Strengthening Financial Institutions’(FIs) Countering the Financing of Terrorism (CFT) Controls

The Monetary Authority of Singapore (MAS) recently conducted a survey and subsequent reviews to assess financial institutions‘ (FIs) understanding of terrorist financing (TF) risk and the effectiveness of their controls related to combating the financing of terrorism (CFT). As a consequence, MAS has now issued a corresponding paper in which the regulator presents its key observations from the reviews and outlines its supervisory expectations for FIs as regards the review of their own CFT controls. The paper is addressed at all capital market license holders, banks, insurance undertakings, payment service providers, trusts, and several others.
In the document, MAS
(1) outlines the key requirements / restrictions under the Terrorism (Suppression of Financing) Act which consist of
– the prohibition to engage in financial transactions (dealing, processing of funds, securities trading) with sanctioned individuals and firms;
– the obligation to have adequate systems and controls to detect any such transactions and / or funds and immediately freeze latter; and
– the obligation to report frozen funds.
(2) summarizes its key expectations in this context, including the need to adopt adequate policies and procedures to monitor client accounts and activities, thereby taking into account particular risks of customers (location of customers), firms‘ own business size and complexity, and the nature of their business. The regulator also mentions the need to subscribe to MAS website to stay informed of ongoing designations.
(3) states some threats and vulnerabilities with respect to terrorist financing such as the use of crypto-assets by perpetrators for the financing of terrorism or the emergence of new terrorist groups locally and globally.
(4) outlines the key areas for improvement it has identified during the recent reviews and sets out corresponding expectations. MAS also includes some case studies for each of the identified shortcoming. The identified shortcomings were the following:
– weaknesses in the transaction and account screening processes,
– little or no use of data analytics for performing the screening task,
– infrequent reviews of internal controls and processes, and
– delayed or incomplete filing of suspicious activity reports (STRs).