MAS paper on strengthening AML/CFT name screening practices

By selecting a number of financial institutions, mainly banks, merchant banks, and finance companies, MAS determined gaps in the name screening frameworks adopted by the financial institutions. We have summarised the key findings here:

1. 1. Inadequate Senior Management Oversight
      Whilst senior management had adequate access to information to oversee, monitor and deliberate follow-up actions for money laundering/terrorism financing/proliferation financing (ML/TF/PF) risks, there was insufficient oversight on AML/CFT processes, including name screening processes to ensure they were operating well. MAS recommends senior management prevent these lapses which result in true hits being erroneously dismissed.

1. 1. Framework, Policies and Procedures
      It was noted by MAS that some financial institutions failed to:
      • implement tools to perform batch ongoing screening of customers and relevant parties to mitigate human error and to ensure checks are carried out in a timely manner
      • screen former names of customers
      • systematically identify and track the parties that were subject to name screening requirements.

      MAS recommends subscribing to a system solution to enable robust and timely screening. MAS also recommends that AML/CFT policies adequately cover the need to screen former names of customers and entities that require screening.

   2. Screening Parameters and Databases
      MAS noted that financial institutions did not adequately understand, evaluate and regularly review the appropriateness of name screening methodology including parameters. MAS also noted that financial institutions did not enquire and document the information/resources used by screening vendors and did not include certain information sources, relevant to ML/TF/PF related matters in their screening databases. MAS has given some suggestions on optimising name screening permutations and has suggested excluding titles, legal entity statuses such as Pte. Ltd., punctuations and symbols and common words such as &, bin, s/o.
      MAS recommends that staff responsible for setting policies for screening parameters are familiar with the systems and how to conduct effective screening. Appropriate training and regular review of the AML screening providers should be undertaken by financial institutions.

1. Alert Resolution
   MAS noted that financial institutions have used inappropriate criteria to determine relevance of news and did not establish clear documentation standards on name screening. Financial institutions are recommended to establish proper records of assessment of alerts especially for dismissing any alerts. Appropriate second line of defence checks and balances should be regularly conducted to detect possible oversight on handling of alerts.
   Although the thematic review was conducted by MAS on banks and finance companies, recommendations provided in the report are useful for all financial institutions. Name screening is an essential part of the AML/CFT process and in the risk rating of customers. Inadequate practices, lack of robustness in terms of name screening procedures will lead to inaccurate risk rating of customers and prevent financial institutions from taking appropriate steps to mitigate ML/TF/PF risks.

For further details on the report, please refer here.

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