The Monetary Authority of Singapore (“MAS“) has issued Circular No. AMLD 02/2003 (“Circular“) on 3 March 2023 to remind all financial institutions (“FIs“) to stay vigilant to the money laundering and terrorism financing (“ML/TF“) risks in wealth management. The Circular sets out MAS’ expectations for FIs to review their existing controls to ensure that they remain adequate to mitigate the ML/TF risks from high growth areas.
The key expectations set out in the Circular are as follows:
- Strengthen Board and Senior Management (“BSM”) oversight and risk and control functions. FIs should ensure that:
- BSM are kept informed of the potential ML/TF risks in high growth areas and set a clear tone on actions to be taken.
- BSM are kept updated on the results of quality assurance reviews and testing done on the effectiveness of ML/TF controls
- The risk and control functions are adequately resourced and familiar with changes in business strategy or target customer segments.
- Conduct added review and quality assurance testing. FIs should:
- Review existing Customer Due Diligence (“CDD“) practices in high growth areas.
- Quality assurance testing should be done on key controls areas relating to the identification of higher risk customers and the corroboration of the source of wealth and funds of customers.
- FIs should promptly enhance their existing CDD practices where inadequate.
- Continue to exercise vigilance over higher risk customers and transactions. FIs should:
- When dealing with legal structures/arrangements for wealth management established for the benefit of the beneficial owners:
- Conduct in-depth enquiry to understand its purpose and risks and take necessary measures to identify and verify the ultimate beneficial owners;
- Adequately understand and identify key controllers behind the structures/arrangements used, beyond obtaining the ownership structure; and
- Conduct appropriate checks to independently corroborate the source of wealth and funds of the legal structures/arrangements and the beneficial owners.
- For prospective customers that withdraw their applications due to an inability or unwillingness to provide requisite CDD information: Have processes to monitor for such situations, and to consider the need to file a Suspicious Transactions Report.
- Remain watchful of anomalous transaction spikes and unexpected fund flows with third parties or purportedly for business purposes, and be vigilant to related party transactions to detect risks associated with insider trading or anomalous commingling of business and personal funds.
- When dealing with legal structures/arrangements for wealth management established for the benefit of the beneficial owners:
Click on the following link for more information:
- Circular No. AMLD 02/2003 on Money Laundering and Terrorism Financing Risks in the Wealth Management Sector (available on the MAS website at mas.gov.sg)
For more information, click here to read the full Legal Update.
