When your company’s bank asks for updated documents, explanations of particular transactions or evidence of where the company’s money came from, it is carrying out customer due diligence that MAS requires. Banks must review customers periodically, monitor transactions against what they know of the business, and look into transactions that seem unusual. MAS Notice 626 says that if a bank cannot complete these measures, it must not continue the relationship and must consider a suspicious transaction report. In practice, the review request is your company’s chance to keep the account. Answer completely, consistently and on time, with documents.
A review request is often the last chance before the bank closes the account. Ignoring it, answering half the questions or giving explanations the records do not support can lead straight to closure, and a customer who is reluctant to provide information is one of the situations in which MAS expects a bank to consider a suspicious transaction report. Deal with it properly, and get advice if the honest answer is uncomfortable.
Why the bank is asking
MAS Notice 626 requires a bank to carry out due diligence measures, among other times:
- on a periodic basis after it establishes the relationship;
- when the people acting for the customer, or its beneficial owners, change; and
- when it has doubts about the truth or adequacy of information obtained before.
It must also monitor the account, check that transactions are consistent with its knowledge of the customer and its business, and, as far as possible, inquire into the background and purpose of complex, unusually large or unusual transactions and document what it finds. MAS’s guidelines say a bank should not accept every explanation without scrutiny, and that where it cannot corroborate a material source of funds or wealth it should consider ending the relationship.
What banks commonly ask a company for
| Request | What usually satisfies it |
|---|---|
| Updated company documents | Current ACRA business profile, constitution, register of registrable controllers, director and shareholder identity documents |
| Nature of the business | A short, accurate description of what the company sells, to whom, where, and how it is paid; website and sample contracts |
| Specific incoming or outgoing transfers | The invoice, contract or purchase order behind each payment, the relationship with the counterparty, and proof of delivery or service |
| Payments from or to third parties | Why someone other than the customer or supplier paid or was paid, with written instructions and supporting documents |
| Source of funds for capital or loans | Share allotment records, shareholder or director loan agreements, and bank statements showing where the money came from |
| Financial position | Latest financial statements, management accounts, tax filings and GST returns where relevant |
How to prepare a response that works
- Read every question and list what is being asked. Note the deadline and ask for more time in writing if you genuinely need it.
- Start from the books. Reconcile the bank account in the accounting records so each flagged transaction ties to an invoice, bill or agreement. Gaps in bookkeeping are the most common reason a company cannot answer quickly.
- Explain the business in plain words, consistent with the ACRA activity code, the website, the financial statements and what the company told the bank when it opened the account. If the business has changed, say so and explain how.
- Attach documents, not just explanations. Number them and refer to them in the answer.
- Be accurate about people. Make sure the controllers and authorised signatories the bank holds match the company’s registers. If ownership changed, show the documents.
- Answer what was asked, truthfully. If a transaction cannot be explained, do not invent one. Take advice before replying.
What not to do during a review
- Do not miss the deadline without asking for an extension in writing.
- Do not give answers the records contradict. The bank will compare what you say with the account history and with what you said before.
- Do not create documents after the event and present them as originals. If a document is prepared now, such as a summary or a confirmation letter, say so.
- Do not let others keep using the account in ways the bank is asking about. If a customer or “partner” has been routing money through the company, stop and take advice. See lending the company account or Singpass.
Example
Example only, not a client case. A trading company’s bank asks about six incoming transfers from a company in another country that is not one of its customers. The director explains that the overseas company paid on behalf of a Singapore customer that was short of foreign currency. The company provides the customer’s purchase orders, the invoices, the customer’s written instruction naming the overseas payer, and the delivery records. It also adopts a rule that third-party payments are accepted only with a written instruction from the customer and director approval. The answer is complete and consistent, so the bank has what it needs to close the review.
Banks also check the MAS Investor Alert List during reviews. See what to do if your company is on the list.
Frequently asked questions
Can the bank restrict the account while it reviews?
Banks’ account terms usually allow them to restrict or suspend services in some circumstances. Read your account terms and ask the bank what is restricted and until when. This is different from a police freeze; see company bank account frozen by the police.
Why does the bank ask about our shareholders’ personal funds?
Banks must understand the source of funds and, in higher-risk cases, the source of wealth of beneficial owners. Money injected by a shareholder is part of the company’s story.
What if the bank closes the account anyway?
See what to do when the bank closes your company account.
More on the company law hub.
Bank asking questions about your company’s account?
If your company, or you as a director or shareholder, has received a KYC review or transaction query from its bank, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133 or +65 9018 0072. We will help you understand the request and its deadline, reconcile the bank account to the books, update the company’s ACRA records and controller register, and assemble the supporting documents. Where your matter needs a lawyer, for example because some transactions cannot be explained, we will refer you to a firm on our panel of Singapore law firms that regularly handles banking and money laundering matters. Raffles Corporate Services is a corporate services provider, not a law firm, and this article is general information, not legal advice.
Kevin Yeo, Raffles Corporate Services