Group Compliance Review on Customer Due Diligence (“Know Your Customer”) Controls, Processes and Procedures of Front Office Business Units in Phillip Securities Pte Ltd (“PSPL”)
Appendix 1 – Gaps identified and Corrective Action Plans to be taken (“CAPs”) GCD/RVW/2014/009
S/N / Regulatory Requirements / Gaps Identified and Group Compliance’s Recommendations / Corrective Action Plans (“CAPs”) / Owner and Target Implementation Date of CAPs1 / Inad of documentation on Suspicious Transaction Reporting (“STR”) and Third Party Authorisation procedures
- SFA 04-N02:
ii)Para 5 (Simplified Customer Due Diligence)
iii)Para 6 (Enhanced Customer Due Diligence)
iv)Para 9 (Suspicious Transactions Reporting)
- Guidelines to SFA04-N02, paragraph 4 to 67
- MAS Circular CMI 01/2013 (Controls Over Correspondence Addresses of Customers)
We note from the TR Handbook that TRs are reminded not to indicate that they have conducted a face-to-face verification if they have not indeed conducted any.As such, the remisiers have not followed the procedure stated in the TR handbook.
In addition, MAS Notice SFA04-N02 prohibits the opening or maintenance of anonymous accounts or accounts in fictitious names. If no proper verification is performed before account opening, there is a risk that the accounts maybe opened in fictitious name, thereby resulting in non-compliance with regulations.
Compliance Recommendations
In view of the above, Compliance recommends BD Remisier and BD MSF to stress and reiterate to the TRs on the importance on performing proper identification and verification of potential client’s identity before submitting the account opening documents for processing. BD Remisier and BD MSF should also highlight the risk and consequences of potential breach of the AML/CFT regulations, including the disciplinary action that will be taken by the regulatory authorities or within PSPL if any of such non-compliance is found.
b)According to the “Customer Due Diligence” page in the TR Handbook,“TRs are required to bring any suspicious transactions to the attention of the compliance department”. The Group’s AML/CFT Policy also states that TRs may report suspicious transactions to their AML Representative or HOD other than the AML/CFT Compliance Officer.
However, Compliance note that BD Remisier and BD MSF do not have documented procedures in their OCM to identify,escalate and report suspicious transactions.
In addition, Compliance note that the TR Handbook does not have documented procedures on third party authorization.
Compliance Recommendations
MAS Notice SFA04-N02 requires reports on transactions (including attempted transactions) suspected of being connected with money laundering and terrorist financing to be submitted. In this regard, Compliance recommendBD Remisierand BD MSF to document procedures on identification, escalation and reporting of STRs and ensure that STRs are reported where required by the applicable regulatory requirements.
Para 4.10 to 4.13 of MAS Notice SFA04-N02 requires capital marketintermediaries to identify and verify the person (agent) who is appointed by the customer (principal) to act on his behalf as well as verify the agent’s due authority in this respect.In this regard, Compliance recommend BD Remisier and BD MSF to document procedures on third party authorization into the TR Handbook and ensure that the TRs adhere to the documented procedures.
c)Compliance noted from the TR Handbook that there are no procedures to ask for reasons from a potential customer who would like to have a mailing address that is different from his/her residential address. We were informed by BD Remisier and BD MSF that they do not request for the reason every time and the reason, if any, is not documented.
Compliance Recommendations
MAS Circular CMI 01/2013 on Controls over Correspondence Addresses of Customers, requires customer should not be allowed to have a mailing address that is different from his/her residential address without a good reason. In this regard, we recommend BD Remisier and BD MSF documentin the TR Handbook to ensure that the reasons are asked every time a customer request for a different mailing address and the reason should be documented.
d)Compliance noted from the TR Handbook that there are no guidance provided to TRs on CDD in the event of deviation from the norm. For example, customer’s face doesn’t match the photograph ID.
Compliance Recommendations
To ensure that TRs knows how to deal with such circumstance, which could present high AML risk, we recommend that BD Remisier and BD MSF document its guidance to TRs in the TR Handbook to request for additional identification documents that contains a photograph of the customer to address Compliance’s observation. / a)All TRs will have gone through AML e-learning which covers CDD and the consequences of any breaches of AML/CFT Regulations. BD had clarified with the remisiers. They are aware of their responsibility to perform face-to-face verification before accepting the applicant as client by signing on the application form.
When interviewed by Compliance colleagues, their responses were in relation to the accounts that were opened by applicants, who are mainly existing clients or referred by existing clients, in persons via PIC.
As the remisiers were not present at the time of submission of the application forms, remisiers will endorse on the top right hand corner to indicate their acceptance of these forms. It is understood that theremisiers are aware of most of these applications beforehand. For those cases that they have not met the applicant in person, they will engage them personally subsequently.
All TRs will go through the account opening training during the TR Orientation conducted by the account processing unit (APU). TRs had been briefed that they should sign only upon confirming having attended to the applicant in person.
BD will liaise with APU to include in their training slides to reiterate to the TRs on the importance of performing proper identification and verification of potential client’s identity before submitting the account opening documents for processing as well as highlighting the risks and consequences for potential breach of the AML/CFT regulations.
BD will also be updating the same in BD’s revised training slides under TR Orientation’s Compliance training and in the TR Hand-book.
b)BD had documented procedures on suspicious transaction reporting since 2010. However, this was not ported over to the new OCM folders.
BD will inform Credit Admin to furnish the procedures for Third Party Authorization to be included in the TR Hand-book. In addition, we will also request that Credit Admin shares on Third Party Authorization Policy/Guidelines in their training slides during the TR Orientation.
c ) Noted. BD will update the TR hand-book. In addition, BD will liaise with Account Processing Unit to ensure a reason is furnished in the account opening form before processing. BD will also request that APU’s training slides be updated with the proposed procedure.
d ) Noted. BD will provide guidance to the TRs on the CDD in the TR Hand-book. / Owner(s):
Margaret Siow, Manager Account Processing Unit
Implementation Date:
31Aug 2014
Owner(s):
Steve Ng, Manager, BD Remisier and BD MSF
Implementation Date:
31 Aug 2014
NA
Owner(s):
George Kwok, Head Credit Admin
Implementation Date:
31Aug 2014
Owner(s):
Steve Ng, Manager, BD Remisier and BD MSF
Margaret Siow, Manager Account Processing Unit
Implementation Date:
31 Aug 2014
Owner(s):
Steve Ng, Manager, BD Remisier and BD MSF
Implementation Date:
31 Aug 2014
2 / Outdated documents in Trading Representatives (“TR”) Handbook
SFA 04-N02, Para 10.12 (Training) / Compliance note that the following documents which are uploaded into the TR Handbook (poem.cyberquote.com.sg) are outdated:-
i)Group AML/CFT Policy and Guidelines;
ii)MAS Notice SFA 04-N02;
iii)Guidelines to MAS Notice SFA 04-N02; and
iv)“Appointment of agent to transact on behalf of principal” form.
In addition, the “Checklist To Avoid Common Errors When Opening New Trading Accounts” cannot be viewed after the corresponding web hyperlink is clicked.
Compliance Recommendations
Para 10.12 of MAS Notice SFA04-N02 requires capital market intermediaries to take appropriate steps to ensure that employees and officers (whether in Singapore or overseas) are appropriately trained in several areas, including AML/CFT laws and regulations and internal policies, procedures and controls on AML/CFT.
In this regard, Compliance recommend BD Remisier and BD MSF to replace the outdateddocuments with the latest updated documents for the reference of TRs and staff. / Noted. BD is in the midst of reviewing the TR Hand-book on its accuracy and currency of the contents.
i-iii) BD will upload the latest Policy and Guidelines in the TR Hand-book.
iv) BD had checked with Credit Admin and was informed that the form is not outdated.
On the hyperlink, it is working fine. / Owner(s):
Steve Ng, Manager, BD Remisier and BD MSF
Implementation Date:
31 Aug 2014
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