Singapore’s renowned safety is a direct result of its legendarily strict laws, from prohibiting feeding pigeons to making it illegal to disturb the peace by singing.
This makes it all the more surprising that in August, authorities seized hundreds of millions of dollars in ill-acquired assets, including properties, vehicles, stacks of cash, luxury handbags, watches, and jewelry, from 10 foreigners living in the city state. The seizures, which have surpassed USD $2 billion in value, are collectively Singapore’s largest-ever case of suspected money laundering and likely emanated from overseas organized crime, including online gambling and scams currently under investigation.
“This case is a reminder that even the most stringent preventive measures can be circumvented by determined criminals,” Josephine Teo, Singapore’s second minister for home affairs, told Parliament according to this Reuters article.
As Singapore reckons with what went wrong in their policies, we review the financial regulations that, to date, have kept Singapore’s financial institutions and businesses on the right side of the law when it comes to protecting against money laundering and financial crimes.
What is KYC in Singapore?
Singapore has a comparatively easy path for companies to form, register, merge, and be acquired, which has led to rising money laundering and terrorist financing. To combat this, Singapore’s Accounting and Corporate Regulatory Authority (ACRA) and the Financial Action Task Force (FATF), an international regulating organization, have developed guidelines and rating systems for jurisdictions.
Singapore has been a member of the FATF since 1992 — just three years after it formed — and is rated “compliant” or “largely compliant” on 37 of the 40 recommendations for governments that comprise a framework for combating financial crimes and fraud. In turn, financial institutions have followed the lead as a result of buy-in from 39 member countries representing some of the largest financial centers in the world.
In Singapore, Know Your Customer (KYC) requirements are regulated by the Monetary Authority of Singapore (MAS), which issued its Prevention of Money Laundering and Countering the Financing of Terrorism in 2007.
The law requires financial institutions to verify the following for every customer:
- Full name
- Alias
- Identification number from an ID certified by a lawyer or notary public
- Residential address
- Date of birth
- Nationality
- Independently verified telephone number
- Telephone confirmation of employment status (with consent)
- Proof of salary details (recent bank statement)
- Initial deposit using a cheque with a bank in Singapore
Verification can be completed using electronic or physical documents and other independent data sources such as relevant databases.
Interestingly, and unlike many other countries and best practices among financial institutions, verification does not need to happen before opening an account as long as there are “...internal policies, procedures, and controls that set appropriate limits on the financial services available to the customer before completing the verification of the identity of the customer and beneficial owner.”
Further shoring up due diligence measures for businesses, Singapore’s Accounting and Corporate Regulatory Authority (ACRA) has mandated all registered companies to be KYC certified since 2015, a process that requires the following:
- Full name of company
- Identification proof (such as a national ID or passport) and confirmed nationality for each of the directors, shareholders, and ultimate beneficial owners of the company
- Resolution by the company’s board of directors
- Copy of the company’s certificate of incorporation
- Copy of the company’s business profile
- Copy of the company’s merger and acquisition agreements
In fact, many financial institutions consider the ACRA certification to be so thorough that it is accepted as proof of identification for many in-house KYC requirements for multiple jurisdictions.
However, KYC verifications are just one element of the anti-money laundering process, which also includes customer due diligence, customer cross-checks on watchlists, and sanctions and ongoing monitoring and screenings throughout the customer life cycle.
What is the role of the Monetary Authority of Singapore (MAS)?
The MAS prioritizes combating money laundering, terrorist financing, and funding of the proliferation of weapons. Financial compliance, internal controls, and record-keeping are key to this mission, and the MAS expects financial institutions to uphold this effort by following its guidelines on onboarding and periodic reviews and audits of clients in order to ensure they are current and accurate.
The MAS has made numerous updates to its regulations in order to stay current with technology and the ever-evolving crimes that perpetuate money laundering. This is part of a larger initiative by the Government of Singapore known as Smart Nation, designed to modernize the nation in all aspects, including healthcare, transportation, and business. One of the aims is to make Singapore a cashless nation and thus embrace digital commerce.
National digital identity (NDI) program
Approximately 97% of eligible Singaporeans currently use Singpass, a national biometric digital identity (NDI) that any citizen or resident over 15 can use to verify their identity in a trusted and secure manner when signing into and accessing services online — from birth registrations to health records to opening bank accounts and applying for loans and credit cards. When used with the related Myinfo service for corporate use, MAS authorizes financial institutions to use Singpass as the sole identification verification requirement for individuals. Singpass also facilitates widely accepted digital signatures in lieu of in-person signatures. And SGFinDex further allows individuals to access personal financial information housed with both the government and banks.
This system is a time and money saver because it reduces the number of verifications needed. It also democratizes the process by eliminating service access barriers for those who can’t go in-person to have documents verified. Furthermore, since 2019, KYC options approved by MAS now include video verifications and use of third parties such as notaries and new technology platforms.
Singapore Payment Services Act (PSA)
There was a time in the not-so-distant past when a business deal was sealed with a firm handshake that symbolized the trust between the two parties. The growth of digital technology in Singapore and around the world has largely eliminated the opportunity to even be face to face.
Recognizing the red flags that these digital deals create for truly “knowing your customer,” the Parliament of Singapore approved the Payment Services Act of 2019 which, since 2020, has expanded regulatory and consumer protections to the following fintech and payment services:
- Account issuance services
- Domestic money transfer services
- Cross-border money transfer services
- Merchant acquisition
- Electronic money issuance
- Digital payment token services
- Money-changing services
The Singapore fintech scene
Like many countries, the COVID-19 pandemic fast-tracked Singapore’s latest adoption of digital technologies introduced by the banking sector. Fintech is a growing sector in Singapore, surpassing even China and India. In 2022, Singapore began welcoming online-only banks and even took part in the first multi-country trial on central bank digital currencies.
As the industry explores advanced technologies that raise the expectation of frictionless, instantaneous transfers of funds, KYC could become the line in the sand that stands between blazing trails and holding back progress. Companies exploring or expanding their operations in Singapore would be wise to shore up their compliance first.
These are far from the only changes happening to Singapore’s KYC regime. In response to the headline-grabbing asset seizures, political leaders wasted no time in gathering an inter-ministerial committee of leaders from MAS and other agencies to review oversights that allegedly led to the brazen crimes. Everything from communication between financial institutions to the role of third parties from real estate and better regulation of luxury goods are being upended. As reported in Reuters, the government will take enforcement action against financial institutions and any staff found to be involved.
Penalties for noncompliance
Singapore has a strict zero-tolerance policy when it comes to money laundering. Under the local penal code, any individual convicted of a money laundering-related offense can be fined up to USD $365,930 or sentenced to prison for seven years — or both.
Financial institutions that fail to comply with AML policies set by the MAS face fines of up to Singapore S$1 million per offense (USD $732,958) or, if it is a chronic offense, an additional S$100,000 (USD $73,296) per day.
ACRA also has significant penalties for companies failing to comply with KYC regulations, including the ceasing of their business as well as:
- Cancellation of ACRA registration
- Denial of access to business services
- Financial penalties
KYC solutions with Persona
If your business operates in Singapore or provides services to Singapore citizens, it’s crucial that you understand which KYC obligations apply to your industry. It’s also important to select a KYC and AML tool kit flexible enough to adapt to these varied requirements.
At Persona, we understand the intricacies of KYC and AML across geographies, and why a standardized approach doesn’t work. Our identity infrastructure and no-code platform are designed with flexibility in mind so our customers can seamlessly build, test, and optimize workflows — without tapping engineering resources.
You can choose from our library of verifications — government IDs, business and personal documents, mobile drivers licenses, selfies, and more — to collect and analyze the information you need. To enrich your understanding and assess risk of potential customers and entities, you can run reports such as watchlist screenings, PEP scans, adverse media checks, and other database queries. Use Workflows to scale your verification strategy through automation and Cases to centralize and streamline applications requiring manual review.
Interested in learning more? Start for free or get a demo today.
.png)
.png)
