28 August 2020
The Monetary Authority of Singapore (“MAS”) conducted thematic inspections on enterprise-wide risk assessment on money laundering and terrorism financing (“EWRA”) in Q1 2020 and, on 3 August 2020, issued an information paper on “Enhancing Robustness of Enterprise-wide Risk Assessment on Money Laundering and Terrorism Financing”.
EWRA assesses a financial institution’s (“FI”) inherent money laundering and terrorism financing (“ML/TF”) risks, the effectiveness of the control environment designed to mitigate those risks, and the need to implement additional measures to manage residual risks where necessary. The requirements and expectations pertaining to EWRA are stipulated in MAS Notices and Guidelines.
The information paper highlights inspection observations and MAS’ supervisory expectations of effective EWRA frameworks and processes that FIs should benchmark themselves against. While the information paper does not impose new regulatory obligations, FIs should study the guidance to identify and address gaps in their EWRA frameworks and processes. Although the paper is based on MAS’ thematic inspections of banks, MAS has stated that the desired outcomes and good practices are relevant and applicable to other types of FIs.
MAS identified the following desired outcomes in the information paper:
- Banks’ senior management maintain active oversight of EWRA frameworks and processes, including ensuring compliance with relevant MAS Notices and Guidelines.
- Banks have sound and systematic frameworks and processes to assess inherent risks, control effectiveness, and residual risks for each business line.
- Banks perform adequate and accurate qualitative and quantitative analyses in assessing risks.
- Banks assess effectiveness of controls, taking into account policies and procedures, control testing results, as well as insights from the banks’ assessments of their cultures.
- Banks have systematic processes to establish and implement control measures to address areas for improvement identified from the EWRA exercise.
- Banks have structured processes to perform gap analysis against guidance papers, and incorporate lessons learnt and good industry practices in their own processes.
MAS concluded that its thematic inspections have shown that banks have room to improve the rigor of management oversight of EWRA processes, the robustness of the design of EWRA methodologies, and the effectiveness of EWRA implementation. The banks have taken, or are taking, remedial actions to improve their frameworks and processes.