kyc regulations

Singapore KYC Regulations: Compliance & Verification | Guide

Singapore may be small in size but it is one of the leading financial centers in the Asia-Pacific region and the world. It ranks highly in terms of forex turnover, fintech, financial secrecy, REIT market size and more. There are thousands of companies that have their regional headquarters in Singapore.

Given these facts, it isn’t surprising to note that Singapore attracts significant capital investments. The country has a pro-business attitude and takes financial security very seriously. Every business must comply with Singapore’s robust KYC (Know Your Customer) and AML (Anti Money Laundering) regulations.

What is KYC?

KYC is the process by which organizations find out who their customers are. All financial institutions must mandatorily carry out KYC processes to verify a customer’s identity and address before allowing them to carry out any financial transactions.

Verifying the identity of a customer through KYC processes protects the customer from issues that may arise from someone else fraudulently operating their account and, in turn, protects the reputation of the institution. Non-compliance with the country’s KYC regulations can also put the institution at risk of penalties by the government.

KYC is also an important part of fighting money laundering activities. This refers to protecting the institution from being involved in transactions that could be sued for finance criminal activities and terrorism.

Who sets Singapore’s KYC regulations?

KYC regulations in Singapore are set by the Monetary Authority of Singapore. This is the central financial regulatory authority and Bank of Singapore that regulates all financial institutions and licensing requirements in the country.

Complying with the Singapore Payment Services Act

Businesses dealing with the buying and selling of digital tokens, custodial services for such tokens or the promotion and advertisement of such services fall under the legislation of the Singapore Payment Services Act (PSA). Some of the organizations covered by this act are:

  • Organizations responsible for domestic money transfers
  • Cross-border money transfer service providers
  • Account issuance service providers
  • Companies providing merchant acquisition services
  • E‑money issuance service providers
  • Digital payment token service providers

These service providers need to take a risk-based approach to fight financial crimes and money laundering. There are 2 levels of due diligence required:

  • Simple Customer Due Diligence

This is an acceptable level of due diligence required for low-risk accounts.

  • Enhanced Customer Due Diligence

This level of due diligence is required for accounts that suggest a high risk of being involved in suspicious transactions or who have been flagged when screened against sanctions lists.

Companies providing payment services that risk their reputation on digital token transactions in Singapore and services outside Singapore that are connected to virtual assets must also consider complying with the Singapore Financial Services and Markets Bill (FSM Bill). This bill is aimed at licensing such service providers and imposing CFT/AML requirements for them.

KYC Regulations in Singapore

To set up a business in Singapore and onboard Singapore citizens as clients every business must comply with the below KYC regulations:

  • Verified phone number
  • Verified address
  • Confirmation of employment status
  • Proof of salary through verified bank statements
  • Certified ID documents
  • Initial deposit through a cheque from a bank in Singapore
  • Other ID verification

The above details must be verified independently with the consent of the individual at the time of onboarding and account opening.

Enhanced Due Diligence

In some cases when the customer is assumed to be at a higher risk of money laundering, additional due diligence may be required. For example, politically exposed persons or people who may have large value transactions may need enhanced due diligence. This may also be the case if the customer submits inadequate information for identification, if there is a material change in the customer relationship or if the institute changes its documentation requirements.

Regulations to verify businesses

In addition to the regular KYC compliance, there may be a few additional requirements for business accounts. Most importantly, Singapore KYC regulations require the business’s ultimate beneficial owners to be identified and verified. This may be any person with executive authority, a director or a partner. Additional due diligence may also be required if there is a change of ownership or if a new person is authorized to act on behalf of the account holder.

KYC Compliance through the Digital Identity

Complying with KYC regulations can be challenging. Verification needs to be thorough and yet, quick enough to not inconvenience the customer. The Singapore digital ID system is very useful here and helps businesses onboard new customers while complying with the country’s KYC regulations.

Every Singapore resident has a digital identity that can be accessed through the Singpass mobile app. As part of the National Digital Identity (NDI) program, the Myinfo service can be used as an easy way to fill in forms automatically with verified personal and corporate data. For example, it can be used to pre-fill loan and credit card applications with verified details and financial data about the customer.

The data available includes an individual’s name, residential address, nationality, date of birth, unique identification number and so on. It also includes biometric data and allows for documents to be signed remotely. Thus, it expedites the eKYC process for signing up to government and private sector service providers.

Summing it up

With a strong financial market and good working relationships with other countries in the Asia Pacific region, Singapore is a good place to establish a base for your company. It is an excellent launch pad. KYC and AML compliance is beneficial not only for financial organizations but also for their customers. While Singapore has a Digital Identity system that makes KYC compliance simpler, customer identities can be verified even without it. Personal data entered for each customer must be verified against reliable third-party databases to ensure that it is accurate, complete and valid. Rather than verify these details manually, businesses can use identity verification tools to automate such verification processes. With this, you can verify customer identities and addresses and get real-time results to help maintain a smooth customer onboarding process.

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