AML and CDD – understanding the regulations - Waystone

      AML and CDD – understanding the regulations

      What is AML?

      Anti-Money Laundering (AML) regulations are put in place to mitigate the risk of money laundering and terrorism financing. AML is a term used to describe legal controls according to which financial institutions are required to take in actions to detect and prevent money laundering activities. Financial institutions are required to monitor their clients to prevent money laundering and terrorism financing from taking place within their organisation and report any financial crime they detect to the relevant authorities. Financial institutions must put in place an effective Anti-Money Laundering and Countering of Financing of Terrorism (AML/CFT) framework.

      In Singapore, the main legislation that governs money laundering related offences is the Corruption, Drug Trafficking and Other Serious Crime (Confiscation of Benefits) Act (CDSA). The Commercial Affairs Department of Singapore (CAD) enforces the AML/CFT regime in Singapore through detection, investigation and prosecution of money laundering and terrorism financing activities. The Monetary Authority of Singapore (MAS) imposes AML requirements on financial institutions in Singapore.

      What is CDD?

      Customer Due Diligence (CDD) refers, in most cases, to the following:

      • identifying and verifying the identity of the customer (or any beneficial owner in relation to the customer)
      • understanding the purpose and intended nature of the business relationship with the customer
      • ongoing monitoring of the business relationship with the customer.

      Know-Your-Customer (KYC) is the initial process undertaken by the financial institution to identify and verify customer or potential customers. This aims to reveal financial institutions’ potential risks of doing business with a particular organisation or person. KYC and CDD are largely similar but there are some subtle differences. KYC allows the businesses to create a customer risk profile by retrieving data before starting a business relationship. CDD allows an assessment of whether the information provided by customers at the onboarding stage is correct. CDD is often conducted on an ongoing basis for the entirety of the time that there is a customer relationship.

      What are the differences between AML and CDD?

      The main difference between AML and CDD is that AML is a broader term that describes the framework responsible for monitoring AML risks and suspicious transaction activities. AML procedures contribute to avoiding money laundering and terrorism financing activities within the organisation. CDD is often seen as a core component of AML. CDD as part of AML/CFT framework of an organisation enables the individual to understand who their clients are and the risks they bring onto the organisation.

      How can Argus Global assist?

      Argus Global (A Waystone Group Company) offers a team of consultants who specialise in regulatory compliance for financial institutions. We can assist clients with the following:

      • drafting AML/CFT policies and procedures
      • conducting gap analysis on existing policies against MAS regulations pertaining to AML/CFT
      • conducting AML screenings
      • providing regulatory advice on CDD measures undertaken by financial institutions or outsourced vendors, such as fund administrators.

      Please reach out to us for an initial discussion at info@argusglobal.co.

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