Monetary Authority of Singapore Issues Penalties over AML/CFT Breaches

The Monetary Authority of Singapore (MAS) has imposed penalties on Standard Chartered Bank and Standard Chartered Trust, with regard to breaches associated with Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT).

The monetary penalties were specified by the MAS in a statement. A penalty of S$5.2 million ($3.95 million) was issued to Standard Chartered Bank, Singapore Branch (SCBS), and an additional S$1.2 million ($0.91 million) was levied on Standard Chartered Trust (Singapore) Limited (SCTS).

The Scope of the Violations

According to the statement, the penalties were issued for violations of the authority’s requirements pertaining to AML and CFT.

More specifically, Standard Chartered Bank is said to have violated the terms of the requirements during a period spanning from December 2015 to January 2016, when trust accounts of SCBS customers were transferred from Standard Chartered Trust (Guernsey) to SCTS.

The timing of the transfers further elicited suspicion, as they took place shortly before Standard Chartered Trust (Guernsey)’s implementation of the Common Reporting Standards (CRS) for the Automatic Exchange of Financial Account Information in Tax Matters. This led to the appearance of the possibility that clients were taking steps to avoid the obligations to the newly introduced CRS reporting requirements.

According to the MAS, Standard Chartered Trust did not properly prepare for the risk associated with such transactions, nor did the company report the suspicious activity in time to ensure the full cooperation of the authority’s AML and CFT guidelines and requirements.

Moreover, the MAS investigated the violations and found that the Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, most brokers employ a risk management department tasked with analyzing the data and flow of the broker to mitigate the firm’s exposure to financial markets moves. Why Risk Management is a Fixture Among BrokersTraditionally the company is employing a risk management team that is monitoring the exposure of the brokerage and the performance of select clients which it deems risky for the business. Common financial risks also come in the form of high inflation, volatility across capital markets, recession, bankruptcy, and others.As a countermeasure to these issues, brokers have looked to minimize and control the exposure of investment to such risks.In the modern hybrid mode of operation, brokers are sending out the flows from the most profitable clients to liquidity providers and internalize the flows from customers.This is deemed less risky and are likely to incur losses on their positions.This in turn allowing the broker to increase its revenue capture. Several software solutions exist to assist brokers to manage risk more efficiently and as of 2018, most connectivity/bridge providers are integrating a risk-management module into their offerings. This aspect of running a brokerage is also one of the most crucial ones when it comes to employing the right kind of talent. One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, most brokers employ a risk management department tasked with analyzing the data and flow of the broker to mitigate the firm’s exposure to financial markets moves. Why Risk Management is a Fixture Among BrokersTraditionally the company is employing a risk management team that is monitoring the exposure of the brokerage and the performance of select clients which it deems risky for the business. Common financial risks also come in the form of high inflation, volatility across capital markets, recession, bankruptcy, and others.As a countermeasure to these issues, brokers have looked to minimize and control the exposure of investment to such risks.In the modern hybrid mode of operation, brokers are sending out the flows from the most profitable clients to liquidity providers and internalize the flows from customers.This is deemed less risky and are likely to incur losses on their positions.This in turn allowing the broker to increase its revenue capture. Several software solutions exist to assist brokers to manage risk more efficiently and as of 2018, most connectivity/bridge providers are integrating a risk-management module into their offerings. This aspect of running a brokerage is also one of the most crucial ones when it comes to employing the right kind of talent. Read this Term and controls of both entities were unsatisfactory and failed to comply with the necessary requirements put in place by the Singaporian authority.

Mr. Ong Chong Tee, Deputy Managing Director of MAS, said: “MAS requires financial institutions to adequately assess money laundering risks when deciding whether to accept customers. They should also have in place good systems and processes to monitor customer transactions. We expect financial institutions to remain vigilant by instilling a strong risk culture.”

A comprehensive assessment of the situation illustrates that the penalties might have been prevented had the companies taken action to improve their risk management and control protocols.

However, the breaches, that had already occurred, could clearly not be overlooked by the MAS, thereby justifying the penalties.

The Approach of the MAS

The MAS has shown a more varied approach to assessing and policing the financial industry, relative to other similar authorities. For instance, despite rumors that had surfaced, the authority made it clear that it would not heavily intervene in the FX market.

More recently, the MAS demonstrated that it is apt to accept the growing demand for cryptocurrency, by recognizing Bitcoin and Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others. Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others. Read this Term technology as fintech investment avenues. The authority has expressed its understanding of the influence that Bitcoin could have on the overall financial industry in the future.

While it appears that the MAS is quite lenient in its approach toward the financial industry, it maintains a respectable level of regulatory constraint, ensuring that proper conduct is maintained within its jurisdiction.

The most obvious example would be the aforementioned penalties. The MAS also will not refrain from suspending the licenses of firms in cases where serious misconduct or repeat offenses occur.