How positive is the FATF really about the AML/CFT environment in Singapore

Anti-money laundering and counter-terrorist financing measures in Singapore – 2016

Many have already commented on the report FATF mututal evaluation Singapore, we took some time to read and reread the report. In this article we’ve summed up our comments and take-aways.

It took a while to release the report apparently, the FATF onsite visit was almost a year ago (Nov/Dec 2015), perhaps because the findings are of a mixed nature. Most comments are quite positive but without being too pessimistic: many comments that indicate some substantial improvements are possible and needed.

Let’s start with the good news. Singapore is found to have “a highly sophisticated coordination on AML/CFT and FIs demonstrate a reasonably good understanding of ML risks”. The National Risk Assessment has provided a sound basis for private and public sector to understand ML/TF risks and specifically domestic measures in FIs are considered adequate.

Looking at the effectiveness ratings 4 areas score ‘substantial’, 6 ‘moderate’ and 1 ‘low’. The technical compliance ratings 18 areas score ‘compliant’, 16 ‘largely compliant’ and 6 ‘partially compliant’. We leave it up to the reader to decide if that’s good or bad.

Let me cite also some less positive statements from the report. “No adequate risk assessment was done on all forms of legal persons and arrangements.”  “Challenges were faced in executing MLA requests in a timely manner.”  “The national risk understanding reflects a disproportionate focus on domestic predicate ML and domestic FIs demonstrated a less sophisticated understanding of ML and TF risks facing them.” “Given the inconsistencies in both the NRA and the individual assessment of risk in FIs, targeting on the basis of ML/TF risks is not optimal.”

Skipping to the prioritized recommendations we can see a few trends:

1.       More focus on non-FIs.

2.       More measures targeted at specific risks – properly reflecting amongst others risks inherent to the nature of Singapore’s financial services industry in which 77% of the funds managed has a foreign origin.

3.       An approach which is less ‘just ticking the box’ and more focused on actual risks.

4.       More focus on complex and foreign predicate money laundering.

Combating financial crime is not easy – we all know that – Singapore has come a long way and as the report concludes the regulatory framework is sophisticated. Reading between the lines though, the report is not altogether that positive. Having a world class regulatory framework is by no means enough; FIs and other players in the financial markets will need to do more than just ‘tick the box’ and truly understand risks and implement programs to mitigate those risks; there’s more work to be done.

Much more.

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