Combating Financial Crime with Data Analytics – MAS

In the year ahead, the MAS will focus on the use of data analytics as well as boosting industry collaboration in its fight against money laundering and terrorism financing.

The MAS (Monetary Authority of Singapore) plans to increase its use of data analytics in combating financial crime in the year ahead, while at the same time boosting industry collaboration.

The comments were made by MAS Assistant Managing Director, Banking and Insurance Group, Ho Hern Shin at the ABS (Association of Banks in Singapore) Financial Crime Seminar on 18 July. According to Ho, the fight against money laundering and terrorism financing) is a continuing priority given Singapore’s status as an international financial centre and trading hub. “We need to remain vigilant to emerging risks and trends,” she said.

In particular, Ho noted progress in key areas, including with the establishment of ACIP (the AML/CFT Industry Partnership), a platform allowing law enforcement, regulator and industry to share information and to collaborate on AML/CFT initiatives. ACIP has recently published two Best Practice Papers on the abuse of legal persons and trade-based money laundering, two areas identified as higher risk and in need of addressing. Some banks have already begun to incorporate the best practices in their policies and processes, Ho said.

Ho also pointed to MAS’ sharpened AML/CFT supervisory approach, whereby thematic based inspections and supervisory visits have allowed the regulator more quickly spot key risks and best practices at financial institutions. Through these supervisory visits, the MAS has raised raise vigilance in targeted risk areas such as proliferation financing, whereby front companies are misused to trade with prohibited entities or countries. The MAS plans to publish its key findings from these thematic visits to help the industry learn from good practices and areas for improvement identified.

Ho also discussed Singapore’s role as an active FATF (Financial Action Task Force) participant: “Singapore’s participation allows us to be apprised of international developments. Our interactions with other FATF members also allows us to gain practical insights which in turn enrich our discussions at ACIP and other industry engagement platforms. It has also allowed us to contribute our industry insights towards global standard setting.”

Turning to the coming year, Ho talked about the use of technology as one of the key focus areas to boost effectiveness in combating financial crime. In particular, data analytics can significantly augment MAS’ ability to identify higher risk areas, she said, noting efforts made by the industry to invest in the technology. She cited work by DBS Bank in leading a working group to identify opportunities for applying data analytics for AML/CFT purposes, and good practices to consider when doing so.

MAS has also enhanced its own use of analytical tools to make sense of the vast amount of data it has, such as more than 25,000 STRs (suspicious transaction reports) filed annually by financial institutions: “Applying data analytics to this data set has enabled us to identify suspicious funds flow networks, and focus our supervisory attention on networks of higher risk accounts, entities or activities,” she said.

“While the results thus far have been promising, we hope to further refine and fine-tune our processes by improving the quantity and quality of our source data inputs.” To this end, MAS is working closely with the STRO (Suspicious Transaction Reporting Office) on the redesign of the STR forms and reporting platform (known as SONAR), which will improve the richness and machine readability of STR data, and enable more in depth and efficient analysis. Implementation is expected in August.

A second focus area for the coming year, according to Ho, will be on boosting collaboration within the government and with industry.  Last year, the government formed an inter-agency working group, comprising supervisory bodies and law enforcement agencies, to deepen its understanding of key ML/TF risks, prioritise cases for investigation, and facilitate enforcement against these cases.

Meanwhile, with regards to ACIP, there have been calls for case-specific, investigative collaboration between the public and private sector, similar to arrangements in Australia and the UK. According to Ho, The MAS is actively considering how it can improve the process of information sharing with financial institutions for the purpose of improving public-private collaboration, for example through more detailed sharing to enable financial institutions to conduct more targeted checks.

Ho concluded her speech urging banks to be discerning in their decisions to open accounts and maintain customer relationships, in recognition of the difficulty in striking a balance between meeting banking needs and addressing money laundering and terrorism financing risks.

“Banks should not avoid entire classes of customers altogether,” she said. “In building a more inclusive society with greater financial participation, it is not our intention to burden banks with disproportionate monitoring of bank accounts.”

To this end, Ho said the MAS would like to work with banks to explore the feasibility of introducing basic bank accounts for individuals with features that enable the customer to perform daily functions and restrictions that adequately safeguard against misuse of bank accounts.

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