MAS’s proposed amendments place more rigorous requirements on financial and other institutions to screen their customers, related parties and partners against lists of sanctioned and high‐risk entities, as well as Politically Exposed Persons (PEPs). This article identifies the elements of MAS’s recommendations relevant and specifically to Customer Screening. Many of MAS’s current and new recommendations affect not only companies and institutions but also small business owners like money-changers, remittance agents and financial advisors. It will be a challenge to ensure compliance to MAS recommendations and at the same time maximise the effectiveness of such customer screening while minimising costs and operational disruption.
The Beneficial Owner
Whereas previous MAS recommendations detailed identifying and screening beneficial owners with the same due diligence as the immediate customer, this area has failed to be addressed well by the vast majority of institutions. It is not always easy to determine the beneficial owners. Even if a customer declares that he or she is acting on behalf of a beneficial owner, the identification documents and letter of authorisation to be provided by the customer or beneficiary owner is most probably not available readily and more so during on-boarding.
Sanctioned Lists and Politically Exposed Person (PEP)
A screening process is fundamental to managing ML/TF risks. MAS expects adequate systems, procedures and processes to be in placed to perform effective screening to identify any parties who are sanctioned or suspected to be involved in ML/TF activities. Screening needs to be performed on all new and existing customers, as well as beneficial owners and any connected parties, at the point of on-boarding and on an ongoing basis. Screening should be performed based on relevant ML/TF information sources, including information and lists provided by MAS and other relevant authorities in Singapore. There are two potential problems here.
Firstly, there needs to be some sanctioned lists which the customers are to be screened against. There are many sanctioned lists provided by international public institutions like FATF, United Nations, European Union, OFAC, HM Treasury, World Bank, as well as MAS and other relevant authorities in Singapore. The problem with public lists is that although they are provided freely, they are from different sources and are not available in the same format. There are also many companies providing their own proprietary lists like DowJones, Worldwatch, etc. The problem with these commercially provided lists is that their costs of subscription are high and significant to some organisations. Moreover, with the new MAS requirements of screening at the point of on-boarding, these private lists may not be useful if they are not integrated seamlessly into the organisation’s systems and procedures.
Secondly, customers need to be screened at the point of on-boarding. The challenge is how to build this into a company’s existing operating procedures and to do this efficiently and cost effectively.
Review of Earlier Relevant Transactions
MAS requires organisations to review the earlier relevant business transactions undertaken by a customer to ensure that the current relevant business transaction (during on-boarding) is consistent with the knowledge of the customer, its business and risk profile and where appropriate, the source of funds. This is impossible to do manually or without a fully integrated customer information and transaction capturing system.
Features of a Good Customer Screening Software
Although the new MAS proposed recommendations are more onerous and far reaching than the previous MAS Notices, a good customer screening software with the following key features can minimise the disruption of day-to-day business, the risk of penalties, and the cost to implement.
Able to allow an organisation’s transaction and customer data to be matched to the data of the various sanctioned lists and PEPs
Has an advanced search methodology to comb through huge volume of transaction and customer data as well as an expanding sanction lists and PEP data
Able to present searched data and matches in real-time for user to review possible hits quickly
Able to keep an automated audit trail and produce reports for senior management, regulators and provide evidence for prosecution of criminal activity if required
Full integration with all major and internationally recognised sanction lists and PEPs
Cost effective and minimum operation disruption