Singapore – Recent Developments in AML/CFT Regulation.

Since May 2015, there have been a number of significant legislative and regulatory changes affecting the regime for anti-money laundering and countering the financing of terrorism (“AML/CFT”):

 

• On 24 April 2015, the Monetary Authority of Singapore (“MAS”) issued revised AML/CFT notices to financial institutions;
• On 11 May 2015, the Singapore Parliament passed the Monetary Authority of Singapore (Amendment) Act (“MAS Amendment Act”) , which came into force on 26 June 2015; and
• The First and Second Schedules of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (“CDSA”) were amended with effect from 3 June 2015 to include various new predicate offences as “serious offences”.

 

This update will take a look at the revised AML/CFT notices and the MAS Amendment Act. While notices were issued for each of the classes of financial institutions, our update will focus on MAS Notice 626 to banks.

 

Revised AML/CFT Notices

 

As noted above, the MAS has issued new AML/CFT notices for all financial institutions. The MAS had first issued a consultation paper on the proposed changes on 15 July 2014. The obligations under the new notices come into effect in stages. One set of new obligations came into effect on 24 May 2015, while another set will come into effect on 24 July 2015. While the obligations summarised below refer to financial institutions as a group, a small few (for example, those on wire transfers exceeding S$1,500) only apply to some financial institutions and not others.

 

Obligations that Come Into Effect on 24 July 2015

 

The following are the new obligations that will come into effect on 24 July 2015:

 

• Financial insitutions are required to take steps to identify, assess, and understand their money laundering and terrorism financing risks. The guidelines on prevention of money laundering and countering the financing of terrorism (“Guidelines”) further explain that these risks are to be assessed on an enterprise-wide level. Financial insitutions should also incorporate the results of Singapore’s national money laundering/terrorism financing risk assessment report into their own risk assessment. This report is issued jointly by the Ministry of Home Affairs, Ministry of Finance, and the MAS.
• Having carried out a risk assessment, financial insitutions are required to take steps to effectively manage and mitigate the risks that have been identified.
• The risk assessment should be carried out at least once every two years or when material events occur. It should also be carried out in relation to new products and business practices, including new delivery mechanisms, as well as in relation to the use of new or developing technologies for both new and pre-existing products. Special attention should be paid to products, practices, or technologies that favour anonymity.
• Financial insitutions are required to develop and implement group policies and procedures to share information required for customer due diligence and for money laundering and terrorism financing risk management. These should include providing customer, account, and transaction information to the group-level compliance, audit, and AML/CFT functions.

 

Obligations That Came Into Effect On 24 May 2015

 

Some of the new obligations that came into effect on 24 May 2015 are, in brief, as follows:

 

• Financial insitutions must file a suspicious transaction report even prior to establishing business relations or undertaking any transaction without opening an account, so long as they have any reasonable grounds to suspect that the assets or funds of a customer are:
• proceeds of drug dealing or criminal conduct as defined in the CDSA; or
• property related to the facilitation or carrying out of any terrorism financing offence.
• Banks and various other financial institutions must perform customer due diligence for wire transfers that exceed SGD 1,500 for any customer who has not otherwise established business relations with the bank.
• Banks and various other financial institutions must aggregate transactions that are suspected to be related, linked or the result of a deliberate restructuring of an otherwise single transaction.
• Financial insitutions must screen customers against relevant money laundering terrorism financing information sources. Such screening must be carried out when establishing a relationship with a customer and at periodic intervals thereafter.
• While financial insitutions may establish business relations with a customer before completing verification measures if certain specified conditions are satisfied, banks must not continue business relations if they are subsequently still unable to complete verification under the deferred timeline.

 

Consolidation And Expansion Of AML/CFT Powers In The MAS Act

 

The MAS Amendment Act amends the Monetary Authority of Singapore Act (“MAS Act”). For financial institutions, the impact of the MAS Amendment Act will be minimal as the changes are to a large extent to consolidate existing requirements already imposed on them under the umbrella legislation of the MAS Act rather via the current mix of legislative and regulatory instruments. However, the MAS Amendment Act does expand the AML/CFT powers of the MAS in the following ways:

 

• It extends the scope of the AML/CFT regime to designated financial holding companies and non-bank credit card or charge card issuers.
• The MAS has been empowered to approve inspections in Singapore by the home AML/CFT supervisor, whether or not it is also the financial institution’s prudential supervisor.
• The MAS may share information to facilitate the AML/CFT supervision of financial institutions where such a request is made by its counterpartjurisdiction. It is also able to make AML/CFT supervisory enquiries on the counterpart’s behalf.

 

 

 

For further information, please contact:

 

Joy Tan, Partner, WongPartnership
joy.tan@wongpartnership.com

 

Elaine Chan, Partner, WongPartnership 

elaine.chan@wongpartnership.com