Singapore’s first industry-led best practice paper to enhance Anti-money laundering/countering the financing of terrorism (AML/CFT) audits in banks was launched today by The Association of Banks in Singapore (ABS), in partnership with the Anti-Money Laundering Audit Peer Group (AAPG).

Developed by the AAPG since October 2022 in consultation with industry and professional associations, the “AAPG Best Practice Paper – Enhancing AML/CFT Audit Effectiveness for Banks” seeks to boost AML/CFT auditing standards in Singapore’s financial sector by providing both bank internal auditors as well as external auditors that work with banks a common framework to formulate and execute AML/CFT audits.

In the paper, the AAPG sets out Baseline Standards and Best Practices for auditors to consider when conducting AML/CFT audits in banks, referencing practices of banks and audit firms that contributed to AAPG’s benchmarking survey in 2023. Baseline Standards set out expected minimum audit standards and practices that internal and external auditors should adopt, while Best Practices refer to existing good practices which auditors are encouraged to adopt in line with the risk profiles of their bank or clients.

Building on the findings of the survey, the AAPG developed detailed guidance on several focus areas for both internal audit and external audit functions, such as risk assessment, the scope and methodology of audits, reporting and following up on findings, as well as the nature and extent of external audit coverage. In addition to the focus areas, the AAPG noted that more banks have adopted data analytics as part of their AML/CFT audits to good outcomes. This has helped to identify higher risk customers/segments for closer audit scrutiny more sharply. Case studies have been included on how financial institutions could deploy analytics to enhance their AML/CFT audit processes.

Ong-Ang Ai Boon, director, ABS, said: “ABS welcomes the AAPG’s initiative to develop this first set of best practices to guide internal and external auditors in their conduct of AML/CFT audits in banks. The guidelines set a common baseline standard for auditors in their assessments of the suitability and effectiveness of a bank’s AML/CFT policies and procedures– and their implementation.”

Loo Siew Yee, assistant managing director, policy payments and financial crime at Monetary Authority of Singapore (MAS), said: “A strong and capable audit function undergirds the effectiveness of financial institutions’ controls against money laundering and terrorism financing. We welcome the industry-led initiative by the AAPG to set out good practices for audit practitioners, including the use of data analytics and continued innovation of audit approaches.”

Derrick Goh, group head of audit, DBS, and co-chair of the AAPG, said: “The auditing community plays a key role in ensuring that financial institutions continue to stay ahead in the dynamic AML/CFT risk landscape and maintaining Singapore’s position as a trusted financial hub. This inaugural best practice paper is an important milestone since the AAPG’s formation two years ago, to guide the financial industry towards strengthening AML/CFT audit practices.

“I would like to thank AAPG members for their contributions and active sharing of ideas, including the innovative use of data analytics, to uplift auditing standards in the industry.”

Harry Lim, group head of audit, OCBC, and co-chair of the AAPG, said: “Thorough and robust AML/CFT audits are important in the detection and prevention of increasingly sophisticated financial crimes. As a financial hub, Singapore is regarded as a safe haven to do business, and the regulatory and legal environment here make it an ideal springboard for many foreign companies into ASEAN. We hope that this best practice paper will be a valuable resource to financial institutions in giving them guidance for AML/CFT audits and mapping out a framework to assess their controls to mitigate the risks of money laundering and terrorism financing.”

The AAPG is the latest example of how the industry has been addressing money laundering and terrorism financing risks. In 2017, the AML/CFT Industry Partnership, or ACIP, was formed as a private-public partnership bringing together the financial sector, regulators, law enforcement agencies and other government entities to collaboratively identify, assess and mitigate key and emerging money laundering and terrorism financing risks facing Singapore.

Re-disseminated by The Asian Banker