Financial institutions operating in Singapore, such as holders of a capital market services (“CMS”) licence and payment service providers (“PSPs”), are required to comply with anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”) regulations. One of the key obligations is the timely filing of suspicious transaction reports (“STRs”) with the Suspicious Transaction Reporting Office (STRO), a division of the Commercial Affairs Department (CAD) of the Singapore Police Force
(SPF).

This article provides an overview of the legal requirements, indicators of suspicious transactions, and the process for filing an STR to help financial institutions remain compliant.

Legal and Regulatory Framework

The following key regulations govern the obligation to file an STR:

• Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act 1992 (“CDSA”)
• Terrorism (Suppression of Financing) Act 2002 (“TSOFA”)
• Notices and guidelines by the Monetary Authority of Singapore (MAS), namely
  • MAS Notice SFA04-N02 for CMS license holders, or
  • MAS Notice PSN01 or PSN02 for payment service providers

Under these laws and regulations, financial institutions must promptly file an STR when they have reasonable grounds to suspect that a transaction is connected to criminal conduct, money laundering (“ML”), or terrorism financing (“TF”). At the latest, they are to submit the STR within 15 business days from their discovery of the suspicious transaction (para. 13-1 Guidelines to SFA04-02 for CMS licence holders and para. 18-1 Guidelines to PSN01 or para. 16-1 Guidelines to PSN02 for PSPs)

STRs filed by Financial Institutions in Singapore

As per information published by the Singapore Police Force (“SPF”)1, the number of STRs filed increased significantly in the past years.

Year     Number of STR Filed    % Increase
2020    33,882
2021    45,897                               35%
2022    49,846                               9%

By far most STRs were submitted by banks. In 2021, they submitted 60% of all STRs, and in 2022, 58%.

Indicators of Suspicious Transactions

All financial institutions should identify red flags common to their type of business and, more specifically, to their company’s specific business. They should list these red flags in their procedures and include them in the AML/CFT training of their staff.

While not exhaustive, the following are common red flags that may warrant an STR filing:

• Transactions involving unusually large amounts with no clear economic purpose;
• Request by a customer for investment management services where the source of funds is unclear or not consistent with the customer’s apparent standing;
• An account operated in the name of an offshore company with structured movement of funds;
• Cross-border transactions involving the acquisition or disposal of high-value assets that cannot be clearly identified as bona fide transactions;
• Transactions linked to high-risk jurisdictions identified by the Financial Action Task Force (FATF);
• Customers unwilling to provide information on the source of funds or the purpose of transactions;
• The customer uses intermediaries that are not subject to adequate AML/CFT laws;
• A customer relationship with a payment service provider in which a customer has a large number of accounts with the same payment service provider and frequently transfers between different accounts;
• Concentration of payments where multiple senders transfer money to a single individual’s account;
• Frequent changes to the customer’s address or authorized signatories;
• Customers are in a hurry to complete the transaction, with promises to provide the supporting information later;
• Funds or digital payment tokens (“DPT”, commonly referred to as cryptocurrencies) used by a customer to settle his obligations are from a source that appears to have no explicit or direct links to the customer;
• Frequent changes in the customer’s identification information, such as home address, IP address, or linked bank accounts/wallet addresses.

Refer to the MAS’ AML Guidelines applicable to your type of business for further examples of red flags that are specific to your type of business (Guidelines to SFA04-N02 for holders of a CMS licence, e.g. for fund management or dealing in capital markets products, Guidelines to PSN01 for PSPs offering fiat payment services such as domestic or cross-border money transfer service, merchant acquisition service, or account issuance service, or Guidelines to PSN02 for PSPs providing digital payment token, i.e. cryptocurrency, service).

Filing an STR: Step-by-Step Process

Identify and Assess the Suspicious Transaction

• Staff carrying out various tasks may identify suspicious transactions either at the time of onboarding or throughout a customer’s relationship life cycle. Suspicious transactions and other new information indicating an ML/TF risk can also be identified through automated monitoring systems. These systems continuously monitor/screen the customers and analyse transaction patterns, customer behaviour, and predefined rules. The systems help flag information and anomalies that could be potential red flags compared to the customer’s profile, prompting further investigation by compliance teams.
• The staff who identifies the suspicious transaction should escalate their suspicion to their compliance team or money laundering reporting officer (“MLRO”), as indicated in your AML/CFT policies and procedures.
• Once escalated to the compliance team or MLRO, they will conduct internal investigations and review the transaction in question.

Complete the STR Form and Submit it to STRO

• The MLRO or a compliance officer may access the STR form via the STRO Online Notices and Reporting (“SONAR”) system and electronically submit the completed STR form.
• In the STR form, you must provide details such as transaction amounts, counterparties, account details, and the basis of suspicion, and supporting documents (e.g., transaction records and emails) should be attached where relevant.

Maintain Confidentiality

The fact that an STR has been filed must not be disclosed to the customer. Tipping-off is an offence under the CDSA and TSOFA. Even internally, this information should only be on a need-to-know basis.

Ongoing Monitoring and Internal Reporting

• Even after the submission, you must continue monitoring the account for further suspicious activity, possibly even conducting enhanced monitoring.
• Moreover, you should consider additional control measures and implement them, as appropriate.
• Don’t forget to maintain proper internal records of the STR submission and any follow-up actions.

Compliance Best Practices

The filing of STRs is part of your comprehensive AML/CFT framework. It must be properly embedded and connected within your entire framework to effectively detect suspicious transactions (and adverse information) and ensure their proper filing through STRs.

• Establish a robust AML/CFT framework, including internal policies and training programs.
• Ensure all employees are aware of their obligations and are trained in identifying suspicious transactions.
• Regularly review transaction monitoring systems to enhance detection capabilities and fine tune to keep them relevant.
• Maintain a log of cases where an STR was filed and circumstances where it was decided not to file an STR with a rationale for the decision.
• File the STR as soon as investigations are completed, and the facts have been established. At the latest, you should file the STR within 15 business days after the discovery of the suspicious transaction.
• Cooperate fully with regulatory authorities and provide additional information when required.

Conclusion

Filing STRs is a critical compliance requirement under Singapore’s AML/CFT regulations. Capital Market Services license holders and Payment Service Providers must establish strong internal controls to detect and report suspicious transactions in a timely and accurate manner. Failure to comply may result in regulatory penalties and reputational damage. Staying vigilant and adhering to legal obligations will help financial institutions contribute to Singapore’s efforts in combating financial crimes.

How We Can Help

We at Ingenia Consultants Pte. Ltd. support our clients in navigating their anti-money laundering requirements, including the filing of STRs. We specialize in helping our clients comply with these regulatory obligations, by developing appropriate policies and procedures. For any further information, please contact:

Vijay Bharadwaj

Director

Ingenia Consultants Pte. Ltd.

vijay.bharadwaj@ingenia-consultants.com