30 March 2023

On 3 March 2023, the Monetary Authority of Singapore (“MAS”) issued Circular No. AMLD 02/2023 on Money Laundering and Terrorism Financing Risks in the Wealth Management Sector (“Circular”).

The Circular reminds all financial institutions (“FIs”) to stay vigilant to money laundering and terrorism financing (“ML/TF”) risks in the wealth management sector and sets out MAS’ expectations for FIs to review their existing controls to ensure that they remain adequate to mitigate the ML/TF risks from high growth areas. FIs should take into account the additional information provided in the Circular and previous MAS guidance that has been issued to the industry.

Board and senior management oversight

The Circular provides that FIs should strengthen board and senior management (“BSM”) oversight of high growth areas and be cognisant of the potential ML/TF risks posed. This includes ensuring that:

  • the BSM are kept apprised of the potential ML/TF risks arising from high growth areas and set a clear tone from the top on actions to be taken to deal with these risks;
  • the BSM are kept updated on the results of quality assurance reviews and testing done to validate the effectiveness of anti-money laundering and countering the financing of terrorism controls in high growth areas; and
  • risk and control functions are adequately resourced and familiar with changes in business strategy or target customer segments.

Added review and quality assurance testing

FIs should take added steps to review existing customer due diligence (“CDD”) practices in high growth areas and ensure that both front-line and control functions are functioning effectively. Added quality assurance testing should be done on key controls areas relating to the (a) identification of higher risk customers, including those that pose higher tax evasion- and corruption-related risks, and (b) corroboration of the source of wealth and source of funds of customers.

Exercising vigilance over higher risk customers and transactions 

FIs should stay vigilant towards higher risk customers and transactions. In particular, FIs should:

  • be cognizant of the added ML/TF risk when dealing with legal structures/arrangements used for the purpose of wealth management (such as trust arrangements, insurance wrappers and family offices) established for the benefit of the beneficial owners;
  • take note of prospective customers that withdraw their applications due to an inability or unwillingness to provide requisite CDD information; and
  • as part of ongoing monitoring, remain watchful of anomalous transaction spikes and unexpected fund flows with third parties or purportedly for business purposes, especially to or from higher risk jurisdictions.

Reference materials

The Circular is available on the MAS website www.mas.gov.sg.