The MAS has issued a circular to all financial institutions on establishing the sources of wealth ("SOW") of customers ("Circular"). The Circular is intended to provide guidance to FIs in the wealth management sector on the establishment of SOW of their customers before business relations are established.
The Circular highlights that FIs should take appropriate and reasonable means to establish the SOW of their customers and independently corroborate information obtained from the customers against documentary evidence or public information sources. In designing policies and procedures to establish customers' SOW, FIs should take into account the following principles: (1) Materiality – where it is not possible to corroborate some SOW, FIs should focus on corroborating SOW that are more material or of a higher risk profile, and also consider if the residual risk of uncorroborated SOW is acceptable to the FI; (2) Prudence – FIS should ensure that any benchmarks or assumptions used are reasonable and appropriate. They should not simply be used to justify explanations by the customer where their reasons that cast suspicion on the SOW; (3) Relevance – FIs should obtain pertinent and fit for purpose corroborative evidence of its customer's SOW to the extent practicable. In this regard, FIs should exercise reasonable judgment in determining which documents are critical or corroborating a SOW, and which they may do without. Where possible, they should rely on independent and credible public sources to support their assessment of the customer's SOW.
The Circular also reminds FIs that establishing its customers' SOW should be part of a wider set of AML/CFT controls to ensure the legitimacy of their customers’ wealth and transactions, and senior management should also continue to exercise close oversight over higher risk accounts and ensure that ongoing monitoring controls take into account the customer’s risk profile. The Circular can be accessed here.
Our Financial Services Regulatory Practice has advised on a broad range of issues that concern Financial Institutions, including AML/CFT related obligations and requirements. Reach out to our Financial Services Regulatory Practice Partners Elaine Chan, Rosabel Ng, Chan Jia Hui, Tian Sion Yoong, or find out more about our practice here.