It may seem like money laundering is on the rise if recent news headlines are anything to go by. But the fact is, criminals have been successfully laundering money through financial institutions for hundreds of years. The difference now is that financial regulators around the world – including the Monetary Authority of Singapore (MAS) – are cracking down on banks to ensure that adequate processes are put in place to prevent criminals laundering money and financing terrorist activity. The landscape for financial institutions is well and truly changing, and the regulations are only going to get tighter.
The Financial Action Task Force (FATF)
In 1989, an intergovernmental body - the Financial Action Task Force (FATF) - was established to fight global money laundering. FATF recently welcomed Saudi Arabia as the newest member and now has members from 39 countries around the world, including Singapore and many other countries within APAC.
Since its inception, FATF has issued a series of recommendations, which have been revised several times to ensure they incorporate the latest developments in laundering techniques. In its current format, the “International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation” outline the 40 FATF Recommendations which now incorporates the 9 Special Recommendations on terrorist financing that had previously been outlined separately.
So how does Singapore stack up?
According to FATF’s 2016 mutual evaluation report, Singapore has a robust framework and approach to AML/CTF with an effective supervisory approach. Singapore was also found to provide effective international cooperation, including the provision of high-quality information and assistance.
Further, if we consider the FATF’s consolidated assessment ratings that were published in April 2019, Singapore ranks highly amongst its peers; Singapore is rated Compliant in 18/40 Recommendations, behind only Macao (22/40) and Malaysia (20/40). In contrast, Thailand, Cambodia and Vanuatu rate as Compliant in a mere 3/40, 2/40 and 1/40 Recommendations respectively.
Singapore was not found to be Non-Compliant with any of the 40 Recommendations, nor was Malaysia. However, a number of countries in the region were found to be Non-Compliant with 5 or more Recommendations, including Australia (5), China (6), Myanmar (6) and Sri Lanka (5) to name a few.
There were just 6 Recommendations where Singapore was found to be Partially Compliant. In contrast, many countries within APAC rated Partially Compliant in 10 or more Recommendations in the initial mutual evaluation report, including Australia (10), Cambodia (19), China (12), Mongolia (15), Myanmar (17), Thailand (13) and Vanuatu (17).
The cost of non-compliance
However, despite being a clear leader in terms of regulatory compliance, FATF’s 2016 report also identified gaps in relation to a number of money laundering threats that Singapore faces, particularly in relation to international crime and Singapore’s exposure to money laundering risks. An issue the Monetary Authority of Singapore doesn’t appear to have taken lightly.
According to recent research, since 2016 the MAS has levied nine separate fines for non-compliance, totalling a staggering $28.5m (US$21m). Yet prior to 2016 it had not issued a single fine. This is a clear message to financial institutions that The Monetary Authority takes its role as Singapore’s regulator seriously, and financial institutions must comply or face harsh financial penalties.
There’s no escaping the growing need for regulatory compliance in Singapore. Although Singapore’s AML/CTF framework may be considered more effective than many countries across APAC given its position from a consolidated ratings perspective, Singapore’s banks are still at risk for exposure to international crime and money laundering. And while keeping on top of the mounting regulatory requirements can pose a significant challenge, there are new technologies such as AI and machine learning which can help streamline processes and help make the task of compliance a little less onerous. One thing remains clear, whether done manually or through the implementation of new technologies, there will no longer be any leniency for financial institutions in Singapore found to be in breach of AML, KYC and CTF procedures.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Rachel Woolley, Global AML Manager at Fenergo, has over 10 years of experience in the financial services industry, having worked primarily in the funds industry and retail banking. She has a strong background in regulatory compliance, particularly in the areas of anti-money laundering and counter terrorist financing (AML/CTF).
Rachel holds a BSc (Hons) Degree in Applied Accounting from the Oxford Brookes University and is an ACCA Affiliate. She currently holds three professional designations: Licentiate of the Association of Compliance: Officers in Ireland (LCOI), Certified Financial Crime Prevention Practitioner (CFCPP) and Certified Data Protection Officer (CDPO).