2. Snapshot of key changes

Inclusion of Proliferation Financing in risk assessments – All financial institutions (FIs) are required under the new framework to identify, assess and mitigate the risk that customer funds or assets could be used for the proliferation of weapons of mass destruction, including through dual-use goods or technology as part of usual money laundering and terrorism of financing risk assessments.

Broadened due diligence for trust and legal arrangements – The definition of a “trust-relevant party” has been expanded to expressly capture protectors, classes of beneficiaries, objects of a power and any other person exercising powers under a legal arrangement. Full identification and verification of these persons, and of any natural person exercising ultimate effective control, is now mandatory.

Accelerated Suspicious Transaction Report timelines – The timeframe for lodging Suspicious Transaction Reports (STRs) with the Suspicious Transaction Reporting Office has been reduced from 15 business days to five (5) business days after suspicion arises. Where the suspicion involves a sanctioned person or someone acting on their behalf, the STR should be filed as soon as possible and no later than one (1) business day. The previous requirement to send a duplicate copy to MAS automatically has been removed and copies should be provided only upon MAS request. Where further suspicion is raised in relation to the customer or any transaction for the customer, the FI should also assess if filing a further or supplementary STR to report the further suspicion is warranted.

Enhanced supervisory expectations – MAS has also made certain amendments to the AML/CFT Guidelines to reflect its supervisory expectations over the years. These cover areas such as screening, source of wealth (SoW) and source of funds (SoF) establishment and guidance on higher-risk structures. In particular, FIs under the supervision of the MAS will have to:

• Extend screening beyond standard databases to include relevant search engines more closely associated with the nationality, residence or source of wealth of the person being screened, where deemed appropriate using a risk-based approach;
• Facilitate sharing of internal information on customers (minimally including customer due-diligence data and SoW information) across all business lines;
• Provide staff with guidance on identifying fraudulent or tampered data and establishing processes to escalate the observed indicators and relevant mitigation measures;
• Reference MAS’ Money Laundering National Risk Assessment Report, Terrorism Financing National Risk Assessment Report, Proliferation Financing National Risk Assessment Report and other risk assessment reports as part of the enterprise-wide money laundering and terrorism financing (ML/TF) risk assessment process;
• Consider higher risk shell companies as a higher risk category. Characteristics include: unclear economic purpose for requiring an account relationship in Singapore; unclear economic purpose for linking a common individual/address to multiple companies; and the addition of unrelated third parties to operate an account after account opening, for example; and
• File an STR when they are aware that a customer has participated in a tax amnesty programme, adopt a risk-based approach to determine whether to conduct a review of the customer’s account, and where a review raises grounds for suspicion, file a further STR with the findings of the account review.

With specific reference to assessing a customer or beneficial owner’s SoW or SoF, MAS’ latest updates also clarified that:

• SoW includes seed money that generated subsequent wealth and gifts of other assets received by the customer and beneficial owner;
• SoW information should comprise the entire body of wealth that the customer and beneficial owner would be expected to have, as well as the means by which the customer and beneficial owner acquired the wealth;
• A risk-based approach should be adopted for the corroboration of SoW and SoF information;
• Reliable and independent sources of information should be used to establish SoW and SoF where there are higher ML/TF risks;
• Where SoW or SoF that presents higher risks cannot be corroborated, an assessment should be made on whether additional risk mitigation measures are required;
• Where a gift forms a material SoW of the customer or beneficial owner, information should also be obtained to establish the legitimacy and plausibility of such gift. Where it cannot be assessed, whether additional risk mitigation measures are required must be considered based on the residual risks presented;
• An overall assessment should be made on the plausibility and legitimacy of the customer and beneficial owner’s SoW and SoF. Where it cannot be ascertained, considerate should be determined whether there is a need to terminate business relations or file an STR; and
• As part of ongoing monitoring, commensurate risk mitigation measures must be implemented if there are changes to a customer’s risk profile, information and/or transactions that warrant corroboration of the customer’s and any beneficial owner’s SoW and SoF.

3. Regulatory outlook: balancing regulatory integrity and market development

At first glance, the heightened AML/CFT requirements may indicate MAS adopting a stricter stance towards foreign capital sourced outside Singapore.

However, it should be noted that the MAS has stated in the Consultation Paper on Proposed Amendments to AML/CFT Notices and Guidelines that many of the amendments are intended to be clarificatory in nature and primarily serve to formalise best practices already adopted in the industry, rather than to increase the regulatory hurdles for investors using Singapore-based asset management solutions.

Further, MAS’s recent policy initiatives reflect instead a broader strategy to strengthen Singapore’s position as a premier asset and wealth management hub. For example, the Equity Market Development Programme aims to bolster the retail equities market by injecting funds up to S$5 billion into Singapore’s capital markets through allocations provided to Singapore-based asset managers. MAS has also committed to streamlining timelines for tax incentive applications and working with private banks in Singapore to reduce bank account opening timelines for single family offices. In addition, an upcoming unified licensing exemption for single family offices is expected to be announced in due course.

Taken together, these measures, alongside the enhancement of AML/CFT standards, demonstrate MAS’s intention to reaffirm investor confidence and reinforce Singapore’s asset management infrastructure from a wider global perspective.

Taking into further consideration the events and accompanying scrutiny and changes that followed in the aftermath of the 2023 money laundering, breach that occurred in Singapore, it is our view that the enhancements to Singapore’s AML/CFT regulatory framework will further reinforce Singapore’s status as a safe and reputable asset and wealth management hub.

4. Action points for industry stakeholders

In response to the new AML/CFT framework, fund managers and other capital markets intermediaries should consider the following actions:

• Review and update their current AML/CFT policies and compliance manuals to ensure alignment with the latest AML/CFT regulatory framework, with particular focus on enhancing due diligence requirements for trust structures, family offices and high-net-worth clients;
• Schedule training for all staff on new STR timelines, expanded customer due diligence requirements, and identification of fraudulent data; and
• Ensure ongoing monitoring and risk assessment processes are robust and aligned with the latest framework.

5. Final thoughts

The latest AML/CFT regulatory updates by the MAS underscore its dual commitment to establishing a robust regulatory framework in line with global standards whilst providing market transparency, as it continues to enhance and deepen Singapore’s position as an established and well-regulated asset and wealth management hub on the global stage.

As highlighted by the Deputy Chairman of MAS, Mr Chee Hong Tat, at the Global-Asia Family Office Summit in September 2024, “robust regulations and proper safeguards can go hand in hand with an environment that is also business-friendly”. He further emphasised that Singapore’s high standard of regulation aims and is intended to “foster a reputable environment for genuine investments and wealth management activities to flourish and bloom”. This encapsulates the objective of the recent AML/CFT framework updates which aim to uphold stringent AML/CFT standards, thereby ensuring that Singapore continues to be recognised as a reputable and competitive asset and wealth management centrein the global and regional markets.

Moving forward, Singapore-based asset managers should consider the steps outlined above and to speak with their external advisors to support their continued alignment with the ongoing regulatory changes in this space.

Reed Smith LLP is licensed to operate as a foreign law practice in Singapore under the name and style Reed Smith Pte Ltd (hereafter collectively, "Reed Smith"). Where advice on Singapore law is required, we will refer the matter to and work with Reed Smith's Formal Law Alliance partner in Singapore, Resource Law LLC, where necessary.

Client Alert 2025-233