The Monetary Authority of Singapore has identified weaknesses in how some licensed digital payment token providers implement anti-money laundering controls, including in due diligence, transaction monitoring and risk assessment for new tokens. The findings come from a supervisory review and point to gaps in execution rather than a lack of understanding of regulatory obligations among firms.
Key Facts At A Glance
- Regulator: Monetary Authority of Singapore (MAS)
- Sector reviewed: Licensed digital payment token (crypto) service providers
- Core finding: Firms generally understand AML obligations but fall short in implementation
- Weak areas identified: Customer due diligence, transaction monitoring, screening, and new-token risk assessments
- Specific gap: Some firms lack documented guidance for staff assessing risk before listing new tokens
- Specific gap: Overreliance on customer self-declarations to verify source of wealth and funds for higher-risk clients
- Specific gap: Failure to investigate unusually large transactions or properly follow up on blockchain analytics alerts
- Ongoing obligation: Firms must securely transmit originator and beneficiary information when transferring tokens to other providers
Regulator Identifies Pattern Of Implementation Gaps
The Monetary Authority of Singapore said digital payment token service providers in the city state generally have a sound grasp of their anti-money laundering obligations, but the regulator found inconsistent execution across several control areas. Its review pointed to shortcomings in customer due diligence, transaction monitoring, screening, and the risk assessment processes applied when firms consider listing new tokens.
Some firms lacked clear internal guidance instructing staff on how to evaluate and document risk before a new token is added to their platform, leaving decisions less consistent and harder to audit. In other cases, providers leaned too heavily on what customers told them about the source of their wealth and funds, rather than independently verifying that information, particularly for higher-risk clients.
Monitoring And Alert-Handling Under Scrutiny
MAS also found instances where crypto firms did not adequately investigate unusually large transactions or properly assess alerts generated by blockchain analytics tools designed to flag suspicious activity. These gaps go to the core function of transaction monitoring systems, which are meant to catch irregular fund flows before they can be used to launder proceeds of crime.
Separately, the regulator reiterated that crypto firms are required to securely transmit originator and beneficiary information when moving digital tokens to another provider, a requirement commonly known internationally as the Travel Rule. Consistent application of this rule allows counterparties and regulators to trace the parties involved in a transfer.
Why It Matters
The findings add to a broader pattern of regulators worldwide tightening expectations around crypto AML execution, not just policy design. For Singapore, which has positioned itself as a regulated hub for digital asset firms, the review signals that licensed status alone will not satisfy MAS if operational controls do not keep pace with the risks of an expanding token ecosystem.
