Digital transformation is one of the main trends around the world, which brings many opportunities for financial and non-financial organizations. However, digitalization also comes with a list of challenges, the most serious of which is increased need for combating money laundering and terrorism financing. In order to be able to prevent these risks, organizations have to comply with international standards, local regulations, as well as be ready to invest in advanced technological solutions.

Singapore is a global leader in terms of development of Fintech and financial services providers, and accordingly, Anti-Money Laundering and Combating Financing of Terrorism is a top priority for the country. This article discusses the main regulatory framework of AML in Singapore and gives some advice how to be AML compliant under these regulations.

Anti-Money Laundering (AML) in Singapore

The era of digitalization has posed many opportunities for incumbent financial organizations as well as for Fintech startups and other non-financial institutions. However, in line with opportunities, risks related to fraud have increased, as well. Money laundering and Terrorism Financing are considered as the most serious risks. Therefore, it is crucial for the companies implement advanced Know Your Customer and Customer Due Diligence procedures and have relevant technologies in place, in the purpose of detecting and reducing money laundering and terrorist financing risks.

In 1992, Singapore became a member of Financial Actions Task Force and starting from then the country has a commitment to be compliant with the FATF recommendations on Combating Money Laundering and the Financing of Terrorism & Proliferation. The latest Mutual Assessment Report on the implementation of AML/CFT standards was conducted in Singapore in 2019. According to this report, Singapore is completely or majorly compliant for the 37 of the 40 FATF recommendations (92.5% compliant).

Singapore is also a founding member of the Asia/Pacific Group on Money Laundering (APG). Besides, Singapore has active partnerships with fellow AML/CFT regulators and supervisors with the purpose of having its contribution in the process of international standards development.

Currently, several authorities regulate the field of Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) in Singapore. Below are presented Singapore based Anti-Money Laundering authorities, which have commitment and power to set standards and requirements in this field.

The Monetary Authority of Singapore (MAS)

MAS is the central bank of Singapore, it is the regulator and supervisor of the financial sector of Singapore (including banking, capital markets, insurance companies and payment system). According to the Monetary Authority of Singapore Act, MAS has the right to issue directions or regulations for any financial institution, which will be necessary for the prevention of money laundering or the financing of terrorism. Currently, according to MAS regulations and guidelines, all the regulated organizations have to build KYC and AML compliance solutions in order to meet the MAS requirements on AML/CFT.

Regulation of Anti-Money Laundering and Countering the Financing of Terrorism is a priority direction for MAS. In this regard, MAS is the regulatory body, which sets requirements for the financial institutions in this field. MAS sets regulatory framework for the financial organizations through developing legislative acts, regulations and notices. It also publishes Guidelines and Guidances for the supervised companies. Besides, MAS advises the supervised institutions to follow its announcements, as well as AML/CFT Guidance Papers published by FATF and other international standard setting authorities.

The Suspicious Transaction Reporting Office (STRO)

This is the intelligence body of Singapore. All the financial institutions and other designated non-financial entities submit to the STRO a list of reports through which (and not only) this body discovers money laundering, terrorism financing schemes and other related crimes. The mentioned reports include suspicious transaction reports (STRs), cash movement reports (CMRs), and cash transaction reports (CTRs).

Commercial Affairs Department of the Singapore Police (CAD)

CAD is the main law enforcement agency in AML/CFT field as well as the primary investigative agency for money laundering offences in Singapore. CAD is a unit within the Singapore Police Force and its scope of competences includes uncovering commercial and financial crimes through investigations and intelligence methods.

There are also several field-specific authorities that have commitments in this area, such as Council for Estate Agents, and the Casino Regulatory Authority of Singapore. These agencies implement investigations in their specific sectors.

Legislative Basis

The main legislation on AML in Singapore includes the following acts:

  1. Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA)
    CDSA is the main anti-money laundering act in Singapore. Although the term money laundering is not apparently specified in the law, however, the law describes cases, which refer to the criminalization of such activities that are connected with the property, which is related to drug dealing or criminal conduct. Sections 43, 44, 46 and 47 of the respective law presented the mentioned cases.
  2. Terrorism Suppression of Financing Act (TSOFA)
    TSOFA is the primary act that regulates terrorism financing by criminalizing activities related to terrorism financing. It also sets reporting requirements for financial institutions and other entities.
  3. Payment Services Act (PSA)
    PSA went into effect in January 2020. The act regulates the payment services providers in Singapore. Under the act, payment services providers include electronic payments providers, and cryptocurrency dealing and exchange services providers. Under the act, the above-mentioned payment service providers should have a license provided by the Monetary Authority of Singapore.

    The clauses relating AML/CFT imply that all licensed payment service providers must comply with AML/CFT requirements set by the Monetary Authority of Singapore. There are two types of guidelines related to AML/CFT: for digital payment token service and other payment services.

In the result of rapid development of Fintech, almost all the countries in the world started to review and enhance their AML regulation, including the area of personal data protection. The Southeast Asia is one of the top regions in the world in terms of the level of Fintech development, and the countries representing this region continuously review their regulations in order to enhance their AML regulation and increase customer protection.

AML Requirements in Singapore

AML requirements in Singapore differ, depending on the specifics of the industry the organizations operate in. In general, these requirements have a purpose to prevent money laundering and financing terrorism, as well as detect and report suspicious transactions. AML regulations that are common for every organization include Know Your Customer requirements, CDD measures, transaction monitoring, etc.

As the financial system as a whole and banking sector particularly, is one of the most vulnerable sectors for money laundering risks, the Monetary Authority of Singapore has imposed a set of AML and CFT requirements for financial institutions.

Below is the list of AML/CFT requirements for the financial institutions operating in the financial system of Singapore:

  1. Financial institutions should have in place AML/CFT risk assessment and risk mitigation policies, procedures and controls.
  2. Financial institutions have to conduct customer due diligence and implement CDD checks for all their customers.
  3. If a financial institution has reliance on third parties, it has to ensure that the third party is compliant with AML/CFT requirements set by FATF.
  4. If a financial institution provides correspondent banking services to a bank, which operates outside the Singapore (respondent financial institution), it has to assess the respondent financial institution’s AML/CFT controls. The same requirement works for wire transfers.
  5. Financial institutions have to keep records of all data, including documents and information that it is required to collect for AML/CFT compliance purposes.
  6. Detecting and reporting suspicious transactions, which is implemented through investigation of customer accounts, transaction monitoring AML purposed activities, etc.
  7. All financial institutions should develop and implement internal policies, compliance, audit and training of their staff to enhance their AML/CFT compliance and ensure efficient risk management controls in this area.

Taking into account all these requirements, financial institutions usually develop AML compliance program, which is applicable to their different internal business processes.

What are the legal or administrative authorities that impose anti-money laundering requirements on financial institutions and other businesses?

Currently, many different industries are exposed to AML/CFT risks. Each type of organization operating in specific industry is regulated by the relevant authority, which sets regulatory or legislative framework to cover AML risks. The key requirement for all types of entities is to implement CDD before providing any service to a particular client.

Below the main designated businesses and their regulatory authorities are discussed.

1. As the central bank of Singapore, MAS is the regulatory body for all financial institutions. The financial entities and persons that are subject to

AML/CFT regulations are the following:

  • Banks
  • Credit card and charge card licensees
  • Merchant banks
  • Finance companies
  • Life insurers
  • Capital markets intermediaries
  • Trust companies
  • Approved trustees (for collective investment schemes)
  • Financial advisers
  • The Central Depository (Pte) Ltd
  • Payment service providers

MAS issues notices for each type of covered institution and the primary requirements are MAS KYC requirements and CDD measures. Meanwhile, according to MAS requirements, financial organizations have to carry out risk-based approach when assessing their customers. For low-risk customers, financial institutions implement simplified CDD measures, and for high-risk clients enhanced CDD checks should be in place, respectively.

An important legislative act covering financial institutions is the Banking Act of Singapore, which sets the contractual duty of confidentiality for banks operating in Singapore. These clauses refer to the disclosure of personal data of customers.

2. Casino Regulatory Authority regulates Casino operators through Casino Control Act and Casino Control (Prevention of Money Laundering and Terrorist Financing) Regulations.

3. Pawnbrokers are subject to specific legislation and regulation issued by Insolvency and Public Trustee’s Office. In particular, Pawnbrokers Act 2015 is the main legislative basis, as well as Information Guide on the Prevention of Money Laundering and Countering the Financing of Terrorism for Pawnbrokers is in place.

4. Dealers in precious metals and stones represent an important sector in sense of AML. These entities are regulated by the Registrar of Regulated Dealers.

5. Accounting and Corporate Regulatory Authority (ACRA) is the regulative authority for Corporate service providers.

6. Real estate agents and salespersons are regulated by Council for Estate Agencies.

7. Other covered entities and persons such as Moneylenders, Lawyers, Public accountants, Registered societies and Registered charities are also subject to AML policy requirements.

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As mentioned above, the main law regulating activities related to money laundering Singapore cases is CDSA. Under this act, penalties are set in case if any individual or organization is convicted of money laundering. The maximum amount of penalty for breaking the requirements of Sections 43, 44, 46 and 47 of the respective law is the following:

  1. A fine of maximum S$150,000 or imprisonment of maximum 10 years (in some cases, both penalties can be implemented) for an individual.
  2. The higher amount of a fine of maximum S$1,000,000, or twice the value of the benefits of dealing with drug or criminal conduct related to which the offence was made, for a non-individual.

The maximum penalty related to Section 47AA of the same act is the following:

  1. A fine of maximum S$150,000 or imprisonment of maximum 3 years (in some cases, both penalties can be implemented) for an individual
  2. A fine of maximum S$300,000 for a non-individual.

Related to financial organizations, Monetary Authority of Singapore has set a penalty of maximum $1,000,000 for each offence if a financial institution does not meet AML and CFT notice requirements. That can relate to KYC or CDD procedures or other requirements.

How to Comply with Anti-Money Laundering in Singapore

Here are some tips, which will help you ensure AML compliance for your company.

Know Your Customer

This is the basis of AML compliance for any type of organization. Today, there are many Anti-Money Laundering Solutions that help companies implement their KYC procedures in a more efficient and faster ways.

Currently, one of the most innovative solutions is BASIS ID Anti-Money Laundering software, which provides advanced identity verification solution for its clients.

Customer Due Diligence

CDD is the second most important thing when combating money laundering and financing terrorism. This is a key point in KYC procedure. Under CDD, companies should implement background screening on the customer, beyond investigating their documents. The aim of CDD is to assess possible AML risks before onboarding the customer.

Using Customer Due Diligence checklists are an efficient way of implementing CDD measures.

Continuous learning and capacity building

In this changing world, learning is the key to success in all the industries. Keeping up to date on the recent developments, being aware of emerging challenges and learning innovative solutions is must for every organization.

And this statement is true especially for the AML field, as emerging trends of virtualization create new risks and require new knowledge to be able to cope with changing risks and challenges.

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