The Monetary Authority of Singapore (MAS) is taking aim. Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) are squarely in the regulator’s sights with three recent updates.
MAS’ latest enforcement report (January 2022 and June 2023) detailed $12.96m in civil penalties imposed and $7.88m in financial fines and compositions imposed - the highest since MAS Enforcement Reports began their publication in 2019.
Out of the $7.88m in financial fines and compositions, it issued a staggering $7.10m total for violations of AML and CFT requirements.
It’s no wonder MAS is taking a strong stance on AML and CFT policy, keeping these aspects of its regulatory remit in sharp focus.
See our full article, MAS Enforcement Reports 39 Convictions and $20.8m in Penalties, for further information about the regulator’s actions.
Singapore is a long-standing, active member of the Financial Action Task Force (FATF), the global standard-setting and oversight body for AML/CFT, having joined the FATF in 1992. MAS says the city-state “works closely with fellow AML/CFT policymakers and supervisors to develop international standards” and is also a founding member of the Asia / Pacific Group on Money Laundering.
How is MAS enhancing Singapore regulation and taking aim at AML and CFT enforcement in 2024?
MAS Launches COSMIC Platform
On 01 April 2024, MAS announced its launch of COSMIC, a new centralised digital platform that focuses on combatting money laundering (ML), terrorism financing (TF) and proliferation financing (PF) globally.
COSMIC enables financial institutions (FIs) to securely share customer information. It is underpinned by The Financial Services and Markets (Amendment) Act 2023 and accompanying subsidiary legislation, which defines the legal basis and safeguards for such sharing.
FIs participating in the platform can share customer information with another participant FI if a customer’s behaviours or profile indicate suspicion or “red flags” as defined under the scheme.
To ensure further protection of customer privacy and information being shared amongst FIs, The Financial Services and Markets Act 2022 (FSMA) requires participants to have appropriate policies and operational safeguards in place.
Ms Loo Siew Yee, Assistant Managing Director (Policy, Payments & Financial Crime), MAS, says that “COSMIC will enable FIs to warn each other of suspicious activities and make more informed risk assessments on a timely basis. It complements the industry’s existing close collaboration with MAS and law enforcement authorities to combat financial crime.”
MAS developed the platform in collaboration with six major commercial banks in Singapore - DBS, OCBC, UOB, Citibank, HSBC and Standard Chartered Bank.
Information sharing is currently voluntary and focused on three key financial crime risks in commercial banking, namely: (a) misuse of legal persons; (b) misuse of trade finance for illicit purposes; and (c) proliferation financing.
MAS Expands the Scope of the Regulated Payment Services Act
On 02 April 2024, MAS announced amendments to the Payment Services Act (PSA) and its subsidiary legislation, which will take effect in stages from 04 April 2024.
The PSA amendments expand the scope of MAS’ regulation of payment services, allowing MAS to impose requirements relating to AML and CFT, along with user protection and financial stability-related requirements on digital payment token (DPT) service providers, AKA virtual asset service providers (VASPs).
These changes also align MAS’ regulation of VASPs with the revised Financial Action Task Force (FATF) Standards, which address money laundering and terrorism financing risks inherent to these types of financial institutions.
The following activities will now be brought under the regulatory scope of the PSA:
- Provision of custodial services for DPTs.
- Facilitation of the transmission of DPTs between accounts and facilitation of the exchange of DPTs, even where the service provider does not come into possession of the funds or DPTs.
- Facilitation of cross-border money transfer between different countries, even where funds are not accepted or received in Singapore.
VASPs already conducting activities under the PSA’s expanded scope will be afforded a transitional period to temporarily continue activities—though they must notify MAS within 30 days and submit a licence application within six months from 04 April 2024 to continue those activities while MAS reviews that application.
Additionally, the application must be “accompanied by an attestation report of the entity’s business activities and compliance with AML/CFT requirements, duly completed by a qualified external auditor” within nine months from 04 April 2024. Entities unable to fulfil the requirements must cease the relevant activities when the amendments come into effect.
Proposal to Impose AML and CFT Obligations on Singapore Organised Market Operators
On 28 March 2024, MAS published a consultation paper about its proposal to impose AML and CFT-related obligations on Approved Exchanges and Recognised Market Operators formed or incorporated in Singapore (“Singapore organised market operators”).
There has not previously been any requirement for Singapore organised market operators to perform AML/CFT checks on investors trading on their markets. Typically, these investors would trade through Capital Market Intermediaries (CMIs), which hold responsibility for AML/CFT-related checks, including:
- Risk assessment and risk mitigation.
- Customer due diligence.
- Reliance on third parties.
- Correspondent accounts.
- Record keeping.
- Suspicious transaction reporting.
- Internal policies, compliance, audit and training.
See MAS’ relevant published guidance in this respect.
However, MAS has noted an increasing trend of Singapore organised market operators allowing investors who are non-regulated FIs to trade directly on their markets without the need for CMIs. Such investors present particular money-laundering and terrorism financing (ML/TF) risks.
To address this risk, MAS is proposing to issue Singapore organised market operators with an AML/CFT notice. This notice will require those operators to perform AML/CFT checks on non-FI market participants who trade directly on their markets without facilitation by a CMI.
The consultation paper is available here, with the consultation period closing on 29 April 2024.
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