MAS Issues Updated AML/CFT Notices and Guidelines for Financial Institutions and VCCs

this document appears to be an excerpt from a response to public feedback on proposed amendments to Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Notices and Guidelines. It focuses on two main areas:

1. Trust Relevant Parties of a Legal Arrangement:

The first section details requirements for trust companies regarding facts they need to obtain and hold on various parties associated with a trust or similar legal arrangement. Key points include:

Defining “Object of a Power”: clarifying who falls under this designation, specifically those with powers to deal with property or vary the arrangement.
Additional Information Requirements: Mandating the collection of specific information on:
The protector of the trust.
the class of beneficiaries and “object of a power.”
Any natural person(s) exercising ultimate effective control over the trust relevant party.
Applying Controller Identification: extending the rules for identifying “effective controllers” to all trust relevant parties.
Information on the Legal Arrangement: Requiring the collection of details about the arrangement itself, such as it’s name, unique identifier, deed, purpose, and management location.

2. Clarifying Timelines for Filing Suspicious Transaction Reports (STRs):

the second section addresses amendments to the guidelines concerning the reporting of suspicious transactions. The key takeaways are:

General STR Filing timeline: STRs must be filed promptly, not exceeding five business days after suspicion is first established, unless there are exceptional circumstances.
Sanctioned Parties: For cases involving sanctioned individuals or entities (or those acting on thier behalf), STRs must be filed quickly, and no later than one business day after suspicion is first established.
Clarification on “Establishment of Suspicion”: MAS clarifies that this refers to the point when an institution concludes an STR is warranted based on available information and investigations. This does not include the time taken for fact-finding or investigations.
Processes for Higher ML/TF Risks: Financial Institutions (FIs) and Variable Capital Companies (VCCs) must have processes to:
Identify and prioritize high ML/TF risk concerns. Promptly review these high-risk concerns.
Escalate any high-risk concerns that cannot be reviewed promptly to senior management for appropriate mitigation measures.

The document also provides a link to the full “Response to feedback Received on proposed amendments to AML/CFT Notices and Guidelines.”

How do the updated MAS guidelines impact the identification and verification of ultimate beneficial owners (UBOs)?

Key updates to Singapore’s AML/CFT Regime

The Monetary Authority of Singapore (MAS) has recently released updated notices and Guidelines concerning Anti-money Laundering and Countering the Financing of Terrorism (AML/CFT) for Financial Institutions (FIs) and Virtual Currency Custodians (VCCs). These revisions, effective immediately, represent a notable strengthening of Singapore’s commitment to maintaining its integrity as a global financial hub and combating illicit financial flows.This article breaks down the key changes and provides actionable insights for compliance teams.

Scope of the Updated Guidelines

The updated guidelines impact a broad spectrum of entities, including:

Banks: Commercial banks, merchant banks, and finance companies.

Capital Markets Services Licensees (CMSL): Fund managers, brokers, and corporate finance advisors.

Payment Service Providers (PSPs): Including those offering digital payment token (DPT) services.

Virtual Currency Custodians (VCCs): Entities providing custodial services for digital payment tokens.

Money Changers: Businesses involved in currency exchange.

Remittance Businesses: Companies facilitating money transfers.

the revisions aim to align Singapore’s AML/CFT framework with the latest recommendations from the financial Action Task Force (FATF) and address emerging risks, notably those related to virtual assets and digital finance.

Enhanced Customer Due Diligence (CDD) Requirements

A core focus of the updated notices is strengthening Customer Due Diligence (CDD) procedures. key changes include:

Beneficial Ownership Transparency: MAS emphasizes the need for FIs and VCCs to identify and verify the ultimate beneficial owners (UBOs) of legal entities, going beyond simply holding nominee shareholder information. Robust UBO identification is crucial.

Risk-Based approach to CDD: The guidelines reiterate the importance of a risk-based approach, tailoring CDD measures to the specific risks posed by each customer, product, and service. Higher-risk customers require enhanced due diligence (EDD).

Source of Wealth (SOW) and Source of Funds (SOF): Increased scrutiny on understanding the origin of customer wealth and the funds being transacted. Documentary evidence is now expected more frequently.

Politically Exposed Persons (PEPs): Enhanced due diligence requirements for dealing with PEPs and their close associates, including ongoing monitoring.

Virtual Asset (VA) and VCC Specific Requirements

The updates contain significant provisions specifically targeting Virtual Assets (VAs) and VCCs, reflecting the growing importance of this sector and associated risks.

Travel Rule Compliance: Strict adherence to the FATF’s “Travel Rule,” requiring VCCs to collect and transmit originator and beneficiary information for VA transfers exceeding SGD 1,500. Implementation challenges and solutions are being actively discussed within the industry.

sanctions Screening: Robust sanctions screening processes for VA transactions, utilizing up-to-date sanctions lists.

AML/CFT Controls for DPT Service Providers: Detailed guidance on implementing effective AML/CFT controls for DPT service providers, including transaction monitoring and suspicious transaction reporting (STR).

Custodial wallet Management: Specific requirements for the secure management of custodial wallets holding VAs, including segregation of customer assets.

Transaction Monitoring and Suspicious Transaction Reporting (STR)

MAS has reinforced the importance of robust transaction monitoring systems and timely STR filing.

Enhanced Transaction Monitoring: FIs and vccs are expected to implement sophisticated transaction monitoring systems capable of detecting unusual patterns and suspicious activity. This includes leveraging data analytics and machine learning.

STR Quality: Emphasis on the quality of STRs filed with the Suspicious Transaction Reporting Office (STRO). Reports must be complete, accurate, and well-documented.

Internal Reporting Procedures: Clear internal reporting procedures for employees to escalate suspicious activity.

Regular System Testing: Periodic testing of transaction monitoring systems to ensure effectiveness.

Record Keeping Requirements

The updated guidelines reiterate the importance of maintaining comprehensive and accurate records.

Retention Periods: Specific retention periods for customer due diligence records, transaction records, and STRs.

Accessibility: Records must be readily accessible to MAS for inspection.

Data Integrity: Measures to ensure the integrity and confidentiality of records.

Benefits of Proactive Compliance

Implementing these updated guidelines isn’t merely a regulatory obligation; it offers significant benefits:

Reduced Regulatory Risk: minimizes the risk of penalties and sanctions from MAS.

Enhanced Reputation: Demonstrates a commitment to ethical conduct and responsible financial practices.

Improved Risk Management: Strengthens overall risk management capabilities.

Increased Customer trust: Builds trust with customers and stakeholders.

Practical tips for Implementation

Gap Analysis: Conduct a thorough gap analysis to identify areas where current AML/CFT programs fall short of the updated requirements.

* Policy and Procedure Updates: revise AML/CFT policies and