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MAS joining the dots on illicit fund flows with data analytics

Regulator also flags risks of financial exclusion as some ex-offenders being denied banking services

This perhaps sums up the potential behind the use of data analytics and information-sharing within the financial industry in combating financial crime, with the Monetary Authority of Singapore (MAS) looking to ramp up efforts in this area.


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This perhaps sums up the potential behind the use of data analytics and information-sharing within the financial industry in combating financial crime, with the Monetary Authority of Singapore (MAS) looking to ramp up efforts in this area.

Speaking at a financial crime seminar held by the Association of Banks in Singapore, Ho Hern Shin, MAS' assistant managing director of the banking and insurance group, said the regulator has applied data analytics to the suspicious transaction reports (STRs), of which there are more than 25,000 annually. These STRs are flagged by the financial institutions due to suspicions over illicit fund flows.

"Applying data analytics to this data set has enabled us to identify suspicious fund-flow networks, and focus our supervisory attention on networks of higher-risk accounts, entities or activities," she said.

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MAS will also glean better machine readability of the reports' data when a revised form and reporting platform is introduced next month.

"Technology, and in particular data analytics, can significantly augment our ability to identify higher-risk areas, and both the industry and MAS have begun to invest great efforts to tap it," said Ms Ho, noting that a report is forthcoming from an industry working group on data analytics applications.

MAS has also used more thematic-based inspections and supervisory visits to "connect the dots more quickly across financial institutions" to spot key risks and best practices, she said. The regulator also intends to make public its key findings from such visits.

It has observed that criminals continue to misuse front companies to trade with prohibited entities or countries. This is known as proliferation financing.

Some banks - which Ms Ho did not name - have now been nudged into taking additional measures to identify and mitigate their proliferation financing risks. This includes corroborating shipping information provided by customers with sources from third-party service providers, such as Lloyd's List and the International Maritime Bureau.

"Some banks have also taken proactive steps to conduct a comprehensive review of their customer databases, to identify customers who have previously transacted with individuals or entities of proliferation concern, for closer scrutiny and review."

Ms Ho also said that a private-public partnership on money laundering and terrorism financing launched in April 2017 "has been helpful" but could be improved. This could be through the sharing of more detailed contexts so financial institutions can mount more targeted checks.

"We are now actively considering how we can improve the process of information-sharing with financial institutions for this purpose," she added.

While there has been greater use of digital technology to suss out financial crime, there is a risk of financial exclusion. In this regard, she stressed that banks have a role in providing access to basic financial services, including to ex-offenders.

This comes as the regulator has occasionally received feedback from ex-offenders who have been denied a bank account.

"Even though Singapore is a highly-banked country, there are pockets of society that still appear to be excluded," she said.

"In today's increasingly digital economy, an individual's access to a bank account linked to card facilities is a bare necessity."

MAS will explore ideas with banks on creating basic bank accounts for individuals. These accounts should allow the customer to perform daily functions, but should also come with restrictions to block the risks of the accounts being misused.

She called on the banks to be "discerning" in opening and maintaining customer relationships, even as the lenders adopt more fine-grained and sophisticated techniques to identify and mitigate money laundering and terrorism financing risks.

Ms Ho said the move to strengthen anti-money laundering standards is not intended "to burden banks with disproportionate monitoring of bank accounts".

"It is important to strike a balance between addressing money-laundering and terrorism financing risks and meeting basic banking needs. Banks should not avoid entire classes of customers altogether."

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