26 July 2018
On 28 June 2018, the Monetary Authority of Singapore (“MAS”) released an announcement relating to the “FATF Guidance on Counter Proliferation Financing - The Implementation of Financial Provisions of United Nations Security Council Resolutions to Counter the Proliferation of Weapons of Mass Destruction” (“FATF Guidance”). The FATF Guidance which was published by the Financial Action Task Force (“FATF”) in February 2018 is available from the FATF website.
The FATF is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (“AML”) and counter-terrorist financing (“CFT”) standard.
Recommendation 7 of the FATF Standards requires countries to implement proliferation financing-related Targeted Financial Sanctions made under the United Nations Security Council Resolutions (“UNSCRs”). Recommendation 2 requires countries to put in place effective national cooperation and, where appropriate, coordination mechanisms to combat the financing of proliferation of weapons of mass destruction. The FATF Guidance aims to give non-binding guidance to facilitate both public and private sector stakeholders in understanding and implementing these obligations. Additional non-FATF required elements under relevant UNSCRs are also included to give stakeholders a more holistic perspective in countering proliferation financing.
The MAS announcement dated 28 June 2018 highlighted that financial institutions (“FIs”) should take note of the following measures set out in the FATF Guidance:
- Identify higher-risk customers and transactions by:
- Considering contextual factors, circumstances and information which may be indicative of customers and transactions posing higher proliferation financing and sanctions evasion risks;
- Reviewing existing customer and transactional information against relevant information provided by authorities, as well as proliferation financing typologies and red flag indicators;
- Subject higher-risk customers and transactions to appropriate monitoring and follow-up actions to prevent prohibited transactions. Such actions should include the timely review and reporting of suspicious transactions and freezing of accounts, where appropriate.
MAS reminded FIs that:
- Senior management of FIs is expected to adequately manage proliferation financing risks and ensure effective implementation of UNSCRs;
- FIs must remain vigilant to the risk of establishing or maintaining business relationships with representatives, nominees or companies, including front or shell companies, which are used to circumvent UN sanctions;
- FIs should regularly review their risk management controls to take into account developments including new typologies noted, information provided by the authorities, or significant legislative changes, and test the controls for effectiveness; and
- FIs should also have adequate processes to review and disseminate in a timely manner relevant proliferation financing typologies and red flag indicators to all relevant officers within the FIs.
- MAS announcement dated 28 June 2018
- FATF Guidance on Counter Proliferation Financing - The Implementation of Financial Provisions of United Nations Security Council Resolutions to Counter the Proliferation of Weapons of Mass Destruction