The Monetary Authority of Singapore (MAS) recently strengthened how Regulated Financial Institutions (FIs) in Singapore establish Sources of Wealth for customers and their Beneficial Owners. This is part of an array of new circulars, guidelines, and announcements MAS has issued.

One of the recent circulars, released on 26 July 2024, places a strong emphasis on establishing the Sources of Wealth (SOW) of customers and their Beneficial Owners (BOs). The circular highlights two priorities. First, understanding the nature of the customer’s SOW. Second, determining a sufficiently independent manner of corroborating it. The need for corroboration may differ based on customer type and risk profile. Generally, the market standard is that higher-risk customers justify more detailed SOW corroboration.

Independent SOW corroboration may include greater scrutiny of the customer’s overall background, profile, profession, and history. This may come from publicly available information, where applicable, as well as information FIs have otherwise obtained on their own. Additionally, FIs should consider the following risk principles when applying this guidance.

Sources of Wealth: Key Risk Principles

Materiality 

FIs should gather detailed information on a customer’s sources of wealth. This helps identify and focus verification on any significant or high-risk SOW. To a certain extent, accuracy might be limited, as it is not possible to verify every detail, especially for older wealth without proper documentation. In such events, FIs should understand when it is material to consider a customer’s whole SOW. Alternatively, they may focus on the committed amount instead.

Prudence

After identifying the material SOW, FIs should obtain reliable sources of information for verification purposes. This includes Audited Reports, or documents independent Third Parties provide, such as tax accountants or brokers. FIs that use certain benchmarks and assumptions for SOW assessments should regularly review their basis for doing so. They should document the relevance of this approach, in accordance with the customer’s risk profile. The benchmarks and assumptions used should help authenticate a customer’s SOW, not justify suspicious SOWs.

Relevance 

FIs should seek relevant evidence and exercise reasonable judgement in determining essential documents. These documents should reliably assess the customer’s SOW. Where documents for older wealth are unavailable, FIs can utilise independent sources for assessment instead. This includes third-party expertise or credible public sources, rather than relying solely on customer-provided documents.

FIs can establish a customer’s SOW from multiple sources. They will normally determine the SOW based on the declaration provided by the customer. In some instances, FIs may also use the customer’s Source of Funds information to help establish their SOW.  

• Employment Income – this could include salaries, bonuses, or other compensation provided as part of the customer’s employment arrangement. 

This documentation should show details such as the customer’s income for a period, or their role in the company employing them, amongst others.

• Investment Income – this could include dividends from shares, interest from fixed deposits, or capital gains from sale of investments.

Relevant records here should include the buy/sell price of the investment product, or the interest/dividend amount the customer gained from the investment held in their name, amongst others.

• Inheritance – this could include assets inherited from family members or relatives.

Corroborative documentation should show details such as the original ownership of the inherited estate/assets, the size of the estate/assets, the relationship between the parties involved, and when the customer inherited these assets, amongst others. 

The information above provides exemplary guidance, though it is by no means exhaustive, for FIs to follow when corroborating customer SOW. Various other scenarios and documentary requirements may apply for more complex circumstances involving a FI’s customers. 

How Can We Help

If you are unsure how to handle such matters, feel free to reach out to us at Curia Regis. Our team offers comprehensive AML/CFT screening  and compliance policies and procedures  support to help you satisfy your obligations as a FIs in Singapore.

Contact us at admin@curiaregis.com to know more and follow Curia Regis LinkedIn page for updates in the regulatory space.