Possible money laundering links to family offices in the city-state and the JPEX crypto scam in Hong Kong clearly show the pitfalls of chasing growth and new markets.
All that glitters is not gold. In English, the phrase can be traced back to Shakespeare and beyond, but almost every language likely has some variation of it. But its meaning, regardless of how it is spoken, is probably something that the governments in both Hong Kong and Singapore are taking to heart right now.
On one hand, you have city-state, where, as finews.asia reported on Wednesday, the authorities are looking into possible links between single-family offices awarded tax incentives and the large-scale money laundering case currently unfolding there.
In Hong Kong, you have JPEX, which seems to be a cryptocurrency platform scam that just keeps on giving, at least in terms of arrests of known television actors, as the South China Morning Post duly reported, also on Wednesday.
Immediate Consequences
So what gives? Both cities had been looking for ways to increase the attraction of their respective financial centers by attempting to attract family offices and the crypto industry, as finews.asia has extensively discussed.
The surprising here is how quickly the consequences have come – although that might not be a bad thing in the long term.
Singapore had been tightening things up related to family offices, as we clearly indicated in March, and the comments by the government Wednesday show it is fully aware of how attractive the city is to criminals. They have also been extremely transparent. We already know the volume of funds laundered and many of the suspects.
Working Process
Looking at the details of the current case, it also does appear that the city managed to avoid many of the pitfalls that dog most jurisdictions. Suspicious transaction reports appear to have been filed early enough and were effective for the involved banks to take appropriate steps. Crucially, it appears that the police were able to seize the funds.
In many jurisdictions, due to volume, incomplete information, and poor drafting, such reports, commonly known in the financial industry as STRs, often fall on deaf ears, and I would challenge any government of a major financial center to go out there and publicly state they have a full handle on their internal processes related to financial crime.
In Hong Kong, the situation is somewhat different. It publicly laid out the carpet for the crypto industry although, in truth, it strengthened regulations at the same time, as finews.asia has discussed at some length.
A Bad Actor
When it comes to JPEX, it seems we are simply dealing with a bad actor through and through – although one with a great marketing plan chock full of celebrities and artists.
It also has made somewhat a name for itself for its litany of passive-aggressive vitriol against the Securities and Futures Commission (SFC), using phrases like «vehemently resent» and «trumped-up» charges to hit back at them.
The Hong Kong government has also not been quite as clear-eyed about the whole thing as Singapore, veering from not disclosing what virtual asset providers have applied for licenses one day and then relenting and giving the full picture a short while later.
Leaving China
The larger truth is that both cities are going to continue to face these kinds of issues, particularly given that wealthy individuals on the mainland appear to be fleeing the country in droves.
Moreover, as we indicated a couple of weeks back, about 13,500 high-net-worth individuals (or those having more than $1 million) are expected to leave China this year alone and some of them are going to be bad actors. The money laundering network uncovered in Singapore could also just be the hypothetical tip of the iceberg, as these cases often are.
That means that the governments in both cities are going to have to learn how to master the art of closely checking anything with any glitter on it when it arrives.
