MAS shares recommendations for banks dealing with crypto-related clients

SINGAPORE – The Monetary Authority of Singapore (MAS) has shared a set of guidelines that banks can consider when they deal with clients who have links to digital assets such as exchanges, and individuals whose wealth comes from cryptocurrencies.

Developed by an industry working group and issued on Tuesday, the non-mandatory guidelines are a set of best practices to help financial institutions manage crypto-related money laundering, terrorism financing and sanctions risks.

For instance, the group says enhanced due diligence for transactions on the blockchain may be necessary for firms that are closely linked to the facilitation of crypto transactions.

Site visits or walk-throughs of a client’s anti-money laundering and anti-terrorism financing processes and controls may also be required.

When onboarding clients, the group says banks should request information that documents the nature of a customer’s crypto exposure and the intended usage of the account.

They should also establish the source of the client’s funds or wealth.

Banks should assess the regulatory status of a merchant customer’s crypto-related counterparties if the latter makes up a large volume of the merchant customer’s transactions.

The group adds that blockchain screening tools can be used to review the on-chain activity of digital token payment service providers.

New and existing wallet addresses owned or controlled by these providers should also be screened against the sanctions list and wallets designated by the authorities on a timely basis.

Ms Loretta Yuen, head of OCBC’s legal and compliance team, says the guidelines are “one of the most in-depth of any jurisdiction in the world”, touching on how banks may assess their management of crypto-related money laundering, terrorism financing and sanctions risks.

“The guidelines also provide prospective customers with an awareness of the key risk considerations that banks may focus on; and should enable them to proactively address banks’ onboarding customer due diligence requirements,” she adds.

Ms Evy Theunis, head of digital assets at DBS Bank, says the guidelines codify best practices across the industry and are consistent with the bank’s existing practices.

UOB says the best practice paper is beneficial to financial institutions, especially as there is a wide range of digital assets with differing levels of risks.

The working group includes representatives from eight banks, MAS, the Commercial Affairs Department and audit firm Ernst & Young.

It was set up in August 2022 under the anti-money laundering and countering the financing of terrorism industry partnership (ACIP).

ACIP is a private-public partnership formed in April 2017 to bring together the financial sector, regulators, law enforcement agencies and other government entities to identify, assess and mitigate key money laundering and terrorism financing risks that Singapore faces.