Tighter rules aim to tackle terrorism financing and money laundering

Closer tabs on public figures' wealth: MAS

By Mok Fei Fei, The Straits Times, 16 Jul 2014

INDIVIDUALS who hold prominent public function roles, including heads of state and senior political party officials, may come under closer financial scrutiny as Singapore's central bank looks to tighten rules to tackle money laundering and terrorism financing.

Monetary Authority of Singapore (MAS) deputy managing director Ong Chong Tee said: "Singapore is fully committed to keeping our financial centre clean and supporting global efforts to combat financial crime."

Since the Sept 11, 2001 attacks on New York and Washington, DC, the authorities around the world have worked to crack down on illegal movements of money.

The MAS yesterday released a consultation paper on the proposed amendments to its notices to financial institutions.

The proposed changes include a requirement for financial institutions to "cater for a risk-based approach for certain categories of politically exposed persons", said the MAS in a statement.

A "politically exposed person" is defined as a person entrusted with prominent public functions, which include the roles held by a head of state, government ministers, senior civil or public servants, or senior political party officials.

Other than conducting normal customer due diligence measures, financial institutions have to go one step further for such politically exposed people by, for example, checking their source of wealth.

Financial institutions must also carry out enhanced monitoring of the business relations with such clients as well as with their family members and close associates under the proposed amendments.

Another rule being proposed is that financial institutions must put in place additional requirements for cross-border wire transfers exceeding $1,500.

These would include performing customer due diligence on occasional transactions and minimum information fields in the message or payment instructions.

Not all cross-border transactions above $1,500 would be affected as financial institutions would normally already have the relevant information as part of their customer due diligence, such as when they establish business relations with their customers.

For the first time, card network providers such as American Express or Diners Club will also be issued with a new notice on the prevention of money laundering and terrorism financing.

MAS said in the consultation paper that such non-bank credit or charge card issuers are already subject to existing regulations and have established internal controls against money laundering and terrorism financing.

They have not been regulated for anti-money laundering and counter-terrorism financing as MAS said they are less exposed to these risks compared with other financial sub-sectors here.

But MAS said they will now come under such regulations as "the card-issuing sub-sector as a whole is considered by international bodies to warrant closer scrutiny".

Other proposed amendments would see financial institutions perform money-laundering or terrorism-financing risk assessments at the wider institutional level.

This is on top of assessing such risks over individual customers.

Financial institutions will also have to formalise the need to screen customers and their connected parties.

Many of the proposals are already being done by financial institutions, according to MAS, which said "the proposed changes formalise existing supervisory expectations and practices of the financial institutions".

MAS said the new measures will further safeguard Singapore's financial system from being used to launder money or finance terrorism.

In an evaluation exercise conducted by the Financial Action Task Force (FATF) in 2008, Singapore was assessed to have a rigorous regime against money laundering and the financing of terrorism, Mr Ong said.

The FATF will conduct another evaluation of Singapore next year and Mr Ong said MAS aims to do as well in that exercise. The FATF is the global standard-setter for measures to combat money laundering, terrorist financing, and the financing of proliferation.

Dr Lim Wee Kiak, a member of the Government Parliamentary Committee for Finance and Trade and Industry, said: "If there are more checks and balances, it is always better."

Thumbs-up all round for tougher MAS regulations
Those involved say rules against money laundering, terror funding are crucial
By Mok Fei Fei, The Straits Times, 17 Jul 2014

BANKS and political figures support the tough rules being proposed to combat money laundering and terrorism financing, despite being the two groups most likely to be affected.

They told The Straits Times that tighter regulations will help uphold Singapore's reputation as a major financial hub.

The rules, outlined in a Monetary Authority of Singapore (MAS) consultation paper released on Tuesday, propose that financial institutions perform enhanced checks on customers. These include taking a risk-based approach for certain categories of what are termed "politically exposed persons".

This refers to people entrusted with prominent public functions, such as government ministers, senior public servants and top party officials.

Other proposals involve financial institutions formalising the need to screen customers and their connected parties.

The proposals, which are generally being carried out by financial institutions already, are to boost Singapore's status as a clean and safe money harbour. They are based on international best practices and the latest recommendations of the global standard-setter, the Financial Action Task Force (FATF).

Singapore Management University associate law professor Eugene Tan noted that money laundering and terrorism funding practices are becoming more sophisticated and evolve rapidly.

"It is imperative that we do not play catch-up in combating these scourges and that our law enforcement agencies are on top of the game," said Prof Tan. "I see the proposed enhanced measures as building upon the existing know-your-customer regime that we have here. They should not be seen as 'nice to have' but instead treated as 'must-haves'."

Compliance costs for banks are expected to rise but the lenders are taking it all in their stride.

Ms Loretta Yuen, OCBC's head of legal and regulatory compliance, said the bank already has in place a number of the proposed risk assessment practices.

"Over the years, the costs that banks worldwide have to incur to comply with more and increasingly complex anti-money laundering and counter-financing of terrorism regulations have risen," Ms Yuen noted.

"But having in place a rigorous regime is critical in combating the increasingly sophisticated methods used... to conceal the source and use of funds."

A DBS spokesman added: "We take the issue of financial-system integrity seriously, and have robust policies and procedures in place to ensure customers use our facilities only for legitimate purposes."

A UOB spokesman also said the bank has measures to manage the risks of money laundering and terrorist financing.

Non-compliance by financial institutions could be costly. An MAS spokesman said an errant institution can be fined up to $1 million and, in the case of a continuing offence, given a further fine of $100,000 for every day during which the offence continues after conviction.

SMU's Prof Tan, who is also a Nominated MP, is not too concerned about the enhanced checks that could be conducted on political figures like himself.

"It comes with the turf. The key concern is for the checks to be done in a sensitive and efficient manner," he said.

Sembawang GRC MP Ong Teng Koon noted that even though the enhanced checks could lead to an intrusion of privacy, they aim to strike a balance between protecting individual rights and upholding Singapore's financial hub status.

"Security and privacy concerns are not mutually exclusive concepts," he added.

Another proposed rule is that financial institutions must impose additional requirements for cross-border wire transfers exceeding $1,500, down from $2,000 previously. The MAS said this is due to the strengthening of the Singapore dollar, relative to international benchmarks set by the FATF of either US$1,000 (S$1,242) or €1,000.