Singapore’s Billion-Dollar Money Laundering Bust
SINGAPORE: In a month dominated by headlines, Singapore has witnessed one of its largest money laundering investigations to date. The police apprehended 10 foreign individuals suspected of engaging in forgery and money laundering activities linked to scams and online gambling. A total of approximately S$1 billion (US$736 million) in assets, including properties, vehicles, luxury items, and gold bars, have either been confiscated or frozen.
Of particular note among the seized items were documents pertaining to “virtual assets,” such as cryptocurrencies. This prompts us to ponder the connection between online gambling and cryptocurrencies within the context of money laundering.
Cryptocurrencies: A New Tool for Money Laundering
The actual scale of global money laundering remains challenging to pinpoint precisely. Estimates from the United Nations Office on Drugs and Crime suggest that it ranges from 2 to 5 percent of global gross domestic product annually. Using World Bank data, global GDP reached US$100.56 trillion in 2022, indicating an annual money laundering volume between US$2 trillion and US$5 trillion.
One common avenue for money laundering is through online platforms, including sports betting websites, online casinos, and peer-to-peer betting platforms. These online platforms gained significant popularity during the COVID-19 pandemic when physical casinos were shuttered.
According to a recent report by the US blockchain analysis firm Chainalysis, approximately US$23.8 billion worth of cryptocurrency flowed through illicit channels in 2022, marking a 68 percent increase from the US$14.2 billion recorded in 2021. These figures only scratch the surface, revealing the extensive realm of digital money laundering.
Cryptocurrencies attract criminals due to their ability to obscure identities and the origins of illicit funds. While transactions of cryptocurrencies like bitcoin are theoretically recorded on the blockchain, their pseudonymous nature allows account holders to avoid linking their wallets to their real names.
A case in point is the US$4.5 billion cryptocurrency money laundering scheme orchestrated by a married couple in 2016. It took authorities years to recover a fraction of the laundered cryptocurrency by Ilya Lichtenstein and Heather Morgan in the United States, requiring substantial manpower and intensive chain analysis.
Lichtenstein later admitted to orchestrating the hack against the Hong Kong-based cryptocurrency exchange Bitfinex before enlisting his wife to launder the stolen funds through an elaborate scheme involving fictitious identities and the concealment of gold coins.
Mixers and Tumblers
Compounding the issue, the emergence of “mixers” and “tumblers” further complicates efforts to trace the origins of funds. Think of “mixers” and “tumblers” as akin to washing machines for illicit money. Dirty money enters the system, undergoes a laundering process, and emerges as clean money. A prime example of such a service could be an online gambling website.
Money launderers often employ two common methods:
First, criminals in one country amass cryptocurrencies through online scams, extortion, and malware, bypassing banks’ two-factor authentication safety measures (e.g., using victims’ credit cards to purchase bitcoins). Subsequently, they utilize these illicit cryptocurrencies to obtain credits on an online gambling platform. In this scenario, criminals create seemingly legitimate gambling records by playing a few rounds online. They then withdraw the credits and convert them into cash in another country, often met with minimal resistance from online gambling sites with lax anti-money laundering (AML) protocols.
The second, more complex method involves close coordination among criminals. This entails criminals selecting an online gambling platform, such as online poker, that allows multiple players. Criminals in one country purposely lose to their counterparts in another country. The affiliates in the second country then withdraw the winnings and convert them into cash. Success in this method necessitates avoiding detection by both the online platform’s AML and anti-fraud systems and other unrelated players in the game.
Singapore’s Anti-money Laundering Efforts
Singapore ranks among the global leaders in financial crime detection, bolstered by robust AML regulations and systems for reporting suspicious transactions. Additionally, the development of a digital platform, known as the Collaborative Sharing of Money Laundering/Terrorism Financing Information and Cases (COSMIC), is in progress. COSMIC will initially involve six major banks and is scheduled for a phased rollout beginning in the latter half of 2024, facilitating enhanced AML capabilities.
Nevertheless, these measures, while essential, do not render Singapore immune to money laundering. Advancements in technology and sophisticated techniques continually challenge detection and monitoring efforts.
For instance, COSMIC is currently tailored for commercial banking, not cryptocurrencies. Monitoring cryptocurrencies may necessitate distinct training data, artificial intelligence, machine learning systems, unique data analytics tools, and monitoring protocols. Furthermore, the speed, scale, and complexity of cryptocurrency transactions complicate real-time monitoring, a challenge that may need to be addressed in COSMIC’s future coverage.
KYC Practices: Blurring Criminal Techniques
Undoubtedly, the first line of defense lies in robust implementation of know-your-customer practices, backed by independent audits to ensure their effectiveness. However, the evolving sophistication of criminal techniques blurs the distinction between “traditional” and “crypto” money laundering.
One potential solution involves integrating cryptocurrency and traditional AML systems, bridging the gap between the two. This would involve linking bank accounts to cryptocurrency wallets for monitoring and detecting money laundering. To enhance detection rates, investments in AI and machine learning systems are imperative for real-time monitoring and correlation of transactions between cryptocurrency markets and financial assets.
Public education regarding the connection between cryptocurrencies and money laundering is equally crucial. Individuals must comprehend the significant risks associated with enabling criminals to utilize their accounts on gambling sites for money laundering. In many instances, individuals convicted of money laundering were found to be unaware of the severe consequences of relinquishing control of their bank accounts for a small fee.
Money laundering through online gambling sites presents a formidable challenge due to its intricacy and involvement of multiple parties. However, given its growing prevalence in the money laundering landscape, avoiding action is not an option.
Addressing money laundering often resembles a cat chasing the elusive red dot of a laser pointer. Perhaps it is time to shift our focus from the red dot to the hand holding the laser pointer.
Born and raised in Singapore, Jeanette developed a passion for gambling at an early age. Intrigued by the dynamics of casinos and the allure of games, she immersed herself in studying various gambling strategies and techniques. Her dedication and commitment to understanding the intricacies of online casinos led her to become a prominent figure in the industry.