Chinese Dirty Money and Singaporean Luxury Properties

Money-laundering bust exposes river of illicit money

Sep 4

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By: Andy Wong Ming Jun

Some of the at-large suspects involved with Singapore’s money-laundering bust announced by authorities on August 16 are speculated to be the ultimate beneficiary owners of 23 units at South Beach Residences, one of the country’s most luxurious condominium developments, sources have told Asia Sentinel. One of these unnamed suspects on the run is described as directly owning two of the most expensive units. All of the property transactions are said to have been completed via shell companies registered in principalities such as Malaysia, Hong Kong, and the British Virgin Islands.

Opening sales at South Beach Residences were so highly anticipated in September 2018 that an unnamed buyer reportedly offered S$26 million (US$19.2 million) pre-launch for a single penthouse. According to sources with knowledge of the sale, the buyer was a Chinese national who offered to pay the full sum in cash without bank financing. Three months later, some 25 units were sold to predominantly Chinese nationals, each commanding more than S$3,000 per square foot at prices starting from S$6 million up to S$8 million. In October 2021, one three-bedroom penthouse apartment sold for a record S$18.5 million to an unnamed Chinese ultra-high-net-worth (UHNW) individual.

Singapore’s Council for Estate Agencies (CEA) is investigating property agents who might have facilitated property transactions relating to the money laundering case, according to local media reports.

Chinese expatriates seeking safe haven and a laundromat for their wealth arrived in Singapore as far back as 2016, the banking and property sources say, facilitated by an army of local and foreign lawyers and property and banking agents. They arrived not just in Singapore but throughout Southeast Asia, driven farther afield from Chinese government scrutiny and law enforcement since President Xi Jinping’s anti-corruption campaign began in 2012. According to the insider accounts, communications were channeled between these Chinese individuals and a multitude of property agents through a “master agent”, resulting in what they described as “murky” business dynamics in which a chain of people was complicit in the money laundering.

The UHNW individuals transferred their funds into Singapore through at least two unnamed private bankers and possibly more, who allegedly sidestepped anti-money laundering protocols in exchange for substantial kickbacks. In the words of one industry figure: “If you have the connections, you employ someone with the right licensing and offer a sufficient percentage cut of the assets/monies under management (AUM), and nobody will refuse.”

Such kickbacks were described as standard within the banking and property industries owing to the prestige and commissions-motivated greed that drove many to take risks in flouting anti-money laundering (AML) rules. Every step of the AML process from lawyer to banker to agent was described as “passing the buck” of AML due diligence responsibility to the previous individual handling the money flow and business transactions, and ultimately reliant mainly on the word of the UHNW individuals that their money was clean and little more.

One of the private bankers described as the chief “fixer” for Chinese dirty money to flow into Singapore was actually caught in a sting operation by his own bank and fired between 2018 and 2019, a knowledgeable source speculated, but somehow retained his certifications and licensing and proceeded to carry on “business as usual” through his newly established financial consultancy. The other private banker who was his main competitor is said to have been implicated in the latest S$1 billion money laundering bust.

While these Chinese UHNWs entered Singapore’s financial system and property markets using local fixers and innocuous-looking foreign-registered companies from countries that would not typically trigger red flags in Singapore’s existing anti-money laundering regime, the foreign-registered companies serve to conceal the true identities of those who set them up either with themselves as direct shareholders and/or beneficiary owners, or through shell companies registered in countries with more dubious business reputations such as Cambodia. All these form part of a sophisticated and methodical layering of financial inflow stemming from the illicit wealth obtained through criminal means by these Chinese UHNWs, of which existing AML regimes often do not dig deep enough for scrutiny, owing to the delicate balance between transparency requirements and reduction of red tape in slowing down such transactions.

According to Jeremy Douglas, the Asian regional representative of the UN Office on Drugs and Crime (UNODC), a crackdown on gambling junket operators in Macau initially drove the subjects to seek safe havens for their operations further afield in jurisdictions that lacked stringent legislation or law enforcement on gambling or foreign financial inflows. Some of these Macanese junkets such as Suncity were already known to Chinese and UN authorities as having organized crime ties for money laundering purposes within the larger underground banking world. Their largest source of income stem from online illegal betting and gambling (with some estimates putting it at around US$145 billion annual outflow from mainland China), and their most visible crime committed is online and mobile phone fraud (with some 2 billion voice-call and text communications intercepted in 2022 alone according to China’s Ministry of Public Security).

These Chinese/Macanese junkets and UHNW individuals with ties to organized crime first settled in the Philippines, operating in various special economic zones under licensed online gambling. When former President Rodrigo Duterte was pressured by the Chinese government under President Xi to step up enforcement action against Chinese organized crime groups still remaining in the Philippines under the newly centralized gambling licenses (POGO) awarded by its gambling commission (PAGCOR), they were forced to flee once again to new safe havens, this time in even less regulated and lawless countries such as Cambodia and Myanmar. It is these countries that generated their illicit income via online scams and illegal gambling, which were then funneled into Singapore and laundered with meticulously calculated efficiency through its banks and luxury properties.

While the UHNWs were infamous for their lavish spending and nouveau riche behavior at luxurious destinations such as the Marina Bay Sands gaming and entertainment complex, including flying in their own Michelin-starred chefs and female hostesses from China to party with, they took care not to draw the attention of authorities by restricting themselves to drinking and womanizing without dabbling in other heavier vices such as drugs. Since their criminal enterprises’ expansion into Southeast Asia in the second half of the 2010s though, China has conducted more joint operations with law enforcement officials in countries such as Thailand, Cambodia, Myanmar, and Laos to nab Chinese nationals linked with organized crime.

This has also been facilitated with the optics of regular diplomatic meetings between China and Southeast Asian countries, of which the latest example would be Chinese Foreign Minister Wang Yi’s August visit to Singapore. The S$1 billion Chinese money laundering bust would happen a mere week later. Singapore’s Law Ministry has denied Wang Yi pressured the Singapore government to launch the anti-money laundering raid in mid-August although it appears likely that Chinese law enforcement officials triggered the probe at some earlier date.