On 3 March, 2023, the Monetary Authority of Singapore (“MAS”) issued a circular to CEOs reminding all FIs to stay vigilant to the ML/TF risks in the wealth management sector. The circular focuses on 3 main points of action for FIs:
Strengthen Board and Senior Management (“BSM”) oversight, risk and control functions
- BSMs should be appraised of the potential ML/TF risks and set a clear tone on actions that will be taken to manage risks.
- BSMs should be kept updated on the results of quality assurance reviews and testing to validate the effectiveness of Anti-Money Laundering and Counter-Terrorism Financing (“AML/CTF”) systems and controls.
- Risk and control functions should have sufficient time and resources, be familiar with changes in business strategy or target customers and have a strong understanding of these high growth areas to effectively advise BSMs on the adequacy of their AML/CFT controls.
Conduct added review and quality assurance testing
- Additional reviews of existing Customer Due Diligence (“CDD”) practices is required in high growth areas.
- Added quality assurance testing on key control areas relating to higher-risk customers, corroboration of source of wealth and source of funds.
- Where CDD controls are found to be inadequate, enhancements will need to be made and specific risks noted.
Exercise vigilance over higher risk customer and transactions
- Awareness of added ML/TF risks when dealing with legal structures/ arrangements used for the purpose of wealth management (e.g., arrangements, insurance wrappers and family offices) established for the benefit of the beneficial owners.
- Clear understanding of the purpose of the legal structure/ arrangement used, to establish there is a clear and legitimate purpose for the use, and take necessary measures to look through the structures/ arrangements to identify and verify the Ultimate Beneficial Owners (“UBOs”).
- Identify key controllers behind the structures/ arrangements used, beyond obtaining the ownership structure which may only depict the legal owner of the entity.
- Conduct appropriate checks to independently corroborate the source of wealth and funds of the legal structures/ arrangements and the beneficial owners.
- FIs should also not regard the granting of tax incentives to legal structures/arrangements as assurance of the legitimacy of the clients but should conduct the necessary due diligence on them independently.
- Take note of prospective customers that withdraw their applications due to an inability or unwillingness to provide requisite CDD information.
- Be vigilant to related party transactions to detect risks associated with insider trading or anomalous commingling of business and personal funds. FIs are strongly encouraged to make use of data analytics to strengthen their monitoring for such unusual transaction patterns as well as to identify customer networks of concern.
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