Singapore Raises Crypto Exchange Risk Level to Medium-High

The Monetary Authority of Singapore (MAS) has elevated the risk level for crypto exchanges from medium-low to medium-high. 

This change aligns with updates to Singapore’s Countering the Financing of Terrorism (CFT) laws, reflecting the 2024 Terrorism Financing (TF) National Risk Assessment (NRA).

2024 terrorism financing national risk assessment

The 2024 TF NRA identifies vital risk areas similar to those outlined in 2020. Money remittances and banks remain highly susceptible to terrorism financing threats due to their accessibility for cross-border payments. However, Digital Payment Token (DPT) service providers now face an elevated risk, moving from medium-low to medium-high. Other sectors, such as non-profit organizations, cross-border cash movements, and the trade in precious stones, metals, and products, maintain a medium-low risk rating.

MAS has stressed the need for increased industry vigilance, stating, “As a result, TF risks associated with Digital Payment Token (DPT) service providers have been elevated from medium-low to medium-high risk, necessitating increased industry vigilance against this evolving threat.”

Alignment with a national strategy for CFT

The updated TF NRA supports Singapore’s National Strategy for CFT, introduced in 2022, with three primary objectives: Prevent, Detect, and Disrupt. The strategy aims to deter terrorists and their supporters from using Singapore for terrorism financing activities. Robust monitoring and tracking mechanisms detect and trace such activities, particularly in high-risk sectors. The strategy also focuses on disrupting and enforcing actions against those attempting to raise, move, or use funds for terrorism.

MAS has thoroughly examined terrorist groups posing significant regional threats and identified their funding mechanisms. The assessment considered international developments, including the Israel-Hamas conflict and tensions in the Middle East, and their potential impact on Singapore. The analysis included data from TF investigations, financial intelligence, Suspicious Transaction Reports (STRs), Requests for Assistance (RFAs), and Mutual Legal Assistance (MLA) requests.

Industry feedback and sector vulnerability assessments

Regulators and supervisors have reviewed vulnerability assessments within their sectors, considering critical TF threats and the potential exploitation of certain products, services, and activities for terrorism financing purposes. Industry feedback was also incorporated, comparing the latest threats with those identified in the 2020 TF NRA.

The assessment underscores the importance of industry vigilance and proactive measures to address the evolving risks associated with terrorism financing. By updating the risk levels for DPT service providers, MAS aims to strengthen Singapore’s resilience against financial threats posed by terrorist activities.

The MAS’s decision to raise the risk level for crypto exchanges to medium-high reflects a proactive approach to countering terrorism financing. The updated TF NRA and the National Strategy for CFT aim to enhance the detection, prevention, and disruption of terrorism financing activities in Singapore. Industry stakeholders are urged to remain vigilant and adapt to the changing risk landscape to ensure the continued security and stability of the financial sector.

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