(SINGAPORE) Banks here are still finding it a challenge to stop money being laundered through customer accounts despite two years of cleaning up.

In some cases, customers are unwilling to provide proper documentation. In others, their funds come from jurisdictions with banking secrecy or data protection regulators.

A particular difficulty is getting information on customers of wire transfers, which have been highlighted by global law enforcers as a popular conduit for money launderers and terrorists, according to a Ernst & Young (E&Y) survey.

'Sometimes, there are penalties involved; customers won't be happy,' said Vivian Kong, E&Y executive director.

Karen Ngui, DBS Bank managing director and head of group strategic marketing and communications said that the bank is very mindful of the risks and challenges associated with money laundering and the financing of terrorism.

'The bank implemented a new set of standardised group-wide customer acceptance procedures in 2007 that are compliant with MAS 626, and recently put a new system in place that enhances our wire transfer monitoring capabilities,' said Ms Ngui.

A majority of financial institutions here said that they need to invest more into fighting money laundering and terrorism financing, following tighter regulations imposed 12 months ago by the Monetary Authority of Singapore in Notice 626.

Close to 70 per cent of respondents said that they face problems performing ongoing monitoring of accounts and transactions to identify suspicious transactions that should be investigated and reported to the authorities where necessary.

Some 65 per cent of them said that they find it a challenge to verify the ultimate beneficial owner who controls the account, during the conduct of customer due diligence.

'In the face of complex corporate structures and vehicles, 65 per cent of financial institutions meet challenges in obtaining information on source of wealth, purpose of investment and verification of customers' identities, especially for cross border transactions,' said Winston Ngan, E&Y head of financial services.

Another problem is relying on intermediaries such as banks, brokers or trustees to perform due diligence on customers, especially if the intermediaries are based overseas.

Said Koh Ching Ching, OCBC Bank head of corporate communications: 'There are challenges in managing the customer due diligence process.

'However, we view this process, which includes ongoing monitoring of accounts and reporting of suspicious transactions as an essential part of the global efforts of combating money laundering and financing of terrorism.

'The bank is fully committed to do this and have put in place control measures and training programmes to ensure that we comply with the relevant laws, rules and obligations.'

Another finding of the survey was that financial institutions in Singapore have stepped up customer due diligence on politically exposed persons - essentially politicians, their relatives and business associates.

Although a positive development, it can come at a cost in terms of delay in transactions and even worse, losing a customer.

An MAS spokeswoman said yesterday that Notice 626 was revised in December 2006 to strengthen Singapore's anti-money laundering and counter-terrorism financing regime (AML/CFT), taking into account the latest developments in international standards. MAS carried out two public consultations over two years on the proposed revisions.

'We took industry feedback into consideration before implementing the regulations.'

MAS will continue to work with the industry to maintain high AML/CFT standards that preserves the integrity of Singapore's financial centre, she said.