Monetary Authority of Singapore (“MAS”) publishes circular on Money Laundering (“ML”) and Terrorism Financing (“TF”) risks in the Wealth Management Sector

15 March 2023|In Legal Updates

On 3 March 2023, the MAS published a circular on ML/TF risks in the wealth management sector (the “Circular”) to: (a) remind all financial institutions (“FIs”) to stay vigilant to the ML/TF risks in the sector; and (b) set out MAS’ expectations for FIs to review its existing controls to ensure that they remain adequate to mitigate the ML/TF risks from high growth areas.
In the Circular, MAS highlighted that the wealth management sector has an inherently higher exposure to ML/TF risks due to its client attributes, size of transactions, and complexity typically involved in managing such wealth.

The Circular sets out three (3) main obligations for FIs in the wealth management sector: (a) to strengthen the Board and senior management (“BSM”) oversight and risk and control functions; (b) conduct added review and quality assurance testing; and (c) continue to exercise vigilance over higher risk customers and transactions.

Strengthen BSM oversight and risk and control functions: FIs should strengthen BSM oversight of high growth areas and be cognisant of the potential ML/TF risks posed, ensuring that:

  1. BSM are kept apprised of potential ML/TF risks arising from high growth areas and set a clear tone from the top on actions to be taken to deal with these risks. BSM should also ensure that risk and control functions are adequate to pose an effective check and balance to front-line functions;
  2. BSM are kept updated on results of quality assurance reviews and testing done to validate the effectiveness of AML/CFT controls in high growth areas; and
  3. Risk and control functions are adequately resourced and familiar with changes in business strategy or target customer segments.

Conduct added review and quality assurance testing: FIs should take added steps to review existing customer due diligence (“CDD”) practices in high growth areas to ensure that both front-line and control functions are functioning effectively.

Continue to exercise vigilance over higher risk customers and transactions: FIs should stay vigilant towards higher risk and transactions, and should, amongst other things:

  1. Be cognisant of added ML/TF risk when dealing with legal structures/arrangements used for the purpose of wealth management established for the benefit of the beneficial owners and conduct an in-depth enquiry to pierce through the structures/arrangements to identify and verify the ultimate beneficial owners (“UBOs”);
  2. Take note of prospective customers that withdraw applications due to an inability or unwillingness to provide requisite CDD information; and
  3. Remain watchful of anomalous transaction and unexpected fund flows with third parties or purportedly for business purposes especially to or from higher risk jurisdictions.

To learn more, please read the Circular here.

IMPORTANT NOTICE: This memorandum is only intended as a guide and does not purport to be an exhaustive or conclusive discussion of the matters set out herein and should not be relied on as a substitute for definitive legal advice. Reference should always be made to the applicable statutes, the relevant subsidiary legislations and other applicable guidelines. This memorandum is not to be transmitted to any other person nor is it to be relied upon by any other person or for any other purpose or quoted or referred to in any public document or filed with any governmental or other authorities without our consent in writing. This memorandum is limited to the laws of Singapore. In issuing this memorandum, we do not assume any obligation to notify or inform you of any developments subsequent to its date that might render its contents untrue or inaccurate in whole or in part at such later time. If you would like to discuss the implications of these legal developments on your business or obtain advice, please do not hesitate to approach your usual contact at Insights Law LLC or you may direct the inquiry to our key contacts stated above.