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Financial advisory
RES5Financial Advisory Services✓M5 — RES5 — Rules, Ethics & Skills for Financial Advisory Services
AML/CFT stands for Anti-Money Laundering and Countering the Financing of Terrorism — the MAS framework requiring financial advisers to detect, prevent and report money laundering and terrorism financing. Money laundering (ML) is the process of masking benefits derived from criminal conduct (e.g. drug dealing) so they appear to originate from a legitimate source; terrorism financing (TF) is the provision or collection of funds to carry out terrorist acts. For FAs the operational rules sit in MAS Notice FAA-N06, backed by two criminal statutes (the CDSA and the TSOFA).
8 sections~6 min read
Money laundering (ML) is a process intended to mask the benefits derived from criminal conduct so that they appear to originate from a legitimate source; terrorism financing (TF) is the provision or collection of funds to carry out terrorist acts. Classic ML runs in three stages:
For financial advisers the framework has two limbs:
The Notice rests on three underlying principles: exercise due diligence with customers, persons acting on their behalf, connected parties and beneficial owners; conduct business to high ethical standards and guard against relations/transactions connected with ML/TF; and, to the fullest extent possible, assist and cooperate with Singapore law-enforcement authorities.
Exam note: unlike banks (MAS Notice 626) and payment-service providers, FAA-N06 imposes no wire-transfer / 'travel rule' obligations on financial advisers — do not attribute value-transfer thresholds to FAs.
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AML/CFT stands for Anti-Money Laundering and Countering the Financing of Terrorism. Anti-money laundering (AML) measures aim to stop criminals disguising the proceeds of crime as legitimate funds, while countering the financing of terrorism (CFT) measures aim to stop funds — whether clean or dirty — being collected or provided to support terrorist acts. In Singapore, financial advisers apply these measures under the MAS framework.
In financial advisory, AML/CFT is the set of controls a financial adviser must run to detect and deter money laundering and terrorism financing — chiefly Customer Due Diligence (CDD) to identify and verify each customer and any beneficial owner, ongoing monitoring of the relationship, enhanced checks for higher-risk cases such as politically exposed persons (PEPs), sanctions screening, and filing Suspicious Transaction Reports (STRs). For CMFAS RES5 these obligations sit mainly under MAS Notice FAA-N06, alongside the CDSA and TSOFA. Confirm the current instruments on the MAS website.
AML (anti-money laundering) targets the laundering of the proceeds of crime — disguising illicit money so it looks legitimate. CFT (countering the financing of terrorism) targets the funding of terrorism, which can involve money drawn from entirely legal sources. The controls overlap heavily — CDD, ongoing monitoring, sanctions screening and suspicious-transaction reporting serve both — which is why the regime is written and examined together as 'AML/CFT'.
For financial advisers, MAS sets the AML/CFT requirements mainly through MAS Notice FAA-N06 (issued under the Monetary Authority of Singapore Act). The underlying criminal offences sit in the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA) for money laundering, and the Terrorism (Suppression of Financing) Act (TSOFA) for terrorism financing. These instruments are updated over time, so verify against the current versions on the MAS website.
An FA must identify, assess and understand its ML/TF risks across its customers, the countries/jurisdictions its customers are from or in, the jurisdictions it operates in, and its products, services, transactions and delivery channels. It must document those assessments, keep them up to date, give MAS access to them, and apply senior-management-approved mitigation (enhanced measures where higher risks are identified).
The FA must also assess ML/TF risks arising from new products, practices and technologies before launch, paying special attention to any that favour anonymity.
CDD (paragraphs 6, 7 and 8 of the Notice) must be performed when the FA:
An FA must not open or maintain an anonymous or fictitious-name account. Where, before establishing relations or undertaking a transaction, the FA has reasonable grounds to suspect the funds are criminal proceeds (CDSA) or terrorism-related property (TSOFA), it must not proceed and must file an STR (with a copy to MAS).