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MAS urges banks to improve tech use in financial crime fight

SINGAPORE — The Monetary Authority of Singapore (MAS) has urged banks to make better use of technology and data analytics in their efforts to fight financial crime.

Reuters file photo

Reuters file photo

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SINGAPORE — The Monetary Authority of Singapore (MAS) has urged banks to make better use of technology and data analytics in their efforts to fight financial crime.

With crooks constantly finding more creative ways to commit crimes such as laundering money and funding terrorism, MAS assistant managing director Chua Kim Leng noted that current transaction monitoring systems largely flag transactions based on pre-set rules, thresholds and scenarios. This can lead to a high rate of “false positives” that require extensive human effort to review.

“Throwing more ‘warm bodies’ at the problem is not a sustainable solution,” he said at the Association of Banks in Singapore (ABS) Financial Crime Seminar on Thursday (July 27).

“This is where better use of technology can help. The next generation of surveillance systems utilise sophisticated techniques such as machine learning, which can help identify unusual patterns of transactions across a network of entities and across time.

“These systems show promise and could succeed in picking out suspicious activities that are impossible for the human eye today.”

He stressed that robust KYC (know your customer) processes are the front line of the financial system’s defences but these processes are resource-intensive by their nature.

“A number of banks in Singapore have come together to build a joint utility for KYC processes,” he said.

“The utility can be a platform for raising the waterline for KYC processes across participating banks, and strengthen the adoption of best practices for screening and on-boarding (of new customers). It can free up resources and allow banks to focus on the more complex aspects of customer due diligence and on-going monitoring, including monitoring and investigating unusual and suspicious transactions.”

Mr Chua also urged banks and financial institutions to keep sharing information with the authorities beyond the AML/CFT (anti-money laundering/countering the financing of terrorism) Industry Partnership, or ACIP.

Launched in April, ACIP is a new approach towards public-private collaboration, providing a platform to exchange views and information on industry-wide AML/CFT issues.

He said the sharing of information should extend to a bank’s group-wide operations, as he allayed concerns among some banks that the Banking Act and the Personal Data Protection Act prohibit such disclosure.

“Let me assure you that they do not. Provided that the recipients maintain the confidentiality of the information, banks can share relevant information with their head offices, and any overseas branch or subsidiary designated by the head office, for risk management purposes,” he said.

“I encourage such sharing as a holistic view of a client relationship is essential for a bank to implement a consistent group-wide AML/CFT policy to combat illicit activities.”

The MAS has intensified supervision on financial institutions that have higher inherent ML/terror funding risks, and on control areas found to be lacking from past inspections.

Mr Chua said the inspections go beyond rules-based compliance and focus on an institution’s risk understanding and risk management.

Arising from its extensive review started in March 2015, the MAS has shut down the operations of BSI Bank and Falcon Bank due to egregious failures of AML controls and improper conduct by senior management at the two Swiss-based private banks. Financial penalties totalling S$29.1 million have also been imposed on eight banks — BSI (S$13.3 million), Standard Chartered (S$5.2 million), Falcon (S$4.3 million), Coutts (S$2.4 million), UBS (S$1.3 million), DBS (S$1 million), UOB (S$900,000) and Credit Suisse (S$700,000) for AML lapses relating to transactions involving state fund 1Malaysia Development Berhad.

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