Best Practices in Relation to Risks in Wealth Management

Introduction

As Singapore continues to solidify its position as a global wealth management hub, the complexity and cross-border nature of high-net-worth clients bring heightened risks of money laundering, terrorism financing, and regulatory breaches into the market. The Monetary Authority of Singapore (MAS), through the AML/CFT Industry Partnership (ACIP) Legal Persons & Arrangements (LPA) Working Group, has released best practices paper (May 2025) to share knowledge with the Financial Institutions (FIs) in relation to the risks in wealth management sector. 

• Latest insights from ACIP paper regarding wealth management 

• Key risk areas and best practices 

• How we can support your institution in navigating these changes 

Overview 

Insight from ACIP Paper on Wealth Management 

Financial institutions offering wealth management services in Singapore continuously face well-documented risks related to money laundering and terrorism financing. These risks stem from unlawful activities such as tax crimes, fiscal non-compliance, corruption, and embezzlement. The risk exposure is significantly greater for wealth management clients, as they often operate across multiple jurisdictions, have more complex financial needs, and may hold positions of prominence or influence, which are the factors that amplify their vulnerability to these risks. 

As such, this paper aims to enhance clarity and alignment regarding key risks identified within Singapore's wealth management industry. It also outlines practices that FIs can adopt in accordance with existing MAS requirements. 

Key Risk Areas & Best Practices 

Through knowledge-sharing among the member banks of The LPA Working Group, they determine that identified risks for the wealth management sector mainly arise from the following 6 areas: 

1. Wealth management structures utilization (e.g., family offices); 

2. Macro-economic developments and events; 

3. The increase in remote onboarding process (e.g., non-face-to-face); 

4. Heightened risk due to nationality and residence information; 

5. Relationship with External Asset Managers (EAMs) or Financial Intermediaries (FIMs); and 

6. Ongoing monitoring. 

Nevertheless, the paper also includes the best practices for each area, which are shown in the table below. 

Key Risk Areas	Identified Risks	Best Practices
Wealth Management Structures	- Use of complex structures (trusts, PICs, family offices) obscuring beneficial ownership.   - Jurisdictional complexity and third-party funding.	- Define and assess “complex structures” internally.   - Apply enhanced due diligence (EDD) and external verification.  - Monitor for third-party inflows and ownership changes.
Macroeconomic & Geopolitical Events	- Capital flight from unstable jurisdictions.  - Fraudulent documentation or MSBs used to bypass controls.   - Sanctions evasion.	- Conduct macro-level exposure assessments.  - Monitor fund flows and restrict physical asset withdrawals.   - Use STR trend analysis and network analytics.
Non Face-to-Face (NFTF) Onboarding	- Impersonation and document fraud.  - Inadequate liveness or identity verification.	- Use real-time video verification with control questions.   - Archive onboarding sessions and supplement with certified documents.   - Apply additional checks for high-risk clients.
Nationality & Residence Risks	- Clients using "Golden Passports" to obscure origin or evade taxes.  - Misrepresentation of residency or name changes.	- Collect all nationalities and verify renunciations, if any.  - Assess plausibility of tax residency and passport rationale.   - Maintain a list of high-risk CBI jurisdictions.
External Asset Managers (EAMs) / Financial Intermediaries (FIMs)	- EAMs shielding clients from scrutiny or manipulating documents.   - Referral abuse and client clustering.	- Conduct due diligence on EAMs and monitor STRs by introducer.   - Use network analytics to detect shared identifiers.   - Escalate concerns to governance committees.
Ongoing Monitoring	- Undisclosed wealth or new SoW entities post-onboarding.   - First-party transactions from unusual jurisdictions.	- Compare transaction flows with client profiles.   - Use pre-execution checks and multi-factor analytics.   - Monitor for material changes in client behavior or wealth.

Summary 

In brief, with the establishment of the paper, the FIs can examine their detection measures, frameworks and governance, implement risk mitigation measures which will help to strengthen their defences against these key risk areas. 

How Kai Global Consulting can help 

As a compliance solutions advisor, we offer tailored support to help your institution meet these evolving expectations from the authority, from understanding of your organization and the customer base, to identifying the risk and implementing best practices solution.

Schedule a 30-minute consultation with us.

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For more details about this article, please refer to https://www.mas.gov.sg/regulation/external-publications/best-practices-in-relation-to-risks-in-wealth-management