Financial Institutions Must Take Risk-Based Approach to Avoid Money Laundering and Terrorism Financing
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In Singapore, financial institutions (FIs) are now required to implement a risk-based approach to prevent money laundering and terrorism financing, as per new guidelines issued by the Accounting and Corporate Regulatory Authority (ACRA).
What is a Risk-Based Approach?
The risk-based approach is designed to help FIs detect and prevent suspicious transactions, and report any suspected money laundering or terrorism financing activities to the relevant authorities. This approach involves identifying and assessing the risks associated with each customer, including individuals and businesses.
Factors to Consider
- Nature of their business
- Financial transactions
- Geographic location
Screening Customers for Adverse Information
FIs are required to screen their customers against adverse information, such as:
- Criminal convictions
- Links to terrorist organizations
Assessing Risks
- FIs must assess the risks associated with each customer based on various factors, including:
- Nature of their business
- Financial transactions
- Geographic location
Enhanced Controls for Higher-Risk Factors
Higher-risk factors may require enhanced controls, including:
- Enhanced customer due diligence measures
- Ongoing monitoring
Examples of higher-risk factors include:
- Unusual business relationships
- Non-resident customers
- Complex ownership structures
Reporting Suspicious Activities
FIs are required to report any suspected money laundering or terrorism financing activities to the relevant authorities, such as the Commercial Affairs Department of the Singapore Police Force.
Why is this Important?
“By implementing a risk-based approach, FIs can better identify and mitigate the risks associated with money laundering and terrorism financing,” said [Name], Director of ACRA. “This is an important step in ensuring that Singapore’s financial system remains robust and secure.”
Conclusion
The new guidelines are part of Singapore’s efforts to strengthen its anti-money laundering and counter-terrorism financing regime. The country has been working closely with international partners to share intelligence and best practices in this area.
Key Takeaways
- Financial institutions in Singapore must implement a risk-based approach to prevent money laundering and terrorism financing.
- FIs must screen their customers for adverse information and assess the risks associated with each customer based on various factors.
- Higher-risk factors may require enhanced controls, including enhanced customer due diligence measures and ongoing monitoring.
- FIs are required to report any suspected money laundering or terrorism financing activities to the relevant authorities.
Source
Accounting and Corporate Regulatory Authority (ACRA). “Risk-Based Approach for Prevention of Money Laundering and Terrorism Financing.” [Date].