On May 26, 2023, the Monetary Authority of Singapore (MAS) published new guidance for financial institutions (FIs) on reviewing their countering the financing of terrorism (CFT) controls. The advisory follows an industry-wide survey conducted by the regulator, which considered CFT-related controls and assessed FIs’ understanding of terrorist financing.
The guidance sets out MAS’ key observations and highlights the supervisory expectations FIs should review their controls against.
Following the regulator’s survey, four areas of firms’ compliance programs were identified as requiring improvement:
- Strengthening the screening process – FIs should regularly review the adequacy and appropriateness of screening processes to comply with the Terrorism (Suppression of Financing) Act (TSOFA), the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) (Amendment) Bill (CDSA), and other relevant MAS rules. Immediate steps should be taken to address any weaknesses identified.
- Leveraging data analytics – To better identify behavior potentially indicative of terrorist financing (TF), MAS encourages FIs to combine insights from multiple data sources. The paper notes the advantages of deploying advanced methods such as network link analysis and geographical mapping of transactions involving higher-risk TF jurisdictions to enrich the analysis.
- Conducting regular reviews to strengthen internal controls and processes – To do this, MAS suggests the following:
- Enhance staff awareness of TF typologies and related red flags.
- Institute clear internal processes to facilitate the timely dissemination of information and escalation of hits on TF-related activity.
- Conduct enhanced due diligence (EDD) measures promptly where TF red flags are identified.
- Ensuring quality and timely suspicious transaction report (STR) submissions – When FIs have additional information or valuable insights relating to existing cases, MAS encourages them to share the insights with law enforcement through supplementary STRs.
Expectation and Requirements
In light of these findings, MAS reiterates several expectations and requirements that all obligated firms must strive to meet, including:
- FIs should ensure that existing anti-money laundering (AML) and CFT frameworks and processes comply with the TSOFA, the CDSA, and other MAS rules.
- FIs should be aware of the external TF risk environment, including:
- FIs should implement adequate controls to mitigate TF risks, taking into account the extent of their TF risk exposure, including:
- The size of their business.
- The nature and complexity of their business model or transactions.
- The geographical base of their customers.
- FIs should subscribe to MAS’ website to be alerted promptly to list changes of UN-designated individuals and entities.
The paper notes that FIs should benchmark themselves against these expectations in a risk-based and proportionate manner and conduct a gap analysis. In doing so, FIs should consider the risk profile of their business activities and customers. Where FIs observe gaps in their frameworks and controls, specific remediation/enhancement measures should be identified and implemented swiftly.
Terrorist Financing Red Flag Indicators
Some indicators of potential terrorist financing behaviors that FIs should be familiar with include:
- Adverse media or law enforcement information that link individuals to violent extremist group(s), sentiments, or violent extremist activity.
- Subjects involved in transactions with individuals, groups, clubs, businesses and/or charities associated with violent extremist groups by the media or law enforcement.
- Transactions that involve certain high-risk jurisdictions.
- Transaction details (contact name, email address, funds totals, remittance info, etc.) that make references to words, phrases and/or numbers linked to violent extremist actors, groups, activity, or iconography.
- Excessive email money transfers followed by the depletion of funds through third parties or cash withdrawals.
- Transactions that involve persons or entities identified by media and/or sanctions lists as being linked to a terrorist group or terrorist activities.
- The use of crowdfunding, fntech platforms, and/or virtual assets to finance individuals or groups associated with violent extremism.
While no single red flag indicator determines illicit or suspicious activity, FIs should consider each transaction’s relevant facts and circumstances in line with a risk-based approach to compliance.
Additionally, when reviewing MAS’ guidance, compliance staff should take note of the case studies featured throughout the document. These studies help contextualize the regulator’s expectations and help firms identify gaps in their current CFT controls that require remediation.
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Originally published 01 June 2023, updated 02 June 2023