← Study index · All 89 facts by topic →

RES5 — Rules, Ethics and Skills for Financial Advisory Services — Cheat Sheet

Chapter 5 · quick-revision digest · narrative, key figures & core facts

📖 Overview

Chapter 5 is a single Notice: FAA-N06 on the prevention of money laundering and countering the financing of terrorism. It rests on three underlying principles — exercise due diligence when dealing with customers and everyone connected to them; conduct business to high ethical standards and guard against any involvement in money laundering or terrorism financing; and cooperate fully with Singapore's law enforcement authorities. Everything else in the Notice is a risk-based application of those principles: the adviser must assess its own ML/TF risks, including those of new products and technologies, and calibrate its controls accordingly.

The operational core is customer due diligence. A financial adviser must identify and verify the customer, any person acting on the customer's behalf, connected parties and beneficial owners; understand the purpose of the business relations; and monitor them on an ongoing basis. The intensity scales with risk: simplified CDD is allowed only where risk is demonstrably low and never where suspicion exists, while enhanced CDD is mandatory for politically exposed persons and other higher-risk customers. An adviser may rely on qualifying third parties to perform CDD, but the responsibility stays its own, and customers must be screened against relevant ML/TF information sources.

When suspicion arises, the adviser must file a suspicious transaction report with the STRO and must not tip off the customer. CDD and transaction records are kept for five years, and the Notice closes the loop institutionally: group-wide AML/CFT policies, staff training, independent audit, and provisions on handling personal data. The Notice's requirements are legally binding, so a breach is not a compliance footnote but an offence.

🧭 Principles & frameworks

Due-diligence principle — Under FAA-N06, a financial adviser shall exercise due diligence when dealing with customers, natural persons appointed to act on the customer's behalf, connected parties of the customer and beneficial owners of the customer. — Ch. 5, p. 5
High-ethical-standards principle — A financial adviser shall conduct its business in conformity with high ethical standards, and guard against establishing any business relations or undertaking any transaction that is or may be connected with, or facilitates or may facilitate, money laundering or terrorism financing. — Ch. 5, p. 5
Cooperate-with-law-enforcement principle — A financial adviser shall, to the fullest extent possible, assist and cooperate with the relevant law enforcement authorities in Singapore to prevent money laundering and terrorism financing. — Ch. 5, p. 5
The three underlying principles — FAA-N06 is based on three underlying principles that serve as a guide for all financial advisers in the conduct of their operations and business activities: exercising due diligence when dealing with customers and related persons; conducting business in conformity with high ethical standards and guarding against business relations or transactions connected with money laundering or terrorism financing; and assisting and cooperating, to the fullest extent possible, with the relevant law enforcement authorities in Singapore. — Ch. 5, p. 5

⏱️ Key figures, limits & deadlines

Item	Value	Type	Source
Record retention — CDD information (5 years from termination)	5 years	Deadline	Ch. 5, p. 20
Record retention — transactions (5 years from completion)	5 years	Deadline	Ch. 5, p. 20

⚠️ Exam traps (commonly confused)

Appendix 5A -> beneficial-owner inquiry exemption (6.15(e)) vs Appendix 5B -> simplified CDD (7.5) & third-party reliance (9.1): Two institution lists with different uses. 5A supports the beneficial-owner-inquiry exemption; 5B supports simplified CDD and the third-party definition. Every 5B institution falls within 5A.
SDD prohibited: FATF-countermeasure / inadequate-AML country / ML-TF suspicion (7.4) vs Higher-risk triggers: FATF-countermeasure (shall treat) / inadequate-AML (shall assess) (8.6): The same jurisdiction categories that BAR simplified CDD also drive the higher-risk/enhanced-CDD analysis. Note 8.6's split: FATF-countermeasure country = shall TREAT as higher risk; inadequate-AML country = shall ASSESS.
Verify before establishing relations (6.30) vs Delayed verification if essential + risks managed (6.31): The default is verification BEFORE establishing relations. Delayed verification is a narrow exception needing BOTH conditions: deferral essential to normal business AND ML/TF risks effectively managed; then verify as soon as reasonably practicable.
CDD records: 5 years from termination of business relations (10.3(a)) vs Transaction records: 5 years from completion of the transaction (10.3(b)): Both periods are 5 years, but the anchor differs: CDD/account records run from TERMINATION of the business relations; transaction records run from COMPLETION of the transaction.
Foreign PEP -> enhanced CDD always vs Domestic / international-org / stepped-down PEP -> risk-based (unless higher risk): Enhanced CDD (senior-management approval, source of wealth & funds, enhanced monitoring) is mandatory for foreign PEPs. For domestic and international-organisation PEPs (and stepped-down PEPs), a risk-based approach is permitted unless the relationship presents a higher risk.
May rely on third party for CDD (paras 6-8) (9.2) vs May NOT rely on third party for ongoing monitoring (9.3); adviser remains responsible (9.5): A third party may perform CDD measures under paragraphs 6, 7 and 8, but ongoing monitoring can never be delegated. Regardless of reliance, the adviser remains responsible for its AML/CFT obligations.
General: no PDPA access/use-info/correction duty (11.2) vs Carve-out: access to 6 basic identity items on request + may act without consent (11.3/11.4): For AML/CFT compliance the adviser generally need not give PDPA access, use information or a correction right (11.2) — but must, on request, give access to six basic identity items and allow their correction (11.3), and may collect/use/disclose data without consent (11.4).
STR filed with STRO (Police CAD), copy to MAS for information (12.2) vs Tipping-off: may stop CDD but must still document + file STR (12.4): STRs are filed with STRO (Commercial Affairs Department of the Police), with a copy to MAS for information — regardless of amount and including attempted transactions. Where CDD would tip off the customer, the adviser may stop those measures but must document the basis and still file an STR.

⭐ Core facts

The must-know propositions, distilled. See all 89 facts by topic →

📋Scope Application

MAS Notice No: FAA-N06 is issued pursuant to Section 27B of the Monetary Authority of Singapore Act 1970 ("MAS Act"). — Ch. 5, p. 3
⚠ FAA-N06 is issued under the MAS Act (s27B), not under the FAA itself.
FAA-N06 applies to (a) licensed financial advisers under the FAA; (b) registered insurance brokers exempt under Section 23(1)(c) of the FAA from holding a financial adviser's licence; and (c) persons exempt under Section 23(1)(f) of the FAA read with Regulation 27(1)(d) of the FAR. — Ch. 5, p. 3

📖Definitions

A "beneficial owner", in relation to a customer, means the natural person who ultimately owns or controls the customer, or the natural person on whose behalf a transaction is conducted or business relations are established, and includes any person who exercises ultimate effective control over a legal person or legal arrangement. — Ch. 5, p. 3
⚠ A beneficial owner is always a natural person with ultimate ownership/control — not a corporate parent or the appointed agent.

🧭Underlying Principles

Under FAA-N06, a financial adviser shall exercise due diligence when dealing with customers, natural persons appointed to act on the customer's behalf, connected parties of the customer and beneficial owners of the customer. — Ch. 5, p. 5

🧮Risk Based Approach

A financial adviser shall identify, assess and understand its money laundering and terrorism financing risks in relation to: its customers; the countries or jurisdictions its customers are from or in; the countries or jurisdictions the financial adviser has operations in; and its products, services, transactions and delivery channels. — Ch. 5, p. 6
A financial adviser shall develop and implement policies, procedures and controls approved by senior management to manage and mitigate identified risks, monitor and enhance them, perform enhanced measures where higher risks are identified, and ensure the measures address the risk assessment and guidance from the Authority. — Ch. 5, p. 6
⚠ Risk-mitigation policies must be approved by SENIOR MANAGEMENT.

🔎Cdd General

No financial adviser shall open or maintain an anonymous account or an account in a fictitious name. — Ch. 5, p. 7
⚠ Anonymous/fictitious-name accounts are prohibited absolutely — no risk-based or approval exception.
Where, prior to establishing business relations or undertaking a transaction, a financial adviser has reasonable grounds to suspect that a customer's assets or funds are proceeds of drug dealing or criminal conduct under the CDSA or property related to a terrorism financing offence under the TSOFA, the adviser shall not establish relations or undertake the transaction, and shall file an STR (extending a copy to the Authority). — Ch. 5, p. 7
⚠ Pre-relations suspicion = decline AND file an STR — do not open the account.
A financial adviser shall perform CDD measures (paragraphs 6, 7 and 8) when it establishes business relations with any customer; when there is a suspicion of ML/TF (even if it would not otherwise be required); or when it has doubts about the veracity or adequacy of information previously obtained. — Ch. 5, p. 7, 8

🪪Customer Identification

A financial adviser shall identify each customer. — Ch. 5, p. 8
To identify a customer, a financial adviser shall obtain at least: full name (including aliases); a unique identification number (e.g. identity card, birth certificate or passport number, or for a non-natural person the incorporation or business registration number); residential address (or registered/business address and, if different, principal place of business); date of birth/establishment/incorporation/registration; and nationality/place of incorporation/registration. — Ch. 5, p. 8

✅Identity Verification

A financial adviser shall verify the identity of the customer using reliable, independent source data, documents or information; where the customer is a legal person or legal arrangement, it shall also verify the legal form, proof of existence, constitution and powers using reliable, independent sources. — Ch. 5, p. 9
⚠ Verification must draw on RELIABLE, INDEPENDENT sources — not customer-supplied information alone.

👤Beneficial Owner

Subject to paragraph 6.15, a financial adviser shall inquire whether there exists any beneficial owner in relation to a customer. — Ch. 5, p. 10
Where one or more beneficial owners exist, the financial adviser shall identify them and take reasonable measures to verify their identities using reliable independent sources: for legal persons, identify the natural persons who ultimately own the legal person, failing which those who ultimately control it, failing which those having executive authority; for trusts, identify the settlors, trustees, protector (if any), beneficiaries, and any natural person exercising ultimate control. — Ch. 5, p. 10, 11
⚠ Beneficial-owner cascade: ultimate OWNERS -> ultimate CONTROLLERS -> executives. BO identity is verified via 'reasonable measures'.
A financial adviser is not required to inquire whether a beneficial owner exists where the customer is: an entity listed and traded on the Singapore Exchange; an entity listed on a foreign exchange subject to disclosure and beneficial-owner transparency requirements; a financial institution set out in Appendix 5A; a foreign financial institution supervised for AML/CFT consistent with FATF standards; or an investment vehicle managed by such financial institutions — unless the adviser doubts the veracity of the CDD information or suspects ML/TF. — Ch. 5, p. 11
⚠ BO-inquiry exemption references APPENDIX 5A (not 5B) and is LOST if the adviser has doubts or suspicion.

👀Purpose Monitoring

A financial adviser shall monitor, on an ongoing basis, its business relations with customers. — Ch. 5, p. 12

🔀Cdd Special Situations

Where there is no face-to-face contact, a financial adviser shall perform CDD measures that are at least as robust as those that would be required if there were face-to-face contact, and shall develop and implement policies to address the specific risks of non-face-to-face relations. — Ch. 5, p. 13
⚠ No face-to-face = CDD 'at least as robust' as face-to-face — not lighter, and not automatically 'enhanced'.
Subject to paragraphs 6.31 and 6.32, a financial adviser shall complete verification of the identity of the customer, any appointed natural persons and any beneficial owners before it establishes business relations with the customer. — Ch. 5, p. 13
⚠ Default = verify BEFORE establishing relations; delayed verification (6.31) is the exception, not the rule.
A financial adviser may establish business relations before completing verification only if the deferral of completion is essential in order not to interrupt the normal conduct of business operations, and the ML/TF risks can be effectively managed; it must then develop internal policies on the conditions for such deferral and complete verification as soon as reasonably practicable. — Ch. 5, p. 13, 14
⚠ Delayed verification needs BOTH: deferral essential to normal business AND risks effectively managed; then verify ASAP.
Where a financial adviser is unable to complete the CDD measures required by paragraphs 6, 7 and 8, it shall not commence or continue business relations with, or undertake any transaction for, the customer, and shall consider whether the circumstances are suspicious so as to warrant filing an STR. — Ch. 5, p. 14
⚠ Cannot complete CDD -> do not commence/continue relations, and CONSIDER filing an STR.

🟢Simplified Cdd

A financial adviser may perform simplified CDD measures in relation to a customer, any appointed natural person and any beneficial owner (other than a beneficial owner it is exempt from inquiring about under 6.15) if it is satisfied that the risks of money laundering and terrorism financing are low. — Ch. 5, p. 15
⚠ Simplified CDD is permitted only where ML/TF risk is assessed LOW (and supported by analysis).
A financial adviser shall not perform simplified CDD where a customer or beneficial owner is from or in a country in relation to which the FATF has called for countermeasures; where a customer or beneficial owner is from or in a country known to have inadequate AML/CFT measures; or where the adviser suspects that money laundering or terrorism financing is involved. — Ch. 5, p. 15
⚠ SDD barred by: FATF-countermeasure country, inadequate-AML country, or any ML/TF suspicion — the mirror image of higher-risk triggers.

🏛️Enhanced Cdd Pep

Where a customer or beneficial owner is determined to be a PEP, or a family member or close associate of a PEP, the financial adviser shall, in addition to standard CDD, perform at least: obtain senior management approval to establish or continue business relations; establish (by reasonable means) the source of wealth and source of funds; and conduct enhanced monitoring of the business relations. — Ch. 5, p. 16, 17
⚠ PEP triad: senior-management approval + source of WEALTH and FUNDS + enhanced monitoring.
A financial adviser may adopt a risk-based approach in deciding whether, or to what extent, to apply enhanced CDD measures for domestic PEPs, international-organisation PEPs, and PEPs who have stepped down from prominent public functions (and their family members and close associates), except where their business relations or transactions present a higher risk of ML/TF. — Ch. 5, p. 16
⚠ FOREIGN PEP -> always enhanced CDD. Domestic / international-org / stepped-down PEP -> risk-based (unless higher risk).

🤝Third Party Reliance

A financial adviser may rely on a third party to perform CDD measures (paragraphs 6, 7 and 8) only if: it is satisfied the third party is subject to and supervised for AML/CFT consistent with FATF standards and has adequate measures; it takes steps to understand the ML/TF risks of the third party's jurisdictions; the third party is not one the Authority has precluded reliance upon; and the third party is able and willing to provide, without delay on request, the CDD data, documents or information. — Ch. 5, p. 18, 19
⚠ Third-party reliance needs the four 9.2 conditions, including provision of CDD info WITHOUT DELAY on request.
No financial adviser shall rely on a third party to conduct ongoing monitoring of business relations with customers. — Ch. 5, p. 19
⚠ A third party may perform CDD (paras 6-8) but NEVER ongoing monitoring — that stays with the adviser.
Notwithstanding reliance on a third party, the financial adviser remains responsible for its AML/CFT obligations under the Notice. — Ch. 5, p. 19
⚠ Reliance never shifts responsibility — the adviser remains fully responsible for its AML/CFT obligations.

🗄️Record Keeping

For CDD information relating to the business relations — as well as account files, business correspondence and results of any analysis — a financial adviser shall retain records for a period of at least 5 years following the termination of the business relations.5 years — Ch. 5, p. 20
⚠ CDD records: at least 5 years from TERMINATION of business relations (not from opening).
For data, documents and information relating to a transaction — including any information needed to explain and reconstruct the transaction — a financial adviser shall retain records for a period of at least 5 years following the completion of the transaction.5 years — Ch. 5, p. 20
⚠ Both periods are 5 years but differ by anchor: CDD -> from TERMINATION of relations; transactions -> from COMPLETION of the transaction.

🔐Personal Data

For the purpose of complying with the Notice, a financial adviser is not required to provide an individual with access to personal data held about them, information about how that data has been or may be used or disclosed, or a right to correct an error or omission in that data. — Ch. 5, p. 20, 21
⚠ General rule (11.2): NO access/use-info/correction duty — but 11.3 carves out access to 6 basic identity items on request.
A financial adviser shall, as soon as reasonably practicable upon an individual's request, provide access to that individual's full name (including aliases), unique identification number, residential address, date of birth, nationality and other personal data the individual provided, and the right to correct errors or omissions in those items where there are reasonable grounds. — Ch. 5, p. 21
⚠ Individuals CAN, on request, access their basic identity data (name, ID number, address, DOB, nationality, other data they provided) and correct errors.
For the purpose of complying with the Notice, a financial adviser may, whether directly or through a third party, collect, use and disclose the personal data of an individual (customer, life-policy beneficiary, appointed person, connected party or beneficial owner) without the individual's consent. — Ch. 5, p. 21
⚠ For AML/CFT compliance the adviser may collect, use AND disclose personal data WITHOUT the individual's consent.

🚨Str Reporting

A financial adviser shall promptly submit reports on suspicious transactions (including attempted transactions), regardless of the amount of the transaction, to STRO, and extend a copy to the Authority for information. — Ch. 5, p. 22
⚠ STRs go to STRO (copy to MAS), promptly, for ANY amount, and cover ATTEMPTED transactions too.
Where a financial adviser forms a suspicion of ML/TF and reasonably believes that performing CDD measures will tip off the customer, an appointed person, a connected party or a beneficial owner, it may stop performing those measures; it shall document the basis for its assessment and file an STR. — Ch. 5, p. 22
⚠ Tipping-off risk: the adviser MAY stop CDD measures, but must still document the basis AND file an STR.

📜Internal Policies

Where the AML/CFT requirements in a host country differ from those in Singapore, the financial adviser shall require its overseas branch or subsidiary to apply the higher of the two standards, to the extent the host country's law permits; where local law conflicts so the higher standard cannot be fully observed, it shall apply additional appropriate measures, report to the Authority, and comply with any further directions. — Ch. 5, p. 24
⚠ Overseas branches apply the HIGHER of Singapore vs host AML/CFT standards; if host law blocks it, add measures + report to MAS.
A financial adviser shall develop appropriate compliance management arrangements, including at least the appointment of an AML/CFT compliance officer at the management level, who (with any assisting persons) must be suitably qualified and have adequate resources and timely access to all relevant records. — Ch. 5, p. 23
⚠ AML/CFT compliance officer must be at MANAGEMENT level, suitably qualified, with timely access to records.
A financial adviser shall maintain an audit function that is adequately resourced and independent, and that is able to regularly assess the effectiveness of the adviser's internal policies, procedures and controls, and its compliance with regulatory requirements. — Ch. 5, p. 23
⚠ AML/CFT audit function must be INDEPENDENT and adequately resourced, assessing effectiveness regularly.

Quick-revision digest · All 89 facts by topic → · source-linked; verify against the study text before exam use.