Tackling AML Law Enforcement Issues Arising From Online Gambling Involving Residents in China: The Singapore Approach
Lau Kok Keng, Partner & Head of Gaming Law Practice, and Edina Lim, Senior Associate at Rajah & Tann Singapore LLP, have written the following article exclusively for Gambling.Re. They examine Singapore's largest anti-money laundering operation, conducted on 15 August 2023, which led to the arrest of 10 Chinese nationals and the seizure of SGD $3 billion in assets.
I. INTRODUCTION
1. On 15 August 2023, the Singaporean police carried out the largest anti-money laundering operation in Singapore’s history, after about two years of the police working on tipoffs about the possible illicit activities by a group of foreign nationals.[1] More than 400 officers conducted raids across Singapore, at locations such as luxury bungalows and apartments in some of the city’s most expensive districts.[2] The raids resulted in the arrest of 10 Chinese nationals living in Singapore, and the seizure and freezing of more than SGD$3 billion in assets.[3]
2. Among other offences, these individuals were allegedly involved in remote gambling operations that targeted and provided gambling services to residents in the People’s Republic of China (which is illegal under PRC law), and had brought their earnings to Singapore where they resided to purchase assets such as luxury homes, cars, jewellery and watches. They were swiftly charged with multiple offences, including offences under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act 1992 (“CDSA”), which is the governing legislation for money-laundering offences in Singapore. As of 10 June 2024, all 10 accused persons who had been arrested have pleaded guilty to their charges, and have been sentenced to around 13 to 17 months’ imprisonment.[4]
3. In this article, we analyse whether the charges under the CDSA would have been made out if any of the individuals had challenged them and had chosen to claim trial instead pleading guilty. In particular, we observe that for the individuals whose only offence had been receiving sums from a “remote gambling business” based overseas, it could possibly be argued that there was no “foreign serious offence” made out under the CDSA if the remote gambling business was actually licensed overseas, but its gambling services were accessible to persons in jurisdictions where gambling is illegal.
4. In the course of analysis, we will also consider the position under PRC law in relation to gambling by its citizens in China or overseas.
II. ANTI-MONEY LAUNDERING (“AML”) REGIME IN SINGAPORE AND THE CONVICTIONS UNDER THE CDSA
5. Singapore has stringent AML and countering of the financing of terrorism laws. Its AML laws are not found in a single consolidated legislation, but are dealt with under various statues (including the CDSA[5]), regulations (including the Casino Control (Prevention of Money Laundering and Terrorism Financing) Regulations 2009), and notices issued by the Monetary Authority of Singapore (such as Notice 626 Prevention of Money Laundering and Countering the Financing of Terrorism – Banks). To be convicted of a money laundering offence, there must first have been a predicate offence committed, which can be offences committed in Singapore or overseas, as long as the requirements in the CDSA are satisfied.[6] The CDSA, among other things, provides for confiscation orders to be made to deprive offenders of benefits accrued from serious criminal conduct, including gambling-related offences.
6. The 10 Chinese nationals who were arrested and charged were convicted under Sections 54 and 55 of the CDSA. Section 54 provides for offences relating to acquiring, possessing, using, concealing or transferring benefits from criminal conduct, while Section 55 for offences relating to possessing or using property reasonably suspected to be benefits from drug dealing or benefits from criminal conduct.
III. THE CONCEPT OF “BENEFITS OBTAINED FROM CRIMINAL CONDUCT” UNDER THE CDSA AND ITS APPLICATION TO THE PROSECUTION OF THE 10 CHINESE NATIONALS
7. Since both sections relate to “benefits from criminal conduct”, it is pertinent to establish what this phrase entails. In this regard, “criminal conduct” refers to “doing or being concerned in, whether in Singapore or elsewhere, any act constituting a serious offence or a foreign serious offence”.[7]
8. In turn, “serious offence” refers to any of the offences specified in the Second Schedule of the CDSA, as well as conspiring to, inciting others to, attempting to, or aiding, abetting, counselling, or procuring the commission of any of those offences.[8] The Second Schedule of serious offences includes, amongst others, offences under the Gambling Control Act (“GCA”).
9. As for “foreign serious offence”, this is one where (a) the conduct is unlawful under the laws of the foreign country, and (b) if the conduct had occurred in Singapore, it would have been considered a “serious offence” under Singapore law.[9]
10. The definitions of “criminal conduct”, “serious offence” and “foreign serious offence” work in tandem and relate to the concept of “benefits from criminal conduct” in the following manner: Where (1) an entity has committed an offence overseas (i.e. the predicate offence); (2) the conduct giving rise to this offence would also have given rise to a serious offence in Singapore if the conduct had occurred in Singapore; and (3) benefits have been derived from the entity’s commission of the overseas offence, then these benefits would constitute “benefits from criminal conduct”.
11. The case of Public Prosecutor v Su Wenqiang was the first to disposed of. In that case, the accused (“SWQ”) was convicted of and sentenced for money laundering offences under section 54(1) of the CDSA based on the following facts and matters advanced by the prosecution:
a. SWQ’s source of income was the operation of a remote gambling service in the Philippines (“Philippines Gambling Service”);
b. The Philippines Gambling Service offered remote gambling services to people in the PRC;
c. SWQ facilitated the running of the Philippines Gambling Service, and earned a share of the proceeds in the Philippines Gambling Service;
d. The provision of remote gambling services to people in the PRC is an offence under PRC law; and
e. If the accused had facilitated the running of the Philippines Gambling Service in Singapore (i.e. if his conduct had occurred in Singapore), it would have been unlawful under section 18 of the GCA, which is a serious offence under the Second Schedule of the CDSA.
12. A few observation points arise from the facts and matters advanced by the prosecution:
a. First, it is not clear whether the Philippines Gambling Service was actually licensed in the Philippines. The Prosecution had only highlighted that the provision of remote gambling services was an offence under PRC law, but it had not mentioned whether the Philippines Gambling Service was in fact unlicensed in Philippines as well. During an earlier bail hearing, SWQ had in fact claimed that Philippines Gambling Service was licensed in the Philippines, but had failed to produce evidence of such a licence.[10]
b. It is also not clear whether the Philippines Gambling Service had proactively targeted PRC citizens, or whether the Philippines Gambling Service had implemented access blocking measures in the PRC which were then circumvented by players there, or whether the Philippines Gambling Service had been operational online without any access restrictions in the PRC.
13. An interesting question thus arises as to whether a CDSA offence would have actually been made out if the Philippines Gambling Service was actually licensed in the Philippines, but was made available to users in China, where online gambling is illegal.
A. Whether the predicate offence has been committed
14. There are two possible ways of analysing whether a predicate offence has been committed.
a. The first is to look at the actions of the operator of the Philippines Gambling Service (the “Operator”) and to assess whether the Operator has committed an offence under Philippine laws or PRC laws.
b. The second way is to look at SWQ’s actions to determine if he has committed an offence under Philippine laws or PRC laws.
a. Predicate offence committed by Operator
15. Assuming the Operator was licensed to conduct the Philippines Gambling Service in the Philippines, no offence would be committed under Philippine laws.
16. However, if PRC law criminalises the offering of gambling services to persons resident within its jurisdiction, notwithstanding that the Operator may be licensed in its home jurisdiction, and provided that such PRC laws have extraterritorial effect, then the Operator would likely be committing an offence under PRC laws if its platform was accessible to end-users in the PRC.
17. Under PRC law, it is illegal for anyone to gamble in Mainland China, other than in respect of state-run lotteries. However, it is unclear whether enforcement action can be taken against the overseas operators of such online gambling websites, especially where such operators are duly licensed overseas.
18. In 2021, the PRC amended its criminal code to stipulate that the organisation of gambling in a foreign country is an offence. The legislative language of the relevant provision is drafted widely and in a non-exhaustive manner. For example, offences will be committed if:
a. Individuals in the PRC are employed or appointed by an offshore gambling operator to solicit PRC nationals to participate in overseas gambling; or
b. There is provision of gambling equipment, gambling funds, technical/ logistics support, etc, for organising/soliciting PRC nationals to participate in overseas gambling.
19. Nonetheless, it is unclear whether the Operator itself would be committing any offence under PRC law simply because its website hosted in the Philippines was accessed by residents in China, without any proof that it had solicited PRC nationals to use the Philippines Gambling Website.
b. Predicate offence committed by SWQ
20. Assuming that the Philippines Gambling Service was in fact licensed in the Philippines, no offence would be committed by SWQ in the Philippines and under Philippines law by being involved in such operations. Given that SWQ was neither a PRC national nor located in China when he was involved in the Philippines Gambling Service, it is unclear whether SWQ is even subject to PRC laws for his activities in the Philippines. It is also unclear how exactly SWQ was involved in the Philippines Gambling Service, and whether he had actually solicited PRC citizens to participate in the Philippines Gambling Service (whether in China or overseas).
B. Whether the conduct giving rise to this offence would have given rise to a serious offence in Singapore if the conduct had occurred in Singapore
21. Assuming that PRC law renders it an offence for the Operator and/or SWQ to offer gambling services to PRC residents and has extraterritorial effect, the next question is whether the “conduct” of the Operator or SWQ is such that, if it had occurred in Singapore, it would have constituted a “serious offence” in Singapore (i.e. an offence under the GCA).
22. Section 18(1) of the GCA provides that a person must not conduct any betting operation, gaming or any lottery, unless the person is granted a licence authorising that person to provide a gambling service involving conducting that betting operation or a betting operation of that kind, gaming or gaming of that kind, or that lottery or a lottery of that kind (whichever is applicable).
23. In assessing whether the conduct, if it had occurred in Singapore, would have constituted a serious offence, we will need to characterise what the “conduct” is. In our view, the relevant conduct for the Operator would be the offer of online gambling services by a licensed overseas operator to end-users in Singapore. As for SWQ, the relevant conduct would be if he had facilitated the activities of a licensed overseas operator to offer remote gambling services which were ultimately accessed by end-users in Singapore.
24. We first consider the characterisation of the conduct for the Operator, and whether it would be considered to have committed an offence under the GCA if the Philippines Gambling Service had been accessed by Singapore end-users. From a Singapore law perspective, whether an offence under the GCA has been committed will depend on whether the Operator had actually taken steps to ensure that the Philippines Gambling Service was not accessible by end-users in Singapore. If the Operator had already taken steps to prevent access of its website by persons in Singapore, but Singapore end-users had managed to circumvent such geo-blocking mechanisms to access the online gambling platform (e.g. through a VPN), then under Singapore law, no offence would be committed by the Operator. Therefore, if the Philippines Gambling Service was actually blocked from access in the PRC (but PRC citizens nevertheless circumvented such measures to gamble on the platform), then it could be argued that even if the Operator had committed an offence under PRC law by virtue of its platform being accessed by PRC citizens, it would not have constituted a “foreign serious offence” for the purposes of the CDSA, as the conduct would not have contravened the GCA if it had occurred in Singapore. Therefore, the Operator would not be taken to be engaging in “criminal conduct” under the CDSA.
25. Similarly, if SWQ had facilitated the activities of the Operator whilst SWQ was in Singapore, but the Philippines Gambling Service was based overseas and measures had been taken to ensure that its website was blocked from access in the PRC, it is likely that if the conduct was taken to have occurred in Singapore (i.e. SWQ was facilitating the activities of a licensed offshore operator whose gambling operation was based overseas and was made inaccessible in Singapore), SWQ would not be committing an offence under the GCA. As such, no “foreign serious offence” would have been committed by SWQ.
26. Based on the above analysis, it appears that if the Philippines Gambling Service had been licensed in the Philippines, and steps had been taken to block the access of the Philippines Gambling Service from being accessed in the PRC, a strong argument can be made that no predicate offence is made out under the CDSA. If so, the monies received by SWQ from the Philippines Gambling Service would not have represented “benefits of criminal conduct”, and he should not have been guilty of an offence under the CDSA.
27. Unfortunately, there was no judicial consideration of the facts of the case and the applicable CDSA legislation, given that SWQ had pleaded guilty (as did the other 9 PRC nationals who were charged in the other cases) and as such, the matter did not proceed to trial.
IV. CONCLUSION
28. With the anonymity that is afforded to players compared to land based gambling, and given the cross border nature of its transactions, online gambling presents lucrative opportunities for criminals to launder their benefits of crime. However, since money laundering involves the act of disguising or converting the gains generated from a criminal activity from one form to another, there must first have been a criminal activity or predicate offence in order to establish the act of money laundering. Reliance on online gambling as the predicate offence is fraught with legal uncertainty, as the regulation of online gambling varies widely across different jurisdictions, and the multi-jurisdictional elements present in the form of the locations of the remote operator, the remote transactional server and the player create legal challenges for law enforcement authorities attempting to establish the predicate offence and combat money laundering.
29. A remote operator that is licensed to offer remote gambling in one jurisdiction, and which hosts its servers in that jurisdiction, is usually not going to limit its offerings to residents in that licensed jurisdiction, and would often take bets from customers all over the world. Given the stance taken by the PRC authorities, remote operators would do well to avoid being seen to be targeting PRC residents, or indeed the residents of any jurisdiction whose laws expressly make it an offence for its residents to gamble with remote operators, whether or not licensed in the jurisdiction in which their servers are based. Otherwise, individuals involved in such operations should avoid using any of the proceeds earned from their online gambling business to purchase any assets in such jurisdictions to avoid being implicated in money laundering.
By:
Lau Kok Keng – Partner & Head of Gaming Law Practice, Rajah & Tann Singapore LLP
Edina Lim – Senior Associate, Gaming law Practice, Rajah & Tann Singapore LLP
[1] https://www.channelnewsasia.com/singapore/wang-baosen-billion-dollar-money-laundering-jailed-third-man-4268751.
[3] https://www.channelnewsasia.com/singapore/su-wenqiang-pleads-guilty-billion-dollar-money-laundering-convicted-4234731.
[4]https://www.police.gov.sg/Media-Room/News/20240610_tenth_person_sentenced_for_forgery_and_money_laundering_offences
[5] Other statues include the Terrorism (Suppression of Financing) Act, which allows for warrants to be issued for seizures and forfeiture of terrorist property, and the Organised Crime Act, which provides for the making of financial reporting orders, organised crime prevention orders, disqualification orders and orders for the confiscation of gains derived from organised crime activity.
[6] https://www.channelnewsasia.com/singapore/billion-dollar-money-laundering-online-gambling-luxury-cars-crypto-cash-3734026.
[7] Section 2 of the CDSA.
[8] Section 2 of the CDSA.
[9] Section 2 of the CDSA.
[10] https://www.businesstimes.com.sg/singapore/money-laundering-accused-says-gambling-service-he-was-linked-philippines-was-authorised