REVIEW: SINGAPORE'S COUNTER TERRORISM FINANCING STRATEGY
In October 2022, the Monetary Authority of Singapore (MAS), Ministry of Home Affairs (MHA) and Ministry of Finance (MOF) issued the National Strategy for Countering the Financing of Terrorism. Based on the findings of Singapore’s Terrorism Financing (TF) National Risk Assessment (NRA) 2020, the National CFT Strategy aims to be complementary to Singapore’s counter terrorism strategy. It outlines Singapore’s national approach to address its TF risks and guides Singapore’s future actions to effectively prevent, detect, investigate, and enforce against TF. It also enhances the coordination of actions across law enforcement agencies, policy makers, regulators and supervisors and as appropriate, the private sector, in Singapore.
The five points of the National CFT Strategy are:
(i) Coordinated and Comprehensive Risk Identification
(ii) Strong Legal and Sanctions Frameworks
(iii) Robust Regulatory Regime and Risk-Targeted Supervisory Framework
(iv) Decisive Law Enforcement Actions
(v) International Partnerships and Cooperation
Robust Regulatory Regime and Risk-Targeted Supervisory Framework
Most of the points involve inter-agency or international efforts. However, the Robust Regulatory Regime and Risk Targeted Supervisory Framework limb of the National CFT Strategy touches upon financial institutions regulated by the MAS.
This limb of the National CFT Strategy ensures that Singapore implements a robust AML/CFT regulatory framework and strong risk-focused supervisory framework for relevant sectors exposed to TF risk, including financial institutions (FIs), to:
(i) Manage the ML/TF risks arising from activities in the sector,
(ii) Ensure that such risks are adequately mitigated, and
(iii) Monitor and supervise the sector for compliance with relevant AML/CFT requirements.
To mitigate the TF risks arising from their sectors’ activities, supervisory bodies like MAS:
(i) Set effective and comprehensive sectoral AML/CFT requirements that are aligned with the FATF Standards and international best practices;
(ii) Conduct enhanced surveillance and supervisory activities that are focused on higher TF risk areas/entities, including requiring remediation measures where weaknesses are found and taking proportionate and dissuasive supervisory actions where breaches are noted; and
(iii) Engage FIs through targeted outreach and industry cooperation initiatives to raise TF awareness.
Effective and comprehensive sectoral AML/CFT requirements that are aligned with the FATF Standards and international best practices
FIs are subject to AML/CFT requirements and guidelines on measures to mitigate ML/TF risks e.g. by identifying and verifying customers, beneficial owners and beneficiaries (where relevant), perform ongoing monitoring and regular customer due diligence (CDD), including enhanced due diligence measures for higher risk customers, conduct screening to promote compliance with CFT requirements, and file suspicious transaction reports (STRs) to STRO promptly. Sectoral AML/CFT requirements and guidelines are regularly reviewed to ensure that they remain relevant and effective in mitigating ML/TF risks and are aligned with the FATF standards and international best practices. For example, MAS introduced the Payment Services Act 2019 (PS Act) in January 2020 and corresponding AML/CFT requirements to address the ML/TF risks arising from new payment services, such as digital payment token (DPT) services, given the inherent ML/TF risks posed by such services. Further amendments to the PS Act were passed in Parliament in January 2021 to expand the definitions of DPT services and cross-border money transfer services, to better mitigate ML/TF risks and align Singapore’s regime for virtual asset service providers with the FATF standards.
Enhanced surveillance and supervisory activities targeting at-risk areas
A risk-based approach is taken in supervising and monitoring sectors for compliance with AML/CFT requirements. Enhanced and targeted supervisory activities are also applied on sectors and entities that are inherently more exposed to TF abuse. For example, in conjunction with the TF NRA, MAS commenced a thematic review of at-risk money remittance, banking and payment sectors in 2021 to examine the effectiveness of their CFT processes and controls, including the use of more advanced monitoring capabilities to detect and trace fund flows linked to terrorist activities. Following the TF thematic review, MAS will develop a guidance paper on sound CFT practices that all FIs, including DPTSPs, should review and adopt. Where CFT control weaknesses are found, supervisors will take appropriate supervisory actions and follow-up with the regulated entities to ensure that remediation measures are taken in a timely manner. Supervisors will not hesitate to take firm actions against errant entities, including the imposition of a range of supervisory measures (e.g. warning or imposition of restrictive actions) and financial penalties, where control weaknesses or breaches of AML/CFT requirements are found.
Targeted TF outreach and industry cooperation initiatives
Outreach, in collaboration with relevant authorities, is conducted to keep specific sectors abreast of changes to key TF risks and threats to Singapore. Targeted engagement sessions are also held for the higher risk sectors. For example, MAS conducted webinars and engagement sessions for relevant financial sub-sectors, including banks, remittance agents and DPTSPs, to educate the sub-sectors on AML/CFT requirements and MAS’ supervisory expectations. MAS also continues to work with financial industry players through platforms such as the AML/CFT Industry Partnership (ACIP) and the Association of Banks in Singapore (ABS) to raise industry ML/TF risk awareness. For instance, following the release of the TF NRA, CAD and experts shared Singapore’s TF cases and regional TF risks at the ABS Financial Crime Seminar in July 2021. MAS similarly works with the payment and DPT sector to raise their ML/TF risk awareness.
Going forward, steps will continually be taken to strengthen FIs’ awareness of TF risks and CFT controls through outreach, industry guidance and risk-focused supervision. Such measures include engagement sessions to enhance their understanding of TF risks that are relevant to the respective sectors and issuance of guidance on CFT requirements and best practices. For example, as the regulatory regime for DPTSPs is relatively new, MAS’ initial focus is on raising the entities’ TF (and ML) risk awareness and strengthening their controls. As part of MAS’ upcoming supervision of DPTSPs, MAS will also give attention to how DPTSPs effectively implement their CFT controls taking into account the risks of their activities. In addition, MAS will continue to engage the remittance, banking and other payment sectors on TF developments and risks.
Conclusion
Singapore’s National Strategy for CFT outlines concerted efforts to ensure robust CFT and AML regulations for FIs. FIs in high-risk industries should take note of MAS’ stated initiatives for CFT and ensure they are in the same “path of travel”.
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