The Monetary Authority of Singapore (MAS) has launched a dedicated unit to fight money laundering in the wake of the 1MDB scandal.

The anti-money laundering (AML) unit was announced in June, but formally launched this week. While officials say the plan predates Malaysia’s 1MDB scandal, it is certain that this helped speed it along.

1MDB is Malaysia’s state-owned development fund. The country’s Prime Minister Najib Tun Razak is accused of channelling around US$700mn from the fund to his own personal bank account. Many top-ranking officials have been dragged into the scandal, with regulators around the world launching investigations and seizing assets that are potentially related to it.

The Singaporean government seized US$180mn in assets linked to 1MDB in a money laundering investigation in July. In May, it shut down BSI Bank of Switzerland because of “gross misconduct” pertaining to 1MDB. It is also investigating the involvement of Goldman Sachs’ Singapore operation in the scandal.

“If your business or home was robbed, the first thing you are going to do is take remediation actions and enhance security and controls: this is exactly how MAS has responded to the 1MDB situation. With all good behaviour it starts at the top in order for it to be adopted throughout the organisation, so it becomes part of the culture, this principle is extended to governments,” Sean Norris, Asia Pacific managing director of AML solutions provider Accuity tells GTR.

MAS confirms that Singapore’s status as a trade hub makes it a natural conduit for money laundering and terrorist financing activities. It is also viewed as being one of the most advanced in fighting such activities in Asia Pacific, ahead of Hong Kong and Australia.

The authorities have increased the number of on-site investigations by a factor of six in the past three years, with 27 financial institutions getting fined. It has also worked to counter trade-based money laundering and define best practices in an area where there is often little joined-up thinking.

MAS is resolved to ensure that Singapore remains a clean and trusted financial centre. Ravi Menon, MAS

The latest move can be traced back to 2014, when MAS did an extensive risk assessment and identified areas that separate Singapore from the rest of the region, Norris says. And while all trade hubs are prone to illegal activity, it’s the response of MAS that helps it stand out.

“The recent upgrade they have made to the enforcement and policy oversight for this area is another example. Another great example was the UK FCA completing a thematic review on AML controls around trade finance, in the region it has only been MAS and the Hong Kong Monetary Authority (HKMA) that have really focused in the area,” he adds.

MAS is also to strengthen its enforcement of AML regulations. On the announcement of the AML unit in June, MAS pointed to the size and diversity of the city-state’s financial sector as motivation.

There are more than 1,500 financial institutions of all functions and sizes, and while the authority says “it is not possible to prevent regulatory breaches and misconduct even with intrusive supervision”, a strong investigative unit will hope to act as a deterrent.

Speaking on the launch, MAS managing director Ravi Menon says: “As our financial centre grows in scale, sophistication, and connectivity, so does the risk of criminal elements abusing our financial system.

“We will strengthen our supervision of financial institutions’ controls to combat money laundering and illicit financing. And we will enhance our enforcement capability to deter poor controls or criminal behaviour in the industry. MAS is resolved to ensure that Singapore remains a clean and trusted financial centre.”