Compliance Insight – June 2023
The Monetary Authority of Singapore (MAS) published guidance on “Strengthening Financial Institutions’ (FIs) Countering the Financing of Terrorism Controls” on 26 May 2023.
- FIs should implement adequate control to mitigate the terrorism financing risks, taking into account their terrorism financing risk exposure, including the size of their business, nature and complexity of their business model and transaction, as well as the geographical base of their customers.
- FIs should be aware of the external terrorism financing risk environment, including geographies with heightened terrorism financing risks, existing and new terrorist groups regionally and globally, emerging typologies, such as ransomware, arts and antiques, and online crowdfunding. In addition to money remittance services, banks and digital payment token service providers, precious stones and metals dealers and non-profit organisations were identified to be more susceptible to terrorism financing.
- FIs should have robust processes in place to detect individuals and entities designated in the sanctions lists of the UN Security Council or in the First Schedule of the TSOFA and ensure that they promptly adopt changes to these lists.
- FIs should establish clear internal processes to timely escalate hits on terrorism financing-related activities and file suspicious transaction reports (STRs) and reports to law enforcement agencies.
- FIs should immediately freeze assets related to these persons. While the FI is assessing potential terrorism financing risks, it should put interim measures in place.
- FIs are encouraged to use data analytics in their measures to counter the financing of terrorism. Combining insights from multiple data sources, such as adverse news and reports, customer due diligence, transaction monitoring and intelligence/data from law enforcement agencies, in data analytics (e.g. network link analysis or targeted geographical tracking) improves terrorism financing detection.
- FIs should enhance staff competency and awareness of terrorism financing typologies and related red flags.
- Regular updates on the FI’s terrorism financing risk exposure should be provided to its senior management.
Financial institutions are expected to conduct a gap analysis and benchmark themselves against the practices and supervisory expectations set out in the MAS guidance paper.
Further, the MAS updated the Frequently Asked Questions: Notice on Technology Management. These FAQs cover, in particular, the reporting of relevant incidents to the MAS, i.e. a system malfunction or IT security incident, which has a severe and widespread impact on the financial institution’s operations or materially impacts the financial institution’s service to its customers.
Finally, financial institutions that had received the 2023 ML/TF Risk Assessment Survey must complete it by 30 June 2023.