News & insights

PLENITUDE INSIGHTS: Navigating the Maze

Written by Valentina Pegolo | Aug 28, 2024 6:19:37 AM

The Asia-Pacific (APAC) region is experiencing a trend towards stricter Anti-Money Laundering (AML) and fraud regulations. This trend accelerated in Hong Kong and Singapore when authorities uncovered several organised money laundering networks, which were moving illicit funds originating from scams and illegal gambling operations based in South East Asia. A series of successful law enforcement operations throughout 2023 and 2024 highlighted the scale, sophistication, and global reach of these criminal networks. This included the disruption of the biggest money laundering operation in Singapore’s history. The uncovering of these networks prompted regulators in the two financial hubs to review gaps in existing AML frameworks, and to take action to strengthen existing regulations, with Singapore’s new Anti-money Laundering and Other Matters (AMLOM) bill passed on 06 August being the latest example of this.

Operations uncovered vulnerabilities in routine compliance checks in key sectors, which criminals exploited as entry points to the APAC financial system. These sectors included digital assets, precious metals and precious stones dealers, real estate, high-value items dealers, wealth management, corporate service providers, and Single Family Offices. Regulators found widespread deficiencies in key financial crime control areas, such as Enhanced Due Diligence, Transaction Monitoring, and Suspicious Activity Reporting. The banking sector as a whole has also come under increased scrutiny for posing the highest ML risks to Singapore, as stated by MAS in its latest National Risk Assessment.

The exposure of these weaknesses emphasises the need for firms to continuously review and uplift their controls in line with evolving threats and ever-changing regulations. Several global and domestic based financial institutions (FI) were left with tens or hundreds of SG$ millions in AML exposure, underscoring the cost of inadequate financial crime controls. As a response, regulators in Hong Kong and Singapore have strengthened financial crime requirements across the key sectors. Efforts have also been re-focused on improving private-private and private-public cooperation in order to counter growing fraud and money laundering, launching new information-sharing platforms such as Hong Kong's FINEST and Singapore’s COSMIC. Overall, these events reignited the regulators’ preoccupation with combating fraud, as well as their concerns about faltering in the ‘culture of compliance’. The UK and the EU, also worried about the increasing social and economic cost of fraud, are equally working to close the gaps in AML and fraud regulations, making this a global trend.

This paper aims to outline key aspects of the recent law enforcement operations and the resulting regulatory responses in Singapore and Hong Kong, showcasing a visualisation of the full scale of the criminal networks disrupted (see Map 1 and Map 2), and providing relevant firms with a starting roadmap for uplifting their AML and fraud controls. To stay on top of the fast-paced compliance landscape in the APAC region, firms should consider:

  • reviewing and uplifting policies, standards and procedures to ensure they fully comply with regulatory requirements and guidance, in particular requirements around CDD and EDD;
  • reviewing and optimising their existing Transaction Monitoring solutions and consider supplementing their existing systems with state-of-the art RegTech solutions;
  • investing in upskilling staff so they are better equipped to apply AML and fraud standards more effectively, as well as to detect potential financial crime or fraud;
  • enhancing Management Information Systems in order to monitor existing and emerging threats more effectively; and
  • improving risk assessments to ensure they adequately cover evolving transnational criminal threats and assess ongoing control effectiveness.