Financial Institutions Urged to Implement Risk-Based Approach to Combat Money Laundering and Terrorism Financing
The Monetary Authority of Singapore (MAS) has issued new guidelines for financial institutions to adopt a risk-based approach in their business dealings, aimed at strengthening its efforts against money laundering and terrorism financing.
New Guidelines Come into Effect
Effective [Date], the guidelines require financial institutions to identify, assess, and mitigate risks associated with their customers and transactions. This is intended to prevent the misuse of the financial system by criminals and terrorists.
Risk-Based Approach
Financial institutions must conduct thorough due diligence on their customers, including screening them against adverse information and other relevant sources. They must also assess the risks associated with each customer and transaction, taking into account factors such as:
- Business relationship
- Ownership structure
- Geographical location
Higher-risk customers may require enhanced controls, including:
- Enhanced customer due diligence measures
- Ongoing monitoring
- To ensure that their activities are transparent and legitimate.
Risk Factors to Consider
Financial institutions should consider the following risk factors when assessing their customers:
- Unusual business relationships
- Non-resident customers
- Companies with unexplained transactions
In addition, financial institutions must obtain information about:
- Terrorist designations
- Legislation for countering terrorism financing
- Subscribe to MAS’ website for updates on targeted financial sanctions.
Consequences of Non-Compliance
Financial institutions that fail to comply with the guidelines may face penalties and fines. Industry observers have welcomed the move, recognizing its importance in maintaining confidence in the financial system and preventing its misuse by criminals and terrorists.
Resources Provided
MAS has provided resources to help financial institutions implement the guidelines, including:
- Training programs
- Guidance on conducting customer due diligence
Conclusion
Financial institutions in Singapore must now adopt a risk-based approach to combat money laundering and terrorism financing. This is aimed at strengthening the country’s anti-money laundering and counter-terrorism financing regime, preventing its misuse by criminals and terrorists, and maintaining confidence in the financial system.