Singapore’s philanthropy sector finds itself at a crossroads following a recent money laundering scandal that has sent shockwaves through the nation’s charitable organizations.
On Oct 13, charities were directed by the Charity Directorate’s office to undertake a rigorous self-examination, spurred by the unfolding aftermath of an intricate money laundering case that unfolded two months prior.
The scandal, originating on Aug 15, saw the arrest of 10 individuals with ties to mainland China, accused of crimes ranging from money laundering to document forgery and fraud.
The total assets seized in connection with this case, valued at a staggering 14.8 billion yuan ($2.04 billion), have widespread implications. The Singaporean authorities, responding with a scale and complexity dubbed one of the world’s largest anti-money laundering operations, have frozen bank accounts holding over 7.77 billion yuan, issued prohibitions on 152 properties and 62 vehicles linked to suspects, and initiated an investigation that spans continents.
Charities in the crossfire
Complicating matters, several charitable organizations have unwittingly found themselves ensnared in the web of this scandal. Revelations indicate that at least four individuals implicated in the 15.06-billion-yuan money laundering case may have been active philanthropists.
Several well-known charities such as Community Chest, President’s Challenge, Ren Ci Hospital, and Rainbow Centre have discovered similarities between the names of their donors and those involved in the scandal. Notably, President’s Challenge received suspicious donations exceeding 1.8 million yuan, while Community Chest received 161,381 yuan in suspicious contributions.
This revelation has thrust charitable organizations into a dilemma. On the one hand, they are obligated to uphold transparency, and on the other, they face the daunting task of distinguishing between genuine contributions and those tainted by illicit activities. Heads of these organizations, including Director of Community Chest Liang Fengxia, have diligently reported any suspicious transactions to Singaporean authorities.
A race against time
The Charity Directorate’s directive to conduct a comprehensive review spanning from January 2019 to the present has added another layer of complexity. Although authorities have not set a definitive timeline, charitable organizations are “strongly encouraged” to complete the review within one month.
If any donations are found to be linked to the money laundering case, these organizations must conduct their own assessments and report any suspicious transactions.
Analysing the legal quandary
As the charitable landscape grapples with these revelations, legal experts opine on the nuanced legal considerations. The core premise is clear – if the donated funds remain untouched in the charitable organization’s accounts, they are subject to recovery based on equity rules.
However, proving the source of these funds becomes a critical factor. Lan Guoqing, a criminal lawyer, emphasizes the importance of clear evidence chains, especially in cases where the charitable organization may have been aware of potential issues at the time of receiving the funds.
Amidst this legal conundrum, ethical considerations loom large. Vice Dean of the Institute for Philanthropy and Charity at Tsinghua University Jia Xijin, underscores the ethical responsibility of charitable organizations to scrutinize the origin of funds.
She contends that organizations with high ethical standards should evaluate donations based on their mission and advocacy direction, emphasizing the need for a robust organizational governance framework.
Singapore’s regulatory landscape
This incident has drawn attention to Singapore’s robust regulatory framework for charitable organizations, intended to balance fostering philanthropy with preventing abuses of power and resources. Since 2006, the Charity Directorate has played a pivotal role in regulating and overseeing charitable institutions, enforcing stringent requirements such as hiring external auditors and publicizing annual financial summaries.
In light of this scandal, the Charity Council’s revised guidelines, introduced in April, now include heightened evaluation criteria for anti-money laundering and counter-terrorism financing.
Challenges for charitable organizations
While these regulations aim to protect against illicit activities, they pose significant challenges for charitable organizations. The increased administrative burden accompanying the self-review process is particularly daunting for smaller entities.
The fear lingers that Singaporean authorities may tighten scrutiny on donor identities and funding sources, further complicating fundraising efforts for organizations already grappling with the aftermath of the money laundering scandal.
In April this year, the Singapore Charity Council released the latest revised version of the Code of Governance for Charities and Philanthropic Institutions. Compared to previous versions, this regulatory assessment checklist added evaluation criteria for anti-money laundering and counter-terrorism financing.
Kia Meng Loh, a lawyer at the law firm of Dentons Rodyk & Davidson, believes that charitable organizations need to balance fundraising performance and resource allocation while setting aside resources to comply with these rules, posing a significant challenge. The Singaporean government should take more action and effort to prevent money laundering in the charity industry, such as creating an anti-money laundering toolkit for charities and establishing a shared database of suspicious donors.