Singapore Proposes Additional AML/CFT Requirements for FIs

Monetary Authority Singapore has issued a consultation paper proposing the scope of AML/CFT to be extended to financial institutions dealing with precious stones, precious metals and precious products.

Monetary Authority Singapore (MAS) has proposed further AML/CFT obligations for financial institutions (FIs) that deal with precious stones, precious metals and precious products (abbreviated to PSM). In particular, the consultation paper adds requirements for PSM dealings involving digital payment tokens, and customers that may be considered higher risk shell companies.

According to the PSM proposal, all FIs that directly deal with PSMs or act as an intermediary will be liable to comply with the AML/CFT requirements. This involves activities conducted by the FIs such as the manufacture, import, sale, purchase for resale of PSM, in addition to the selling or redeeming of any related asset-backed tokens.

The PSM proposal highlights the following conditions, where customer due diligence must be implemented by financial institutions: 

1. The FI establishes an account relationship with any customer for the purpose of dealing in PSM
2. The FI undertakes any PSM transaction involving more than SGD 20,000, regardless of the payment mode
3. The FI suspects money laundering or terrorism financing or has doubts about the veracity or adequacy of any information previously obtained

To further enhance Singapore’s financial sector and prevent criminal activities such as money laundering and terrorism financing, the consultation paper also proposes to update the current MAS notices regarding AML/CFT compliance for FIs and VCCs (Variable Capital Companies). 

The proposal will expand the scope of AML/CFT requirements to Digital Payment Tokens (DPTs) and Digital Tokens that are Capital Markets Products (DCMPTs). Similar to the requirements introduced in the Payment Services Act, FIs would be required to conduct Customer Due Diligence from the first dollar for occasional transactions involving DPTs or DCMPTs.

Additionally, the PSM Notice will also require financial institutions to collect and record information regarding beneficial owners when they transmit or arrange for the exchange of DPTs on behalf of customers. FIs will also have to immediately and securely submit this information to beneficiary DPT service provider, and screen the value transfer originators and beneficiaries against relevant information sources for AML/CFT risks. 

FIs and VCCs have also been directed to implement adequate risk assessment for the timely detection of shell companies that pose higher ML/TF risks. MAS will also be laying down guidance regarding the red flags of money laundering, including examples of unusual transactions and behavioral caution points. 

Additional guidance regarding the alignment of AML/CFT obligations for credit card or charge card licensees will also be introduced in the Notice, as introduced by the Payment Services Act.

The consultation paper is open for comment until 10 August 2021.

Suggested Read: Why Financial Industry Needs KYC/AML Compliance?