Friday, July 22, 2016

Money laundering activities

Three banks in Singapore, DBS, Standard Chartered and UBS, are cited by the Monetary Authority of Singapore for lapses in the monitoring and reporting of transactions that are suspected to be money laundering. See this report.

I understand that banks also have to monitor transactions that are linked to "financing of terrorism".

Frankly, I do not blame the banks for these lapses. I blame the MAS.

It is easy for MAS to tell the banks to monitor and report "suspicious transactions" but what are these transactions? How are they to be identified? Does MAS take the lead in guiding the banks on this responsibility?

It is easy to know that certain people are involved in money laundering or illegal activities after the facts are known, and then trace their transactions. It is difficult to know that these people are suspects in the first place.

In their blind attempt to implement these regulations, banks have resorted to ineffective practices of spending a lot of unproductive time to monitor ordinary citizens opening bank accounts, I have to spend two hours to open two bank accounts just to place a fixed deposit. This is ridiculous.

If MAS really wants to tackle the roots of the problem and to have a more effective monitoring system, they have to take a different approach. Here are my suggestions.

a) Allow people to open bank accounts without the unnecessary hassle.
b) Require banks to ask for the reason and source of funds for transfers that exceed a threshold per transaction and for each month. These transactions are to be reported to a central database managed by MAS
c) Require banks to report transactions made by certain persons who are on a blacklist maintained by MAS in the central database. These are people who are suspected to be linked to money laundering or financing of terrorism.

This monitoring and reporting will involve the collection of large volume of transactions. MAS can implement algorithms to monitor these transactions and identify those transactions that need to further investigated.

The problem can be dealt with more effectively, if MAS takes the responsibility. Will they?

1 comment:

Yujuan said...

All 3 banks are just given a slap on the wrist, pay heed they are in own way politically connected.
Onus on banks' responsibility to do monitoring of large transactions within their respective banks, and then report to MAS.
In this Internet connected world, strange that MAS were in the dark, so either sleeping on the job, or dida apa till a breaking news' event exposed. Senang, could act blur and point fingers to abstain itself from responsibility as Regulator.

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