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Family-owned Asiaciti Trust fined $1.1 million by MAS for breaching anti-money laundering requirements

Overview

The Monetary Authority of Singapore (“MAS”) has fined Asiaciti Trust Singapore Pte Ltd (“ATSPL”) $1.1 million for its failure to implement adequate checks against money laundering on 22 July 2020.

Failure to adhere to Anti-Money Laundering and Countering the Financing of Terrorism (“AML/CFT”) requirements

Between 2007 and 2018, ATSPL has committed “serious breaches” of MAS’ AML/CFT requirements for trust companies by failing to implement adequate AML/CFT policies and procedures, in addition to not subjecting its AML/CFT controls to independent audits. The lack of policies and procedures, combined with the inadequacy of the AML/CFT controls, hindered ATSPL’s ability to detect and mitigate money laundering and terrorism financing (“ML/TF”) risks associated with its higher-risk customers.

MAS further clarified that ATSPL failed to determine if its business contact with trust relevant parties presented a higher risk for ML/TF and failed to establish, by appropriate and reasonable means, the source of wealth of an effective controller (“EC”) of a fund. ATSPL had simply relied on the EC’s representations regarding his source of wealth without obtaining information to adequately corroborate his claims.

Additionally, ATSPL did not conduct enhance monitoring of higher-risk customers, particularly in the background and purpose of “unusually large transactions with no obvious economic purpose”, undertaken by “politically exposed” customers.

RHTCS’s view on MAS’s expectation on AML/CFT requirements

On 19 March 2020, MAS imposed a composition penalty of $400,000 on TMF Trustees Singapore Limited (“TTSL”). The reasons in which TTSL was issued the penalty was similar to ATSPL, where TTSL failed to verify the source of wealth of settlors of trusts and had only relied on the settlors’ representations regarding their source of wealth or bank reference letters without obtaining information to adequately corroborate those claims. TTSL also failed to monitor, on an ongoing basis, the transactions of trust relevant parties (TRPs), particularly the failure to ensure that transactions were consistent with its knowledge of the TRPs’ business and risk profile as well as the source of funds.

Breach occurred. What now?

1. Financial Institutions (“FIs”) should implement effective AML/CFT policies and procedures

2. Assess that the AML/CFT policies, procedures, controls are effective and robust by conducting independent evaluations

3. Adopt a risk-based approach in AML/CFT compliance programs

4. Effective transaction monitoring system to detect abnormalities transactions

5. Run an effective KYC programme for Client Identification, Customer Due Diligence and ongoing monitoring

6. Ensure an effective process to identify and verify source of wealth and source of funds

7. FIs need to apply additional AML/CFT measure on Politically Exposed Person (“PEP”) when establishing a business relationship

8. Provide adequate and regular AML training to all employees to strengthen their knowledge and to ensure compliance with AML/CFT laws and regulations

As seen in the cases of ATSPL and TTSL, it is safe to assume that MAS will not hesitate to act against those who fail to meet the standard required under the AML/CFT regulations.

RHT Compliance Solutions would like to highlight to the Board of Directors and Senior management for all other Financial Institutions, the importance of strong oversight regarding ML/TF risks and to ensure the effectiveness of the AML/CFT controls implemented.

Notes

1. https://www.mas.gov.sg/regulation/enforcement/enforcement-actions/2020/mas-imposes-composition-penalty-of-1100000-on-asiaciti-trust-singapore-pte-ltd-for-amlcft-failures

2. https://www.mas.gov.sg/regulation/enforcement/enforcement-actions/mas-imposes-composition-penalty-of-400000-on-tmf-trustees-singapore-limited-for-aml-cft-failures

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