In a significant move to reinforce anti-money laundering and counter-terrorism financing (AML/CFT) requirements, the Monetary Authority of Singapore (MAS) has recently imposed composition penalties totalling S$3.8 million – the equivalent of USD2.8 million – on a number of prominent financial institutions.
On 21 June 2023, it emerged that DBS, OCBC, Citibank, and Swiss Life (Singapore) were all found in breach of specific requirements in this area, bringing to light the crucial importance of correctly investigating and identifying beneficial ownership structures of customers for AML purposes. These penalties were uncovered during MAS’s examinations following the Wirecard scandal and allegations of involvement by Singapore-based entities.
Breaches and Failures in Investigating Beneficial Ownership
DBS, the largest recipient of the composition penalties, was fined S$2.6 million by MAS for violations that occurred between July 2015 and February 2020. According to the regulator, the bank failed to maintain accurate and up-to-date due diligence information on the beneficial ownership of certain customers, along with neglecting to update their risk ratings.
Similarly, OCBC overlooked probing into the ownership and control structures when the declared beneficial owners were not named in corporate registration documents.
Citibank, incurring a penalty of S$400,000, breached regulations between September 2019 and June 2020 concerning two corporate customers. The bank failed to grasp the control structure of these customers and correctly identify their beneficial owners, despite possessing information that suggested incorrect declarations.
Swiss Life (Singapore) received a penalty of S$200,000 for breaches that took place in May 2017 related to an investment-linked life insurance policy. The insurer neglected to understand the intricate ownership and control structure of a higher-risk customer and failed to adequately verify the source of the beneficial owner’s wealth. This last example showcases how not only banks, but companies in other regulated sectors such as insurance also risk incurring in penalties due to client due diligence failures.
Increased Regulatory Focus on AML Breaches
In an official statement, MAS Deputy Managing Director, Ho Hern Shin, stressed the growing importance of strengthening controls against illicit financial flows as Singapore assumes an increasingly significant role as an international financial center. In light of this, MAS conducted thorough checks to assess the adequacy of financial institutions’ AML/CFT policies and controls specifically in relation to their dealings with entities and individuals associated with the Wirecard scandal.
The Role of Accurate Beneficial Ownership Data
In an era of heightened regulatory scrutiny like the current one, it becomes imperative for financial institutions in Singapore and worldwide to rely on accurate and official beneficial ownership data.
By accessing official sources of information able to provide the necessary documentary evidence and tracking all due diligence operations automatically, banks, insurance companies and regulated businesses across all sectors can effectively protect themselves from regulatory breaches.
One solution that can greatly assist in this regard is Know Your Customer, which stands as the leading provider of real-time registry connections globally. Our unmatched ultimate beneficial ownership (UBO) mapping capabilities, fueled by AI and machine learning, empower financial institutions to enhance their compliance processes and KYB controls quickly and cost-effectively.
By leveraging Know Your Customer’s advanced technologies, financial institutions can streamline their due diligence processes, automatically retrieving UBO information from official company documents and ensuring they maintain relevant and up-to-date information on beneficial ownership structures. This technology helps identify any complex ownership and control structures, discrepancies or red flags much faster, enabling swift action to be taken to mitigate potential risks and significantly reducing the possibility of oversight and non-compliance.
The recent penalties imposed by MAS on DBS, OCBC, Citibank, and Swiss Life emphasise the critical need for financial institutions to investigate and identify beneficial ownership structures accurately. As regulators continue to intensify their scrutiny, relying on accurate and official beneficial ownership data becomes paramount.
Know Your Customer’s solutions, including our real-time registry connections and AI-driven UBO mapping capabilities, equip financial institutions in Singapore and globally to protect themselves against the financial and reputational risk of non-compliance. By leveraging these tools, institutions can bolster their AML/CFT measures, ensuring compliance and maintaining the integrity of the financial system.