INTERSHORES I Top 3 AML Trends in 2022 - What Does It Mean To An Entrepreneur

Evolution of advanced technology offered business opportunity on one hand but regulators need to develop artificial intelligence (AI) to detect sophisticated hidden financial crime on the other.   Businessmen have to prepare themselves for more anti-money laundering  (AML) regulation in the foregoing.  Below are the key AML trends in 2022 which will affect your business.


1.   Using Advanced Technology

AI has played a pivotal role in automating processes applicable to AML such as risk scoring, creating risk portfolio, consolidation of customer due diligence (CDD) data and screening process (for example Politically Exposed Persons, sanction, watchlist and adverse media screening).  Banks or financial institutions always adopt risk based approach allocating more financial resources in AI for CDD name screening, transaction monitoring and ongoing monitoring process.


For example, UOB in Singapore adopted AI in transaction monitoring of its AML/CFT measures analyzing 60,000 account names monthly against global watch lists. Through machine learning techniques in transaction monitoring, false positive risk assessment is greatly reduced.


Besides banks or financial institutions, professional practice like law firms, accountants, trust and company service providers have adopted AML/CFT measures using their best available technology resources (or outsourcing the AML function with vendors in provision of AML/CFT services) for on-boarding customers and ongoing monitoring as well. 


2.   More Crypto Regulations

Cryptocurrency becomes an alternative to cross border transaction nowadays.  Government used to be very liberal towards cryptocurrency in provocation of financial technology related business.  The unique feature of anonymity of crypto transaction has resulted in a loss from crypto-related crime reaching a sky rocking figure of US$14 billion in 2021, a rose of 79% from 2020.   Call for monitoring of Virtual Asset Service Provider (VASP) and virtual assets has been initiated from the international policy-making body Financial Action Task Force (FATF) who has issued guidance on VASP and virtual assets with full support in G20.


Hong Kong and Singapore have already put in place in combating crypto-related crimes.


i.    Hong Kong -  Introduction of a Licensing Regime for Virtual Asset Services Providers

The Financial Services and the Treasury Bureau upgraded the  Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO)  requiring an entity who intends to operate a virtual asset exchange to apply for a license from the Securities and Futures Commission (SFC).  


ii.   Singapore - Strengthening AML/CFT Controls of Digital Payment Token Service Providers

By amendments to the Payment Services Act 2019 (PSA) in 2021, the power of Monetary Authority of Singapore (MAS) is broadened that on the exchange of Digital Payment Tokens (DPTs) where service providers do not come into possession with the money or DPTs involved in a transaction may now come under the regulation of MAS.  MAS also published a new infographic setting out supervisory expectations on AML/CFT controls for the DPT sector.  


More and more regulations for crypto related business will be expected.


3.   Information Sharing Beyond the Private Sector

Financial crimes become more sophisticated.   FATF places great emphasis on information sharing and has issued guidance on private sector information sharing and standards on information sharing. 


i.   Hong Kong Launched Anti-Money Laundering Regtech Lab — AMLab

The Hong Kong Monetary Authority (HKMA) launched an AML RegTech Lab (AMLab) in November 2021, promoting information sharing through public-private partnership efforts as one of the key focus of AMLab. As a trial, 5 banks experiment with network diagrams in identifying suspected money mule accounts, learn how to organize data for analysis, and discover how to apply network analytics to identify money laundering risks.  


ii.   Singapore's First Digital Information Sharing Platforms — COSMIC

MAS has introduced the first digital information sharing platforms, the Collaborative Sharing of ML/TF Information and Cases (COSMIC), which allows financial institutions to warn each other about unusual activities on their customers’ accounts.  Information sharing will soon become a norm.


Measures for entrepreneurs 

1.   Evaluate your current business partners and customers, screen your new partners/customers and put a system in place for on-going monitoring to mitigate sanction risk by United Nation or country-specific sanction or US Treasury's Office of Foreign Assets Control (OFAC) sanction.


2.   Build up a closer relation with your banker and let them know about your business activities.  To play safe, let them know when there is a large transfer in or out.


3.   Diversify your risk by having more than 1 bank account or business account of payment institution.


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Whilst reasonable care has been taken in provision of information above, it does not constitute legal or other professional advice. INTERSHORES does not accept any responsibility, legal or otherwise, for any error omission and accepts no responsibility for any financial or other loss or damage that may result from its use.  In particular, readers are advised to take appropriate professional advice before committing themselves to any involvement in jurisdictions, vehicles or practice.










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