ABS partnership outlines best practices for anti-money laundering audits in banks

THE Association of Banks in Singapore (ABS) has launched Singapore’s first industry-led best practice paper to enhance anti-money laundering/countering the financing of terrorism (AML/CFT) audits in banks.

This was done in partnership with the Anti-Money Laundering Audit Peer Group (AAPG), an industry-led group established in October 2022 to facilitate AML/CFT audit best practices in Singapore’s financial industry.

AAPG is co-chaired by DBS and OCBC, with the Institute of Internal Auditors Singapore (IIA) and Ernst and Young Advisory (EY) among its members.

The group also aims to promote engagement with the Monetary Authority of Singapore (MAS) and the wider audit community on key AML/CFT risk areas.

On Monday (Oct 21), ABS said the best practice paper was developed in consultation with both industry and professional associations.

It seeks to boost AML/CFT auditing standards in Singapore by providing both bank internal auditors, as well as external auditors working with banks, a common framework to formulate and execute audits.

While baseline standards in the paper set out expected minimum audit standards and practices for auditors to adopt, best practices referred to existing good practices that auditors are encouraged to adopt in line with their bank or clients’ risk profiles.

Both baseline standards and best practices outlined in the paper referenced practices of banking institutions and audit firms that contributed to AAPG’s benchmarking survey conducted in 2023. 

Using the survey results, AAPG developed detailed guidance on several focus areas for both internal audit and external audit functions such as risk assessment.

Other focus areas include the scope and methodology of audits, reporting and following up on findings, as well as the nature and extent of external audit coverage.

The paper also contains case studies on how financial institutions could deploy analytics to enhance their AML/CFT audit processes.

This comes as AAPG observed that more banks have adopted data analytics as part of their AML/CFT audits to “good outcomes”. Doing so has helped to identify higher-risk customers and segments for “closer audit scrutiny”, said ABS.

IIA president Stephen Ching believes that with the new guidance, auditors will be “better equipped to detect and mitigate the risks of money laundering and terrorism financing, as well as providing clarity to both them and their clients to reduce ambiguity”.

“This new guidance strengthens the alignment of audit practices with evolving risks, ensuring that both internal and external auditors are well-equipped to uphold the integrity of Singapore’s financial institutions,” added Radish Singh, financial services risk management leader at EY Asean.

“The paper is a great example of the collaborative efforts by the financial services industry to share practices with one another, with the aim of creating greater clarity and consistency.”