Regulators, banks to use data analytics to combat financial crime

Regulators, banks to use data analytics to combat financial crime

In a bid to boost the fight against money laundering and terrorism financing schemes, banks here may soon be sharing a standard format of data submission and risk analytics with regulators and law enforcement agencies. 

SINGAPORE: In a bid to boost the fight against money laundering and terrorism financing schemes, banks here may soon be sharing a standard format of data submission and risk analytics with regulators and law enforcement agencies. 

This follows recommendations released on Monday (May 14) by Anti-Money Laundering and Countering the Financing of Terrorism Industry Partnership (ACIP), a pact formed in April 2017 between the government and private companies in the financial industry as well as the Association of Banks in Singapore (ABS).

In a report, the partnership recommended that agencies such as the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD) collaborate with financial institutions on data analytics.

It is hoped that this will help them detect money-laundering activities, such as those seen in the 1MDB scandal that involved several banks in Singapore, and weed out terrorism financiers.

Currently there is no standardised format for banks to submit their data, which makes it difficult for MAS to analyse it and detect suspicious patterns.

Speaking at an industry dialogue, special advisor of MAS’ financial supervision group Chua Kim Leng said that the regulator has managed to identity suspicious transaction reports across banks using network analysis.

“Data analytics has helped us better identify problem areas,” said Mr Chua.

“This has made our inspections more focused and effective, and has yielded findings that would be more useful to the banks in enhancing their anti-money laundering and counter-terrorism financing systems and implementation.”

The partnership also recommended that a central register of owners of legal entities incorporated in Singapore be set up, so that banks will find it easier to identify owners who may not be directly connected to these legal entities.

The release of the recommendations comes in the wake of the 1MDB scandal, which saw several banks in Singapore fined for money laundering activities.

IDENTIFYING "RED-FLAG" BEHAVIOURS

The papers highlighted some of the latest and established methods used to carry out financial crime, so that financial institutions can look out for such "red-flag" behaviours or transaction patterns to better detect illegal financial activities.

One recurring method that authorities continue to find is the suspicious “round-tripping” of funds through companies controlled by the same or related individuals.

One example, explained by Mr Chua, is how a network of several companies, which were incorporated in various countries, had all of its bank accounts in Singapore, controlled by the same person. Large sums of money were transferred from one company to another before being returned within a short period of time under the guise of "repayment of loans".

A new and emerging method to carry out financial crime is the use of entities with names similar to established companies so that banks will believe that the entity in question is related to or is the equivalent to the legitimate company.

CAD director David Chew, who was speaking as the same industry dialogue, said: “Criminals are constantly exploring new ways to exploit our financial system to launder their criminal proceeds and evade detection by law enforcement.”

Mr Chew added that ABS and the Institute of Banking and Finance will include recommendations from both papers into their future training.

CAD’s Suspicious Transaction Reporting Office will also update its guidelines on what constitutes “red-flag” behaviours as highlighted in the papers as a reference for all reporting entities.

Source: CNA/aa(ra)

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