PART A. LEGISLATIVE AND REGULATORY BACKGROUND
1. What is Money Laundering?
The Money Laundering Regulations require a fundamental understanding of the processes that can be involved in money laundering and require that you respond appropriately to any knowledge or suspicions that these processes may be taking place. This section of the Anti-Money Laundering (“AML”) and Countering the Financing of Terrorism (“CFT”) Policy (hereinafter – the “Policy”) explains what money laundering is, and the offences and the penalties.
The main objective of money laundering is to exchange the initial proceeds of an illegal activity with a financial asset or other valuables to give legitimacy to such proceeds and to conceal the true source of the funds.
Simply put, money laundering is any process whereby funds derived from criminal activity are given the appearance of being legitimate by being exchanged for “clean” money. Participating in the handling of such funds is illegal, and it can also be illegal to become involved with them “indirectly” through knowledge or suspicion.
The wider definition of money laundering and activities controlled by the statutory framework could be described as:
- concealing, disguising, converting, transferring or removing criminal property;
- entering into or becoming concerned in an arrangement which a person knows or suspects facilitates the acquisition, retention, use or control of criminal property;
- acquiring criminal property, using criminal property; or possession of criminal property.
The process of money laundering can be divided into three sequential stages:
- Placement. At this stage, funds are converted into financial instruments, such as checks, bank accounts, and money transfers, or can be used for purchasing high-value goods that can be resold. They can also be physically deposited into banks and non-bank institutions (e.g., currency exchangers). To avoid suspicion by a company, the launderer may as well make several smaller deposits instead of depositing the whole sum at once, this form of placement is called smurfing.
- Layering. Funds are transferred or moved to other accounts and other financial instruments. It is performed to disguise the origin and disrupt the indication of the entity that made multiple financial transactions. Moving funds around and changing their form makes it complicated to trace the money that is being laundered.
- Integration. Funds get back into circulation as legitimate to purchase goods and services.
Being involved in any of these three stages is potentially a criminal activity.
2. Legislative References
As a legal entity incorporated in Singapore, Walletory Pte. Ltd. (hereinafter “the Company”) is required to comply with two parallel regimes: legislative and regulatory.
The company is incorporated in Singapore, and, therefore, has to comply with local legislation. Relevant legislative references include:
- Monetary Authority of Singapore (“MAS”) Act (Cap. 186)
- Payment Services Act 2019 (“PS Act”)
3. Regulatory References
The requirements to prevent and detect money laundering and to counter terrorism financing arise from MAS Notice PSN01A Prevention of Money Laundering and Countering the Financing of Terrorism – Persons Providing Account Issuance Services who are Exempted under the Payment Services (Exemption for Specified Period) Regulations 2019.
4. Industry Guidance
The AML and CFT regulatory requirements are largely pulled together by a set of industry guidance notes, provisions of which the Company aims to incorporate into its policies, procedures and day-to-day operations.
The Company is adhering to the following guidance documents:
- MAS: PSN01A Prevention of Money Laundering and Countering the Financing of Terrorism – Persons Providing Account Issuances Services who are Exempted under the Payment Services (Exemption for Specified Period) Regulations 2019 Financial Action Task Force (FATF) Recommendations that are recognized as the international standard for combatting money laundering and the financing of terrorism and proliferation of weapons of mass destruction.
5. Offences, Penalties and Defenses
5.1. Offences and Penalties
There are a number of different offences that may be committed under the applicable legislation Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (“CDSA”) dated July 1, 2000, Terrorism (Suppression of Financing) Act (“TSOFA”) dated July 31, 2003. Main offences and relevant penalties are:
Offence (Section): Penalty
The assistance of another person in retaining, controlling or using the benefits of drug dealing or criminal conduct under an arrangement (whether by concealment, removal from jurisdiction, transfer to nominees or otherwise) (43 (1)/44 (1) of CDSA),
The concealment, conversion, transfer or removal from the jurisdiction, or the acquisition, possession or use of benefits of drug dealing or criminal conduct (46 (1)/47 (1) of CDSA),
The concealment, conversion, transfer or removal from the jurisdiction of another person’s benefits of drug dealing or criminal conduct (46 (2)/47 (2) of CDSA),
The acquisition, possession or use of another person’s benefits of drug dealing or criminal conduct (46 (3)/47 (3) of CDSA):
- Individual: fine not exceeding SGD 500,000 or to imprisonment for a term not exceeding 10 years or to both
- Not an individual: fine not exceeding SGD 1 million or twice the value of the benefits of drug dealing in respect of which the offence was committed, whichever is higher
The possession or use of any property that may be reasonably suspected of being benefits of drug dealing or criminal conduct, without a satisfactory account as to how the property had been occasioned (47AA (1) of CDSA):
- Individual: fine not exceeding SGD 150,000 or to imprisonment for a term not exceeding 3 years or to both
- Not an individual: fine not exceeding SGD 300,000
Tipping off (48 CDSA):
- Individual: fine not exceeding SGD 250,000 or to imprisonment for a term not exceeding 3 years or to both
Failure to disclose knowledge or suspicion that any property represents the proceeds of, or is linked to a criminal activity (39 (1) CDSA):
- Individual: fine not exceeding SGD 250,000 or to imprisonment for a term not exceeding 3 years or to both
- Not an individual: fine not exceeding SGD 500,000
All employees should note that:
- all the offences listed above are criminal offences and committing them is punishable by prison sentences and/or a fine;
- offences can be committed by employees as individuals even if they are acting in the course of their employment;
- in addition to the criminal offences noted above, any failure to follow the Policy by the relevant employee may lead to disciplinary action being taken at the discretion of the Company’s management.
There are certain defences available for some of the offences listed above. The main defence relevant to the Company’s employees is the defence of having made an ‘authorized disclosure’, which is a disclosure made:
- before an offence is committed;
- while it is being committed but an employee started the act at a time when, because he did not know or suspect that the property constituted or represented a person’s benefit from criminal conduct, the act was not an offence, and the disclosure is made on the employee’s own initiative and as soon as is practicable to make it;
- after the offence was committed, but there is a good reason for the employee’s failure to make the disclosure before the act was done, and the disclosure is made on the employee’s own initiative and as soon as it is practicable to make it.
If an employee makes a disclosure to the MLCO in accordance with the Procedure for Internal Suspicious Activity Reporting as specified in the AML & CFT Procedures Manual, then that disclosure will be sufficient for the employee to rely on this defence, provided a disclosure is made before any offence has been committed. This is why it is so important for all employees to read this Policy carefully, comply with its requirements and act quickly.
The MLCO will then decide whether to report the suspicion to STRO – Suspicious Transaction Reporting Office, Commercial Affairs Department of the Singapore Police Force. Where a suspicion is reported, the MLCO may contact the STRO analyst assigned to the case for further instruction. STRO will need more time to respond, in cases where STRO has disseminated the information to law enforcement agencies or foreign financial intelligence units.
MLCO is also obliged to submit Suspicious activities and incident of fraud report to MAS in form of Form 1 to Notice No. PSOA-N04 no later than 5 working day after the discovery of the activity or incident.
If the MLCO submits Suspicious activities and incident of fraud report to MAS, an employee must discuss with the MLCO what information can be given to the customer, so that this does not result in an offence of tipping off.
6. Sanctions Regime
There is a separate but related sanctions regime that imposes restrictions on the Company’s ability to do business with those persons and entities on the United Nations and European Union sanctions lists. Some entries on the lists are specific to a particular person or entity and others are general financial sanctions on all persons and entities in a particular jurisdiction. Screening of all customers against sanctions lists in World-Check is an integral part of the Company’s KYC and Customer Due Diligence (hereinafter – “CDD”) procedures, and is done both when accepting an application from a new customer, and regularly during the business relationship with the customer. The Company’s Customer Acceptance Policy (CAP) stipulates that application from a customer, where he is identified as a true match on a sanction list during KYC procedure, shall be rejected and no business activity shall be initiated with such customer.
PART B. OVERVIEW AND POLICY FRAMEWORK
It is of critical importance, for the Company’s integrity and reputation, to be able to identify, report, and take precautions to guard against money laundering and financing of terrorism. The nature of the Company’s business requires it to abide by AML & CFT legislation and regulation that apply to providers of financial services. In addition, the Company may be particularly attractive to individuals seeking to clean-up money due to non-face-to-face nature of the services.
In order to prevent the criminals from using the Company’s products and services for laundering the proceeds of crime, it is required to establish appropriate, and proportionate to the risk level, systems and controls, and ensure their effective implementation. Therefore, this Policy is designed to ensure that the Company has a defined and approved by senior management overarching framework to comply with all applicable AML & CFT legislation and regulations.
The Policy is supplemented by AML & CFT Procedures Manual and other associated policies and procedures, the full list of which can be found in Appendix 1 to this Policy, designed to ensure AML and CFT compliance during the day-to-day operations of the Company.
8. Purpose and Scope
The principal objectives of this Policy are to:
- prevent the Company from being used by money launderers to further their illicit business;
- define a framework to enable the Company to assist law enforcement agencies in identifying and tracking down money launderers and their criminal property;
- ensure that the Company remains compliant with all relevant AML, CFT and sanctions legislation and regulations;
- inform all relevant employees about the obligations of the Company and their obligations in relation to complying with AML & CFT laws and regulations.
This Policy applies to all employees of the Company, its vendors, partners, and any external parties involved in customer referral, customer onboarding and transaction processing.
PART C. GOVERNANCE, ANTI-MONEY LAUNDERING AND CFT SYSTEMS AND CONTROLS
9. Governance and Core Responsibilities
9.1. Wider Governance Arrangements
The Policy is part of the Company’s risk management framework, alongside its arrangements for assessing and mitigating risks (including financial crime risks), senior management’s formalized roles and responsibilities, regular reporting to the Board, KYE Policy and Procedures, employee training and awareness arrangements. These arrangements are collectively designed to ensure that the Company:
- conducts its business in line with the law and proper standards;
- pro-actively identifies and prevents financial crime risks it may be exposed to.
9.2. Core Responsibilities
This Policy was approved by the decision of the Company’s Board. The MLCO ensures the Policy is reviewed annually and ad-hoc, as legislative and regulatory developments dictate, and taking into account regular compliance reviews and audit reports.
Delegated authority to make updates and amendments
The MLCO is responsible for updating the Policy, subject to an approval from the Board, to:
- reflect changes in relevant legislation, regulations and external guidance, where these do not require significant changes in the Company’s internal practices and processes;
- update job titles and roles;
- update the list of associated policies and procedures;
- make minor drafting and presentational changes;
- make any other changes that do not substantively change the provisions of the Policy or result in or require significantly different practices and procedures.
In addition, the MLCO may issue clarifying instructions and guidance materials as to the scope of the Policy and its operation.
The responsibilities for approving and implementing the AML, CFT and sanctions policies are outlined below:
(1) The Board:
- reviews the financial crime policies and procedures, suggest changes and approves them;
- reviews regular financial crime reports and annual report prepared by Money Laundering Compliance Officer;
- reviews the adequacy and effectiveness of the AML & CFT systems and controls employed.
(2) MLCO is responsible for:
- the Company’s policies and procedures for countering the risk that it might be used to further financial crime.
- providing direction to and oversight of the Company’s AML & CFT strategy;
- compiling at least annually a report on the operation and effectiveness of the Company’s systems and controls to combat money laundering and terrorist financing, and taking any necessary action to remedy deficiencies identified by the report in a timely manner;
- establishing appropriate policies, controls and procedures to mitigate and manage effectively the risks of money laundering (ML) and terrorism financing (TF);
- ensuring AML & CFT Policies and Procedures are kept up to date;
- overseeing the development and reviewing the financial crime and compliance policies including AML & CFT Policy;
- monitoring compliance with all relevant laws, regulations and policies and reporting any material or relevant non-compliance to the Board.
- oversees the Company’s compliance with the rules on systems and controls against ML;
- ensures the establishment and maintenance of adequate and effective AML & CFT risk management systems and controls;
- monitors day-to-day compliance with the AML & CFT policies and procedures;
- acts as the focal point for all issues related to ML and TF and primary interface with the regulatory authorities and law enforcement agencies.
All relevant employees are required at all times to comply with this Policy and associated AML & CFT Procedures Manual and other operational guidelines as provided by the Company. Non-compliance by employees with these policies, procedures and guidelines may be regarded as gross misconduct and could result in a disciplinary offence which could lead to dismissal and, depending on the nature of the issue, the employee may be subjected to criminal proceedings.
10. Risk Management Framework
To facilitate and ensure compliance with AML & CFT laws and regulations and sanctions regime, the Company is actively implementing a set of measures, consisting of policies, procedures, internal systems and controls. The development and implementation of such adequate measures and their effectiveness is managed and overseen by the Company’s management. These measures are applicable to the Company, its vendors, partners, and any external parties involved in customer referral, customer onboarding and transaction processing.
This section of the Policy provides an overview of the internal adopted measures, while the more detailed procedures are outlined in the AML & CFT Procedures Manual and shall be complied with by all relevant employees, alongside this Policy.
Below is the summary of internal measures and controls, adopted by the Company and governing its day-to-day operations:
- the Company’s governance structure allows for adequate segregation of functions between managers in charge of oversight and effective management of all matters related to financial crime risks, and is properly formalized in the Statement of Roles & Responsibilities document;
- the managers’ roles and assigned responsibilities in relation to managing financial crime risks, developing and providing oversight over the Company’s internal systems and controls are clearly defined in the Statement of Roles & Responsibilities approved by the Board;
- the financial crime risks are identified and assessed as part of the Company’s business-wide risk assessments and AML risk assessments, which are produced as necessary, or as required by the senior management. The priority is given to the risks that have a greater chance of materializing, and may cause a bigger impact for the Company, and to adequate allocation of resources required to manage the risks effectively;
- the sufficient level of oversight on the part of the Board is established through regularly produced management information that also ensures the effectiveness of the development and implementation of the measures and remediation plans, designed to tackle the financial crime risks identified during risk assessments.
The following management information is produced internally:
- Money Laundering Risk Assessments produced as necessary;
- Annual report prepared by the MLCO and reviewed by the Board;
- Internal audit reports prepared as often as required.
The Company does not underestimate the importance of the role that its employees play in tackling ML and other financial crime risks, as well as safeguarding the integrity, reputation and high standards of conduct within the Company. The Company’s vetting process and KYE policy, therefore, ensure the integrity and expertise of all relevant employees on an ongoing basis. All relevant employees, including MLCO and managers, undergo regular (at least twice per calendar year) AML trainings and awareness sessions and are kept aware of their responsibilities and obligations in respect to AML and CFT, as well as recent legislative and regulatory developments in this area, and any changes in the Company’s policies and procedures.
11. Customer Onboarding and Acceptance
The following are the broad guidelines in respect to customer onboarding:
- all customers undergo identification document (ID) and face match verification through an automated system, equipped with trusted computer vision technology that uses machine learning to quickly and accurately ensure the authenticity and validity of the customer’s ID and verify the customer’s identity. The detailed procedure is stipulated in the Customer Identification and Customer Due Diligence section of the AML & CFT Procedures Manual. It is considered that the automated customer identity verification fully replaces face-to-face identity verification;
- all customers are screened against World-Check database in order to ensure that their identity does not match with any persons known to have a criminal background or subject to sanctions, or associated with banned entities such as individual terrorists or terrorist organizations, etc. In addition, the customers are screened against records of PEPs (including their close associates and family members), which are also covered in the World-Check database;
- all customers are classified into different risk categories in line with the provisions of the Customer Classification section of the AML & CFT Procedures Manual. The following risk factors, inter alia, are accounted for when considering the level of risk involved with each customer relationship:
- cumulative amount of funds deposited into the customer’s account,
- country of residence,
- nationality (in the meaning of “citizenship”),
- results of World-Check screening, etc.
Depending on the level of risk assigned to the customer, additional checks may be required for customers falling within higher risk categories. Enhanced CDD is conducted for such customers, whereby the residential address, the source of funds and/or source of wealth, and any other information deemed necessary, are verified additionally to the checks conducted within the standard due diligence. The classification of customers according to their risk profile then serves the Company to set the appropriate rules for ongoing monitoring of the relationship and transactions. The detailed CDD procedures are laid out in the relevant section of the AML & CFT Procedures Manual;
- following the necessary checks, and based on the perceived level of risk associated with each customer relationship, the decision is made to either proceed with accepting the customer’s application or rejecting it. For all customers classified as high-risk, an approval from either the MLCO, his deputy, or the CEO is required;
- PEPs, their family members and close associates are classified as higher-risk and must undergo enhanced CDD procedure;
- the Company’s CAP lays down the criteria for accepting the customers. The detailed provisions of CAP are specified in AML & CFT Procedures Manual. The following customer categories are not accepted by the Company as customer (the list below is not exhaustive):
- where sufficient KYC information could not be obtained/confirmed;
- as per the risk categorization;
- the customer matches the person in any sanction list during World-Check screening and the match is confirmed to be a true match by the designated MLCO;
- the customer matches the person in the lists of persons with criminal records during World-Check screening and the match is confirmed to be a true match by the MLCO;
- customers from countries on the list of FATF non-cooperative jurisdictions;
- customers from the United States of America;
- customer is opening an account in the name of a company, the shares of which are in bearer form;
- customer opening the account is a Trust.
12. Ongoing Customer Monitoring
The ongoing monitoring arrangements are comprised of two sets of measures:
- First, the customer records are kept up to date, KYC information and documents are updated regularly or upon expiration, as applicable; these updates, for instance, include ongoing World-Check screening for all existing customer base. Customer information updates may result in the re-classification of a customer into a different risk category, in which case the rules for ongoing monitoring over this customer relationship are re-set to align with the updated risk category;
- In line with the risk classification of a customer relationship, the transaction monitoring rules are designed for the specific customer, and ongoing monitoring of that customer’s activity is conducted manually by the relevant employees, in “real-time” and retrospectively.
13. Internal and External Reporting
All employees must be aware of their obligation on reporting suspicious activity where they have knowledge of or grounds for suspicion. For further guidance on what constitutes grounds for suspicion and what constitutes suspicious activity, please refer to the Recognition and Reporting of Suspicious Activity section of the AML & CFT Procedures Manual.
In case of suspicion, all employees must fill in the Internal Suspicious Activity Report and send it directly to the MLCO for further investigation. No transacting with the customer who is the subject of suspicion is allowed without the guidance from the MLCO. No disclosure is allowed, apart from the MLCO and the employee’s line manager, to anyone in the Company or to the customer, for prevention of tipping-off and committing an offence. The detailed procedure for submitting Internal Suspicious Activity Report is outlined in the AML & CFT Procedures Manual.
The MLCO is responsible for reviewing all internal reports submitted to them and making a judgement when the report to the STRO must be made.
If no report to the STRO is made, the reason must be recorded by the MLCO. The MLCO will commit a criminal offence if they know, suspect, or have reasonable grounds to do so, through a disclosure being made to them, that another person is engaged in money laundering and/or terrorism financing, and they do not disclose this as soon as practicable to the STRO.
14. Record Keeping
The retention of relevant records is done in line with the regulatory obligations in Singapore and in line with the Company’s internal policy, outlined in the AML & CFT Procedures Manual.
The MLCO is in charge of keeping records of all referrals received and any action taken to ensure an audit trail is maintained. All information obtained for the purposes of ML checks and referrals must be kept up to date.
APPENDIX 1. ASSOCIATED POLICIES AND PROCEDURES
- AML & CFT Procedures Manual including:
- KYC and Customer Due Diligence procedures
- Customer Acceptance Policy (CAP)
- Procedure for Internal Suspicious Activity Reporting (“ISAR”)
- Know Your Employee (KYE) Policy
- Departmental Operational guidelines for relevant business divisions
- Senior Management Structure, Roles and Responsibilities Statement
APPENDIX 2. GLOSSARY
- AML – Anti-Money Laundering
- CAP – Customer Acceptance Policy
- CDD – Customer Due Diligence
- CFT – Countering the Financing of Terrorism
- FATF – Financial Action Task Force
- KYC – Know Your Customer
- KYE – Know Your Employee
- MLCO – Money Laundering Compliance Officer