Tax Crimes Classified as Laundering Money in Singapore The Money Authority of Singapore (MAS) has made an extra move that wish to deter individuals from engaging in tax crimes by classifying it as a type of money laundering act. In its proposal, tax crimes are to be considered a criminal offence and this would take into effect beginning 1 July 2013. At present, MAS has published a consultation paper that aims to accept views, comments, and suggestions with regards to the implementation framework of the said revision. However, all of these should be submitted on or before 9 December 2012.
Definition of Tax Crimes
Omissions, falsifications, or fraudulent conduct that shows willful intent to evade tax or the assistance to evade tax is to be considered a criminal offence. (Note: This definition has been carefully studied and compared with other major financial hubs and jurisdictions all over the globe)
The following are the list of tax crimes that will be designated as money laundering, thus liable to be penalized as predicate offences:
Direct Tax Offences Classified under s.96 and s.96A of the Income Tax Act
Individual that are proven to willfully evade or assist anyone to evade tax through the following rules are to be charged a predicate offence classified as tax crimes:
- omission of certain income returns
- submission of false statements or entries
- false answer in response to written or verbal queries in relation to this provisions contained in this Act
- failure to comply with s. 76
In any case, individuals that are proven to assist in the preparation of false book of accounts or records, as well as maintenance of similar falsification of records and accounts; and persons that utilize contrivance, fraud, that results to similar fraud shall be further charged serious fraudulent tax evasion case.
Indirect Tax Offences Classified under s.62 and s.63 of the Goods and Services Tax Act
Individual who knowingly performs an act to either cause or attempt to cause an improperly obtained refund together with the following acts are to be charged indirect tax offences:
- understates his or her output tax or overstates an input tax
- makes false entries or statements in relation to claims, returns, or applications under this provision
- provides false answers either in writing or verbally to questions or request classified in relation to this provision
- maintenance and preparation of false records or books of accounts or authorizes the preparation or maintenance of such
- use of contrivance, fraud, or art in any manner it may be or authorize anyone to do the same
This move has been made as a way to safeguard Singapore from becoming a tool of some tax evaders to harbor their proceeds gained from tax crimes. Moreover, MAS has reiterated the need for financial institutions to be extra-vigilant with any suspicious flow of funds, so as to resolve outstanding tax issues with other countries in the world.
Essential Elements to Consider Concerning Internal Policies and Procedures
MAS has acknowledged its limit in generating internal policies and procedures relating to this provision. Therefore, it has sought the assistance of financial institutions (FIs) for the following details:
Identity and Assess Tax-related Risks
MAS requires assistance with supplement involving current due diligence measures including surveillance checks that helps to asses the tax-risk profile of their clients that will include additional information, verification of information, or the identification and incorporation of certain red-flag indicators that could easily spot high-risk clients. It would also entail a critical review of their clients existing accounts to see if the assets filed under their safeguard are legitimate or not.
Management and Mitigation of Tax Related Risks
FIs are also expected to apply the necessary control measures, which includes the following:
- the escalation of policies that may look scrupulous before approval of these applications,
- design of monitoring procedures that would easily detect transactions resulting to possible tax predicate offences,
- file transactions that may look suspicious,
- maintenance of proper records of due diligence to see if their taxes are properly assessed and paid, and
- close monitoring of staff for them to adhere to compliance policies and internal control that will be approved and implemented by the FIs in accordance with this provision.