On 24 August 2022, the Monetary Authority of Singapore (“MAS”) published an Information Paper on Strengthening AML/CFT Practices for External Asset Managers (“Information Paper”). The Information Paper follows from a series of anti-money laundering and countering the financing of terrorism (“AML/CFT”) thematic inspections and engagements conducted by MAS on selected external asset managers (“EAMs”). This is also in line with the MAS’ enforcement priorities of pursuing strong enforcement actions against financial institutions for serious lapses in AML/CFT systems and controls.
In the context of the Information Paper, MAS has generally identified EAMs to be fund management companies that manage the assets of high net worth customers that are custodised with private banks on an advisory or discretionary basis, and/or manage funds that are sold to high net worth customers.
The Information Paper sets out MAS’ general supervisory expectations, general practices, good practices and areas of weaknesses observed from its thematic inspections, and key takeaways in relation to the areas of:
- Governance – in particular the role and responsibility of board and senior management in maintaining good governance and sound AML/CFT risk management frameworks and controls;
- Enterprise-wide Risk Assessments (“EWRA”) – in particular on conducting adequate and robust EWRAs, as well as monitoring and periodically reviewing/updating the EAM’s EWRA;
- Customer risk assessment – in particular on considering relevant risk factors to identify, assess and understand the money-laundering and terrorism financing risks posed by a customer, and to apply the appropriate level of customer due diligence (“CDD”) and ongoing monitoring measures;
- CDD measures conducted on customers – in particular on ensuring that CDD measures are conducted thoroughly and in a timely manner, conducting effective transaction monitoring based on a sound transaction monitoring framework, and conducting periodic reviews of business relations with the EAM’s customers with the appropriate follow up measures;
- Enhanced CDD – in particular on identifying customers with a higher ML/TF risk, and conducting appropriate enhanced CDD measures and monitoring; and
- Suspicious transaction reporting – in particular on identifying suspicious transactions, ensuring that suspicious transaction reports are filed in a timely manner, and conducting appropriate risk mitigation measures.
EAMs are thus expected to review their AML/CFT frameworks and controls against these expectations, and identity and implement the appropriate remediation measures where gaps are observed. In addition, as the takeaways are also applicable to other fund management business models, the Information Paper also serves as useful guidance for all fund management companies in general.
For further information, please contact:
Peiying Chua Heikes, Partner, Linklaters