would not surprise me that this piece of legislation (I have not read it myself) would be framed in a way that could cover non-drug-trafficking related sources of money 'parked' in Singapore,that could include the conversion of this money into physical assets.

2. Insofar as money laundering is concerned, I would think that if a person were to deposit a large sum of money in a Singapore bank, by whatever means (electronic transfer, a bank draft, a suitcase full of cash), the bank would accept it if the person fulfils the minimum requirements of the bank, i.e. bona fide passport, etc.

3. The bank would be in no position to discern whether or not this is 'dirty' money.

4. On the other hand, I am told by some in the banking industry that banks are required to submit, regularly, to MAS reports on such accounts. I do not know what criteria guide the submission of such reports on foreign-depositors' accounts.

5. The crux of these issues, it seems to me, is ultimately a question of jurisdiction. I.e., if the money is 'dirty' (from drugs, or whatever) elsewhere but is brought in and is deposited in fulfilment of, or compliant with existing general regulations on foreigners depositing money in banks here, then the depositor has fulfilled Singapore's jurisdictional conditions on such matters. And the money will be happily accepted by the bank.

6. If my argument is right, then our 'Mareva Injunction' legislation exists as a 'contingent' piece of legislation (if such a term could be used). I.e., only when a request is made by a foreign state/jurisdiction (based on, minimally, prima facie evidence) will Singapore authorities then act to investigate the money/paper trail. If no such request is made, there is little or no reason to investigate these accounts held by foreigners or PRs.

7. That, however, raises the question as to why - if it is indeed true - MAS requests information on such accounts.

Apologies: no edifying conclusions here; merely more food for thought.

Anonymous said...

1)Think u guys should know S'pore is a very reputable and enthusiastic supporter of The FATF which is an inter-governmental body whose whole purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing. The FATF is a "policy-making body" created in 1989 that works to generate the necessary political will to bring about legislative and regulatory reforms in these areas. The FATF has published 40 + 9 Recommendations in order to meet this objective.

2. Andy Xie is really a f-up economist. Any economist worth his salt will know that the size of the growth has a lot to do with the base. Why doesn't he compare China's GDP leap with what's happening in the US? Also, to have S'pore's per capita income remain constant while its population base has almost doubled is nothing short of miraculous. Besides Xie's grammar stinks. As for MS defending his email as stimulating internal discussion, it's really lame, becos if it's true, then I'm appalled by the total lack of quality in the stimulus!

Legal Layman said...

Anonymous at Thursday, October 12, 2006 10:49:35 PM: "S'pore is a very reputable and enthusiastic supporter of The FATF".

Yeah, right. Singapore is reportedly also a strong supporter of Intellectual Property rights, but everyone knows it is not "that" difficult to find pirated software in Singapore.

Anonymous at Thursday, October 12, 2006 10:49:35 PM: "Andy Xie is really a f-up economist... Besides Xie's grammar stinks".

FYI, grammar stinks does not equate content is sub-standard. Talk about tying growth to its base, "China’s GDP in dollar terms has tripled during the same period", but did its residents/population-base tripled? How about the Singapore scenario?

Lau Min-tsek: "The housing price imbalance could just be a kink in the system. Only time could tell".

I vaguely remember not too long ago that the Singapore govt relaxed the policy to allow residential purchases to be counted into the $x million investment for PR application. Could that also have contributed to the kink? Only time could tell.

expat@large said...

I hear that a lot of high-end property is being purchased by our friends the Burmese these days. And Myanmar's millionaires get their money for these purchases from ... their legitimate pharmaceutical business?

PC's observation that Indonesians are buying less high-end property recently ties in with Andy Xie's comment about Indonesia having no money.

btw Grammar issues can be ignored - his comment was from an internal e-mail that was leaked, not from a published article (in FEER? ha ha!)


Question: how many suitcases full of heroin and blood-stained money can you bring into Singapore before having to declare it?



"Bank secrecy laws and the lack of routine currency reporting requirements make Singapore an attractive destination for drug traffickers, criminals, terrorist organizations and their supporters seeking to launder money, and for flight capital." INCSR-2006

expat@large said...

That's "heroin-tainted and blood-stained money"... sorry.

Suitcases full of heroin! LOL!!!

moomooman said...

Transactions numbers by nationality (key nationalities) in prime districts (Dist 1,4,9,10,11) between Sep '05 to Sep '06:

Total transactions: 6336

Australia 140 (2.21% of total)
China 85 (1.34%)
Hong Kong 41 (0.65%)
Indonesia 591 (9.33%)
Malaysia 331 (5.22%)
India 186 (2.9%)
USA 124 (1.96%)
UK 249 (3.93%)
Singapore (include PR) 3881 (61.3%)

moomooman said...
This comment has been removed by a blog administrator.
moomooman said...

Saw someone mentioned Myanmar.

Myanmar 15 (<1%)
Companies (shell companies?) 213 (3.36%)

Some of the property related questions, I think they are best discussed in more related topic. This one is about money laudering.

The stats I provided is to allow some of you guys to read into them and make relevant anaylsis.

Anonymous said...

moomooman : good information. thanks for that. however, just need to check the source please?

moomooman said...

pc,

source: ura

Anonymous said...

Corruption and secrecy is part of a global trend. See the big picture and judge for yourselves:

http://www.youtube.com/watch?v=nRlDlAkonJU

Anonymous said...

gee, what about swiss bank accounts? what about the huge number of rich Chinese, middle-east businessmen, Korean and Thai people in places such as Australia, Vancouver, Europe etc? When it comes to developed, rich countries benefitting from corruption in third world countries, whose hands are unclean?

It would be conceited to expect that if we refuse entry to rich Indonesia businessmen, they would stop being corrupt. Rich Indonesien Chinese may choose to come here because we're close to Indonesia, and Sg is a safe, clean place. What is morally wrong in making Sg a good place to live in?

I do not believe that we make our money by being a money laundering center. If a country could get rich this way, then we wouldn't be investing so much into educating each generation of singaporeans.

Anonymous said...

As for Andy Xie's comparison of Singapore to China (as a lot of China people in Singapore like to do), it belies that even a top economist can make redundant and non-value adding comments. Yes, China's growth is staggering, but that's because it's easy to achieve growth when the base is low. Besides, China's eventual rise was foreseen by Singaporean leaders decades ago, which is why Singaporean kids can speak Chinese today, even though their kentang parents have to drag them kicking and screaming to tuition centres.

Anonymous said...

As I see it, the purpose of Andy Xie's email was to brief his management/colleagues about what happened at the IMF meeting. He wasn't out to diss Singapore or to compare Singapore to China or accuse Singapore of money laundering or whatever. He was really just reporting his thoughts on what happened at the meeting, and that's why he also talked about Eurozone economy, US economy, China, India, who said what about which country etc.

His "negative" comments about Singapore were made in a very incidental way. It's like he just makes the comments and moves on and treats them as non-controversial, "by-the-way" sort of points which his colleagues surely wouldn't disagree with and are so well-known that we wouldn't really want to waste time debating them.