No let down in MAS fines for financial crime failings

No let down in MAS fines for financial crime failings

The vast majority of financial penalties issued by the Monetary Authority of Singapore are for failure in controls around money laundering and terrorist financing. And recent enforcement activity shows that the regulator hasn’t taken its eye off the ball – despite Covid-19. For all financial institutions it would be prudent to re-visit the guidance released by the authority last year and avoid being singled out. 

The MAS expects financial institutions to have robust AML/CFT controls to detect and disrupt attempts to abuse Singapore’s financial system for illicit purposes. To maintain an effective deterrent, the MAS continues to investigate and take firm actions against entities and individuals who breach AML/CTF requirements.  

Recent enforcement actions against institutions and their senior management range from composition penalties (between S$400,000 and S$1 million) to revocations of licences. Actions have been taken against institutions from all segments of the financial sector from private banks, licensed trust companies and asset managers for failing to comply with MAS AML/CFT requirements.  

Over an 18 month period from 1 January 2019 to 30 June 2020, there were S$3,400,000 in financial penalties and compositions collected of which S$3,300,000 were a result of AML/CFT breaches.  

MAS identified failures to address critical AML/CFT requirements in the following key areas:  

  • identifying the source of funds of customers 
  • identifying the beneficial owners or relying on the customers’ representations without obtaining information independently to corroborate with them 
  • having independent auditors to test the effectiveness of AML/CFT controls 
  • performing enterprise-wide AML/CTF risk assessments  
  • identifying and monitoring politically exposed persons  
  • inquiring into the background and purpose of large transactions with no obvious economic
  • purpose and in connection, failing to file a suspicious transaction report. 

In connection with the breaches, in September 2020 the MAS released guidance outlining its supervisory expectations of effective AML/CFT controls with a focus on private banking. The paper: Effective AML/CFT Controls in Private Banking, outlines key AML/CFT concepts which also apply to capital market intermediaries and, indeed all financial institutions. The guidance covers the following key areas: 

  • corroborating customers’ source of wealth and funds 
  • detecting and mitigating tax-related money laundering risks 
  • detecting and inquiring into commercial/third-party transactional flows 
  • exercising active senior management oversight 
  • instituting sound performance management framework to foster strong risk culture. 

All financial institutions are subject to MAS AML/CTF requirements, and the Authority has signalled zero tolerance for financial system abuse and its willingness to take serious enforcement actions. The result could be severe financial and reputational repercussions.  

We can help 

If you’re a financial institution looking to improve it your money laundering and terrorist financing systems and controls, we have experience across all areas of financial crime. We can review your current AML/CFT systems and controls against MAS requirements, performing a gap analysis and recommend a plan of action. We are also able to act as independent party to conduct internal audits review focusing on other regulatory requirements. We are also specialists in helping fund managers with ongoing compliance support to MAS regulated institutions.  

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