Anti-money laundering and financial crime prevention

Requirements

What are the main anti-money laundering and financial crime prevention requirements for private banking and wealth management in your jurisdiction?

The main legislative acts to combat money laundering and financial crime are:

  • the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act, Chapter 65A of Singapore (CDSA), which criminalises the laundering of proceeds derived from more than 400 drug dealing and other serious offences;
  • the Terrorism (Suppression of Financing) Act, Chapter 325 of Singapore (TSOFA), which criminalises terrorism financing;
  • the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 (No. 7 of 2019) (PSPMA); and
  • the MAS Act, Chapter 186 of Singapore, which empowers MAS to issue direc¬tions or regulations to financial institutions to give effect to, amongst others, targeted financial sanctions under United Nations Security Council Resolutions.

The CDSA makes it mandatory for a person, in the course of his or her business or employment, to lodge a suspicious transaction report (STR) if he or she knows or has reason to suspect that any property may be connected to criminal activity. The TSOFA also imposes a duty to provide information pertaining to terrorism financing to the police. The PSPMA imposes similar customer due diligence and reporting requirements on dealers of precious stones, precious metals and precious products (including a person who sells or redeems tokens backed by one or more precious metals, precious stones or precious products), but banks, merchant banks and FMCs are exempt from these requirements. However, banks, merchant banks and FMCs are still required to submit cash transaction reports to Suspicious Transaction Reporting Officers in respect of cash transactions for precious stones, precious metals, precious products or asset-backed tokens exceeding S$20,000.

In addition, MAS has issued separate notices and guidelines on money laundering and terrorism financing to financial institutions. In particular, MAS has issued notices and guidelines to, among others:

  • banks (MAS Notice 626 and Guidelines to MAS Notice 626);
  • merchant banks (MAS Notice 1014 and Guidelines to MAS Notice 1014);
  • capital markets intermediaries (MAS Notice SFA04-N02 and Guidelines to MAS Notice SFA04-N02); and
  • financial advisers (MAS Notice FAA-N06 and Guidelines to MAS Notice FAA-N06).

The notices and guidelines issued by MAS require the financial institutions to implement procedures for, among others, customer due diligence, record keeping and reporting of suspicious transactions.

Politically exposed persons

What is the definition of a politically exposed person (PEP) in local law? Are there increased due diligence requirements for establishing a private banking relationship for a PEP?

A PEP is defined in the MAS Notices as a natural person who is, or has been, entrusted with prominent public functions, whether in Singapore, a foreign country, or an international organisation, including persons who hold the roles held by a head of state, a head of government, government ministers, senior civil or public servants, senior judicial or military officials, senior executives of state-owned corporations, senior political party officials, members of the legislature and senior management of international organisations.

A financial institution is required to perform enhanced customer due diligence measures where a customer or any beneficial owner of the customer is determined by the financial institution to be a PEP or a family member or close associate of a PEP. Enhanced customer due diligence measures include:

  • obtaining approval from the financial institution’s senior management to establish or continue business relations with the customer;
  • establishing, by appropriate and reasonable means, the source of wealth and source of funds of the customer and any beneficial owner of the customer; and
  • conducting, during the course of business relations with the customer, enhanced monitoring of business relations with the customer.
Documentation requirements

What is the minimum identification documentation required for account opening? Describe the customary level of due diligence and information required to establish a private banking relationship in your jurisdiction.

The standard due diligence measures to establish a private banking relationship would include the following:

  • obtaining and verifying information pertaining to the customer and, where the customer is not a natural person, certain other persons associated with that customer;
  • where the customer is not a natural person, identifying and verifying the identity of the natural persons appointed to act on the customer’s behalf;
  • determining whether any beneficial owners exist and applying the identification and verification procedures to those beneficial owners; and
  • where business relations are to be established, obtaining information as to the nature and purpose of the intended business relations.

To open a private banking account, the minimum identification documentation that would typically be required are documents evidencing:

  • the customer’s full name, including any aliases;
  • unique identification number (such as an identity card number, birth certificate number or passport number, or where the customer is not a natural person, the incorporation number or business registration number);
  • the customer’s residential address, registered or business address, and if different, principal place of business (as may be appropriate);
  • the customer’s date of birth, establishment, incorporation or registration (as may be appropriate);
  • nationality, place of incorporation or place of registration (as may be appropriate); and
  • in the case of a customer who is a not a natural person, constitutional documents and resolutions authorising the opening of the account and appointment of authorised signatories.

MAS has provided guidance on financial institutions’ use of MyInfo for non-face-to-face customer identification and verification. MyInfo is a digital service that enables individuals to authorise service providers to access their personal data that has been submitted to and verified by the Singapore government. Where MyInfo is used, MAS will not require financial institutions to obtain additional identification documents to verify a customer’s identity.

Tax offence

Are tax offences predicate offences for money laundering? What is the definition and scope of the main predicate offences?

Tax offences have been designated in the CDSA as money laundering predicate offences.

The main predicate offences are:

  • domestic and foreign drug dealing offences;
  • serious offences such as bribery, corruption, criminal breach of trust, cheating, misappropriation of property and the foreign counterparts of such offences (ie, an offence under foreign law which if the conduct had occurred in Singapore would have constituted an offence);
  • domestic tax offences; and
  • foreign tax offences (regardless of whether the foreign tax concerned is of a type that is imposed in Singapore).

The predicate offences include conspiracy to commit or an attempt to commit the relevant offences.

Compliance verification

What is the minimum compliance verification required from financial intermediaries in connection to tax compliance of their clients?

Financial institutions in Singapore are generally required to undertake ongoing monitoring of their business relations with customers, and to have adequate systems and processes to detect and report suspicious transactions. Financial institutions must also have internal policies, procedures and controls in order to meet their obligations to report suspicious transactions and to help prevent money laundering and terrorism financing.

Under the MAS’ Guidelines to its Notices on Prevention of Money Laundering and Countering the Financing of Terrorism, financial institutions are expected to reject a prospective customer where there are reasonable grounds to suspect that the customer’s assets are the proceeds of serious crimes, including wilful and fraudulent tax evasion. Where there are grounds for suspicion in an existing customer relationship, the institution should conduct enhanced monitoring and (if the customer is to be retained) approval must be obtained from senior management with the substantiating reasons properly documented, and the account subjected to close monitoring and risk mitigation measures. This requirement applies to serious foreign tax offences, even if the foreign offence relates to a type of tax for which no equivalent obligation exists in Singapore. Appendix B to the Guidelines sets out examples of tax crime-related suspicious transactions and red flags, such as negative tax-related reports from the media.

In addition, Addendum 1 to the ABS’ Code of Conduct sets out industry sound practices relating to the designation of serious tax offences as predicate offences to money laundering in Singapore. Among other things, a financial institution should have procedures to assess the bona fides of clients and assets booked, and to carefully evaluate the tax-related risks. Prior to on-boarding a client, the relevant staff should assess the client’s tax-risk profile and determine whether there are any reasonable grounds for suspecting that the client’s funds are proceeds from serious tax crimes. An institution’s relationship manager should also provide written confirmation that, from the information provided by the client during the due diligence process at on-boarding and during the maintenance of the account, there is no indication that the funds are proceeds from serious tax crimes. At the time of account opening, clients should acknowledge in writing that they are responsible for their own tax affairs. In addition, clients should provide any information relating to their tax affairs as may be required by the institution, including signing a declaration to confirm that they have, to the best of their knowledge, not committed or been convicted of any serious tax crimes. Financial institutions also need to continuously monitor and assess tax-related risks that may stem from the conduct of their businesses.

See also question 31 on reporting requirements applicable to private banks or financial intermediaries in relation to the US Foreign Account Tax Compliance Act (FATCA) and the Standard for Automatic Exchange of Financial Account Information in Tax Matters or Common Reporting Standard.

Separately, on 14 May 2018, the Anti-Money Laundering and Countering the Financing of Terrorism Industry Partnership (ACIP) published a best practice paper, ‘Legal Persons - Misuse Typologies and Best Practices’, which highlights recent typologies involving the misuse of companies and other legal persons. The ACIP is a private-public partnership that is co-chaired by the Commercial Affairs Department (CAD) of the Singapore Police Force and MAS. The practice paper highlights red flags that led to detection of such typologies, and sets out industry best practices that could detect or prevent such abuses. The paper is relevant to the private banking industry and includes red flags and best practices relating to suspected tax fraud and tax-motivated activities. CAD and MAS have encouraged all relevant firms to adopt the red flag indicators and recommended measures set out in the paper to strengthen resilience against money laundering and terrorism financing risks.

Liability

What is the liability for failing to comply with money laundering or financial crime rules?

Failure to comply with the CDSA and TSOFA may constitute a criminal offence, which is punishable by fines and imprisonment.

Non-compliance with notices and guidelines issued by MAS under section 27B of the MAS Act (ie, in relation to money laundering and terrorism financing) may amount to an offence that is punishable with a maximum fine of S$1 million and, in the case of a continuing offence, with a further fine of S$100,000 for every day during which the offence continues after conviction.

In addition, MAS has broad powers to revoke the licence of a bank or CMSL holder, withdraw the status of an RFMC or withdraw approval of a merchant bank.