MANAGEMENT OF MONEY LAUNDERING (“ML”), TERRORISM FINANCING (“TF”) AND SANCTIONS RISKS FROM CUSTOMER RELATIONSHIPS WITH A NEXUS TO DIGITAL ASSETS

In August 2022, a Digital Assets Risk Management Group was established under the AML/CFT Industry Partnership (“ACIP”) including representatives from the banks (OCBC, SCB, HSBC, JP Morgan, DBS, UOB, Citibank, Maybank), the Monetary Authority of Singapore (“MAS”), the Commercial Affairs Department (“CAD”) and Ernst & Young ('EY'). The objective of the Digital Assets Risk Management Group was to define and share best practices on the management of Money Laundering (“ML”), Terrorism Financing (“TF”), and Sanctions risks arising from customer relationships with a nexus to digital assets.

This paper provides Financial Institutions (“FIs”) with a foundational framework to advance understanding and management of ML/TF, and Sanctions risks arising from customer relationships with nexus to digital assets in the Singapore context by (a) presenting a high-level overview on the classes of digital assets and proposing risk factors for assessing relevance of digital assets from the AML/CFT perspective; (b) identifying the possible types of customer nexus to digital assets such as cryptocurrencies and analysing the underlying risk profiles; and (c) clarifying risk management objectives and assessing incremental risk management capabilities required to manage these associated risks.