Risk Insights Newsletter: No. 4

Good day, everyone! Sharing this week’s updates as follows. Don’t hesitate to reach out - happy to discuss any of the following and its impact upon your business.

1. Thailand - Alleged Links to Burmese Military via the Banking Sector

   The UN published a report identifying Thailand’s Siam Commercial Bank, Bangkok Bank, Kasikorn Bank, TMB Thanachart Bank and Krung Thai Bank among those allegedly facilitating banking services to Burmese institutions controlled by the country’s military. Thailand’s Bankers’ Association denied the report’s findings. The Bank of Thailand, the country’s central bank, and the Anti-Money Laundering Office (AMLO) advised financial institutions to strictly adhere to KYC and EDD procedures for both customers and their transactions, as outlined by the AMLO. Interestingly, the report coincides with Thailand’s efforts to secure a seat on the UN Human Rights Council due September this year.

2. Singapore - Working Group on Banks’ SOW Checks

   The Monetary Authority of Singapore (MAS) recently set up a working group, which includes representatives from local and global banks, to look into how banks perform KYC checks at account opening and verify the clients’ source of wealth (SOW). Uneven standards on how banks verify client-related information is the key concern. The aim is to come up with the standardized process and the best practices by the year-end. Sources asked not to be named, as discussions are private. Other ongoing efforts to address illicit flows are in the following link.

3. “Eastward Drift” - Sanctions Circumvention Trends

   In May 2024, Brian NELSON, the top US Treasury official, flew to Malaysia and Singapore to discuss the issues of non-compliance with the US/G7 sanctions policies. In September 2024, David O’SULLIVAN, the first special envoy for implementation of the EU sanctions, will visit Malaysia and Vietnam for the same reason. Noting an “eastward drift” in sanctions circumvention, O’SULLIVAN is likely to elaborate on the US/G7 investment policy, among other arguments. “The US and the EU are by far the greatest source of that kind of investment - Russia is not going to invest. So they don’t want reputational damage of their country and companies being identified as breaking sanctions.”

4. FATF & VAs/VASPs - Implementation of the FATF Standards

   The Financial Action Task Force (FATF) released its fifth update on jurisdictions’ compliance with its 15th Recommendation - AML/CTF financing measures to virtual assets (VAs) and virtual asset service providers (VASPs). The report highlights that global implementation is still lagging. Based on 130 mutual evaluation reports and follow-up reports, 75% of the assessed jurisdictions are still only partially or not compliant with the FATF requirements, equivalent to April 2023 figure. The FATF calls on countries to accelerate implementation and enforcement measures.

5. AUSTRAC - National Risk Assessment Reports on ML/TF

   The Australian Transaction Reports and Analysis Centre (AUSTRAC) released two national risk assessments elaborating on the scale, sophistication and threat of money laundering and terrorism financing in Australia. Interestingly, criminals still prefer to execute via traditional channels, using banks, real estate agents, casinos and professional service providers despite the emergence of new channels. On the terrorism financing front, the scale is small and of low value; however, businesses are nevertheless strongly encouraged to make use of the report findings to identify any relevant risks and develop firm-specific mitigation measures.