Singapore’s National Risk Assessment (NRA) pertaining to prevalent Money Laundering (ML) & Terrorism Financing (TF) risks was recently updated. The updated NRA covers threats and vulnerabilities in Singapore which evolved from global, regional and local developments such as the ongoing Israel-Hamas conflict, the recent money laundering case as well as the growth of cross-border digital financial services. The revised national strategy enhances coordination of actions across law enforcement agencies, policy makers, regulators and the private sector in Singapore.
The five principles to countering ML and TF as outlined in the document are:
- Coordinated and Comprehensive Risk Identification
- Strong Legal and Sanctions Frameworks
- Robust Regulatory Regimes
- Decisive Enforcement Actions
- International Partnerships and Cooperation
The revised NRA’s key TF threats take into account factors such as the rising threats of funds flows to the Middle East by radicalised individuals and groups who are sympathetic towards the cause of these terrorist groups that may potentially threaten national security and Singapore’s reputation as an international business hub. The key areas of risk in this update focus on the moving and use of funds as aforementioned, that includes Financial Institutions such as Banks, Money Remittance Companies, Online Fundraising Platforms and Digital Payment Token Service Providers.
At the same time, key ML threats are mainly derived from:
- Fraud (cyber-enabled)
- Organised Crime (illegal online gambling) and
- Tax Crimes
Cyber-enabled fraud in particular, is an increasingly important issue as one of the key crimes globally. The outreach of masses is now more convenient with the use of social media platforms which makes contact easier with audiences worldwide without little hindrance. This poses a challenge for Singapore as a nation to curb spreading of misinformation and/or false ideologies through social media features such as private direct messages.
Fraudulent proceeds are easily layered through complex networks which comprise multiple layers of intermediary entities and/or transactions with shell companies using refined strategies, more so as compared to the past. Advanced cyber tools and anonymous transactions using cryptocurrencies are gaining traction in popularity and this makes it more challenging for authorities to track the source of funds and determine fund flows.
The following are sectors classified as Higher ML Risk:
MONEY REMITTANCE COMPANIES
There are no changes to the risk rating for Money Remittance Companies as per the assessment above. Due to the significantly lower cost of using a Money Remittance Company compared to Banks, this contributes to the significant volume of transactions made which render higher exposure to ML and TF risks. Being an international financial hub, Singapore is exposed to voluminous money flows daily which increases its vulnerability to potential exploitation. With new digital cross border payment services such as PromptPay and NETS-DuitNow, alongside the convenience, this also increases the chances of individuals supporting illegitimate activities overseas under the guise of other causes, e.g. online fundraising. Mules working for such syndicates are also able to make fund transfers easily to intermediaries or through the use of complex ownership/corporate structure to conceal their intended destination.
Money Remittance services are also preferred as a means to evade currency controls in their home jurisdictions and tax obligations for foreign workers in Singapore as it is less stringent compared to the Banks.
DIGITAL PAYMENT TOKEN SERVICE PROVIDERS
As of 2024, the risk rating for Digital Payment Token Service Providers changed from Medium-Low to Medium-High risk. In this digital era, virtual currencies are trending and heavily traded online. While there are multiple legitimate use cases for Digital Payment Tokens, it has also emerged as a potential avenue for tech-savvy militants and terrorist financiers to move their funds across borders seamlessly, being less likely to be detected as the technology required to identify location and identities linked to such transactions may not be readily available yet. To illustrate, users are able to conduct ML/TF funding through such providers under the guise of sending gifts to content streamers on social media platforms. Since the platform charges consumers, these amount to legitimate transactions which render detection tough for suspicious activities.
What does this mean for you?
As a Regulated Financial Institution in Singapore, whether you are a fund management company, a broker-dealer, a cross border money transfer business or even a cryptocurrency exchange, your understanding and implementation of the National Risk Assessment’s determination of the higher risk-type industries and sectors within the financial industry is important. You would need to take into accord these new updates within your organisation, as part of your customer onboarding and ongoing due diligence measures, and as part of your Enterprise-Wide Risk Assessments.
If you are unsure as to how to implement the updated National Risk Assessment into your current framework, feel free to reach out to us at Curia Regis. Our team is able to offer comprehensive services to assist you in navigating the necessary requirements and documentation required, for you to satisfy your obligations as a Regulated Financial Institution in Singapore accordingly.
Contact us at [email protected] to know more and follow our LinkedIn page https://uk.linkedin.com/company/curiaregis for updates in the regulatory space.
