Financial Crime World

Preventing Money Laundering and Terrorist Financing: Requirements for Banks and Licensees in Singapore

In a bid to prevent money laundering and terrorist financing, banks and licensees in Singapore are required to identify their customers, directors, partners, and beneficial owners. This is according to the Monetary Authority of Singapore (MAS) notice, which outlines the measures that financial institutions must take to comply with anti-money laundering (AML) and counter-terrorism financing (CFT) requirements.

Identifying Customers, Directors, Partners, and Beneficial Owners

To identify these individuals and entities, banks and licensees must obtain relevant corporate records, such as:

  • Certificates of incorporation
  • Partnership agreements

For customers that are companies, they must identify the shareholders and directors. Similarly, for partnerships and limited liability partnerships, they must identify the partners.

In addition to identifying the customer itself, banks and licensees must also take steps to understand the ownership and control structure of the customer. This includes:

  • Verifying the authority granted to natural persons acting on behalf of the customer
  • Collecting specimen signatures from these individuals

Enhanced Due Diligence for High-Risk Customers

Customers who present a higher risk of money laundering and terrorist financing, such as:

  • Politically Exposed Persons (PEPs)
  • Their family members and close associates

require enhanced due diligence measures. This includes:

  • Obtaining approval from senior management to establish or continue business dealings with these customers
  • Establishing the source of wealth or funds
  • Conducting ongoing monitoring

Compliance Requirements for Intermediaries

Banks and licensees can rely on intermediaries that are subject to and supervised for compliance with AML/CFT requirements. However, they must:

  • Document their satisfaction of the intermediary’s compliance before using them for customer due diligence measures
  • Ultimately, take responsibility for preventing money laundering and terrorist financing

Digital Payment Token Service Providers: New Requirements

Following the commencement of the Payment Services Act 2019, digital payment token service providers, including:

  • Cryptocurrency dealing or exchange services

must comply with MAS AML/CFT requirements. This includes implementing customer due diligence measures, such as:

  • Identifying and verifying the identity of customers

Background on Money-Changing and Remittance Businesses

Money-changing and remittance businesses were previously regulated under the Money-Changing and Remittance Businesses Act (Cap. 187) and the Payment Systems (Oversight) Act 2006. However, these Acts have been repealed and replaced by the Payment Services Act 2019, which adds a number of additional businesses and activities to its purview.

The newly regulated payment services include:

  • Domestic money transfer services
  • Merchant acquisition services
  • Digital payment token services, including virtual currencies

Virtual Assets Service Providers (service providers of digital payment tokens that facilitate the use of digital payment tokens for payments and may not possess the moneys or digital payment tokens involved) are also subject to AML/CFT requirements.

Conclusion

The MAS notice outlines the measures that financial institutions must take to comply with AML/CFT requirements. This includes:

  • Identifying customers, directors, partners, and beneficial owners
  • Conducting ongoing monitoring of high-risk customers
  • Relying on intermediaries that comply with AML/CFT requirements
  • The ultimate responsibility to prevent money laundering and terrorist financing rests with the bank or licensee.