Generative AI and Financial Institutions – MAS Provides Insight on Cyber Risks and Mitigation Measures
Generative Artificial Intelligence (“GenAI“) has proven an innovative and game-changing resource for businesses, while also presenting an array of thorny challenges. While GenAI has been adopted across a wide range of industries, its application to financial institutions (“FIs“) raises some unique issues, both in terms of opportunities and attendant risks.
In light of this, the Monetary Authority of Singapore (“MAS“) has published an information paper on “Cyber Risks Associated with GenAI” (“GenAI Paper“). The GenAI Paper aims to raise FIs’ awareness by highlighting key cyber threats arising from GenAI, the risk implications, and the appropriate mitigation measures that FIs can take.
In this Update, we highlight the key features of the GenAI Paper and what it means for FIs. We also provide an overview of the solutions that Rajah & Tann Technologies and Rajah & Tann Cybersecurity can provide, mapped against the elements of the GenAI Paper.
For more information, click here to read our Legal Update.
New Screening Report Requirement for S13O, S13U Tax Incentive Applications by Family Offices
In December 2023, the Monetary Authority of Singapore (“MAS“) extended the scope of due diligence checks to a wider group of individuals and entities associated with family offices who are applying for tax incentives. Depending on the screening results, applicants may be required to provide further documents to support their application.
On 5 August 2024, MAS published a list of specialist firms that may conduct these screening checks on family offices (“Screening Service Providers“) for money laundering and terrorism financing risks. It also stipulated that all new tax incentive applications for fund vehicles managed by family offices must be accompanied by a screening report issued by a Screening Service Provider, beginning from 1 October 2024.
This new requirement is part of a series of moves by MAS to heighten regulatory scrutiny of family offices, with a focus on money laundering risks. In this Update, we look at the new requirement and comment on the broader context of its implementation.
For more information, click here to read our Legal Update.
MAS Circular Provides Further Guidance for FIs in Wealth Management Sector on Establishing Sources of Wealth of Customers
On 26 July 2024, the Monetary Authority of Singapore (“MAS“) issued the Circular titled “Establishing the Sources of Wealth of Customers” (Circular No.: AMLD 08/2024) (“Circular“). The Circular applies to all financial institutions in the wealth management sector in Singapore (“FIs“). The Circular provides further guidance on the establishment of the sources of wealth (“SOW“) of customers and their beneficial owners before business relations with customers can be established.
In summary, the Circular emphasises the existing requirements for FIs to take appropriate and reasonable means to establish the SOW of customers and independently corroborate information obtained from customers against documentary evidence or public information sources.
The Circular provides that FIs should take the following steps:
- Ensure that their policies and procedures to establish the SOW of customers are risk-proportionate and reasonable, taking into account the unique circumstances and profile of each customer.
- Consider the risk principles of materiality, prudence and relevance when designing their policies and procedures to establish the SOW of customers.
- Ensure that their senior management should: (i) exercise close oversight over higher risk accounts and transactions; and (ii) ensure that ongoing monitoring controls take into account the customer’s risk profile.
For more information, click here to read our Legal Update which outlines the key guidance under the Circular.
Singapore and the Philippines Enter into MOU to Collaborate on Carbon Credits Aligned with Article 6 of Paris Agreement
On 15 August 2024, Singapore and the Philippines signed a Memorandum of Understanding (“MOU“) to collaborate on carbon credits in alignment with Article 6 of the Paris Agreement (“Article 6“). Article 6 allows countries to cooperate to achieve emission targets set out in their Nationally Determined Contribution (“NDC“).
Under the MOU, both countries will aim to:
- work towards a legally binding Implementation Agreement that sets out a bilateral framework for the international transfer of correspondingly adjusted carbon credits, including the criteria for transfer of carbon credits under Article 6; and
- identify potential Article 6-compliant mitigation projects which can support both countries to achieve their respective NDCs. The Philippines has strong potential for carbon credit projects such as nature-based projects (e.g. blue carbon and forestry projects), renewable energy projects, and transition credits from the early retirement of coal-fired power plants.
The MOU signals the commitment of both countries to advance high-integrity carbon markets and promote sustainable development.
The MOU was signed by Singapore’s Minister of Sustainability and the Environment and Minister-in-Charge of Trade Relations Ms Grace Fu, and Secretary of the Philippine Department of Environment and Natural Resources Ms Maria Antonia Yulo-Loyzaga during President Tharman’s State Visit to the Philippines, which marked the 55th anniversary of diplomatic relations between Singapore and the Philippines.
Singapore aims to achieve net zero emissions by 2050, and is committed to advancing global climate action through international collaboration with like-minded partners.
ACRA Enhances Corporate Compliance Regime to Combat Money Laundering
As Singapore’s corporate regulator, the Accounting and Corporate Regulatory Authority (“ACRA“) regularly updates and enhances legislation under its administration. This has become particularly important in light of the rising threat of money laundering, which has necessitated greater vigilance and corporate compliance.
As part of its regular review, and to strengthen Singapore’s anti-money laundering regime, ACRA proposed a number of legislative amendments to the corporate compliance regime. These amendments have since been passed in Parliament on 2 July 2024:
- Corporate Service Providers Act, which aims to enhance the regulatory regime for the Corporate Service Provider sector;
- Companies and Limited Liability Partnerships (Miscellaneous Amendments) Act, which aims to enhance the transparency of the beneficial ownership of companies and limited liability partnerships; and
- ACRA (Registry and Regulatory Enhancements) Act, which aims to bolster data protection, facilitate digital communications between the Government and businesses, and enhance the regulatory framework for entities under ACRA’s purview,
(collectively, “Acts“).
Among other changes, the Acts introduce new obligations and restrictions on corporate entities in relation to the maintenance of registers, nominee directors and shareholders, and personal data filed with ACRA. The Acts have yet to come into force.
This Update highlights the key features of the Acts and the compliance measures therein, as well as the indicated timelines for implementation.
For more information, click here to read our Legal Update.
Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice
