Monetary Authority of Singapore (Amendment) Bill

Mdm Speaker, the introduction of this amendment Bill and its enhancements aligns Singapore with the international AML/CFT standards set by FATF.

I support and welcome the introduction of more measures to counter money laundering and terrorism. Singapore has a legal system in place to apply targeted financial sanctions regarding terrorism financing. However, there are technical shortcomings which

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may affect the effectiveness of the proposed amendments to this Act.

Financial institutions are first in the front-line to inform MAS of any suspicion but, at the same time, they are put in a difficult position of keeping their clients' confidentiality and meeting their own key performance indicators (KPIs) in the face of intense competition.

While the Bill addresses anti-terrorism, I am afraid this Bill may not be effective in keeping financial institutions in check as they are put in a position of holding dual conflicting roles.

This Bill also does not address extradition. Cross-border and international white collar crimes make it difficult to catch money laundering criminals. Countries should constructively and effectively execute extradition requests in relation to money laundering and terrorism financing without undue delay.

Mdm Speaker, I would like to propose that the Bill address the following:

(a) money laundering and terrorism financing are extraditable offences;

(b) have clear and efficient processes for the timely execution of extradition requests, including prioritisation of cases, where appropriate;

(c) a case management system with rigorous supervision be maintained to monitor progress; and

(d) ensuring an adequate legal framework.

In addition, the Accounting and Corporate Regulatory Authority Act (Cap 2A) (ACRA) has been amended and a new Part VIA1 introduced to enhance the regulatory framework for corporate service providers, comprising registered filing agents and registered qualified individuals, such as solicitors, accountants and advocates.

Under this Act, a new set of Accounting and Corporate Regulatory Authority (Filing Agents and Qualified Individuals) Regulations 2015 sets out further requirements on this enhanced framework.

Under Recommendation 8 of FATF (Financial Action Task Force), ACRA will also have more scrutiny on non-profit organisations – corporates limited by guarantees (CLG).

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I feel that this MAS Bill should be read concurrently with the ACRA (Amendment) Bill or perhaps make it into an omnibus MAS-ACRA Bill, providing more enforcement powers over professional firms and corporate service providers. There should also be some provisions to ensure that MAS scrutinises law firms, accounting firms and charities and companies limited by guarantee.

Many accounting firms, law firms and corporate service professional firms are tasked to incorporate foreign companies and foreigners with paid-up capital funds from other countries.

Most criminals and scammers do their money laundering by setting up shell companies with post office (PO) boxes as registered and mailing addresses in Singapore. MAS needs to provide and train bankers, bank officers, lawyers, accountants to detect such suspicions, especially those that are classified in the high-risk range which include politically-exposed foreigners and organisations from countries and territories and their unrealistic turnover in client business accounts with no apparent business and low paid-up capital.

Section 30ZC (5), under assistance that may be rendered to domestic authority, the Bill should also address the confidentiality clauses that bind lawyers under the Legal Profession Act. This Bill should ensure that lawyers are able to break all confidentiality without the worry of the Legal Profession Act in place.

In 2012, there was a case in France in which a lawyer was taken to task for reporting the origin of his client's money. While client-attorney privilege is important, the French court concluded that the obligation to report suspicions did not represent a disproportionate interference with lawyers' professional privilege and that there had been no violation.

Last but not least, the ACRA Act also addresses non-profit organisations (NPOs) and religious bodies. Increasingly, activities are linked to terrorism and its financing, including the use of NPOs for terrorism financing. Therefore, I would again ask the Minister whether the MAS Bill should be read concurrently with the ACRA Act as they both share the same purpose, as the Bill and Act will raise NPOs' awareness of possible misuse of their organisations for money laundering and terrorism purposes. Enforcement authorities should also periodically monitor NPOs which are reasonably suspected of such activities.

Mdm Speaker, I stand in support of the MAS (Amendment) Bill. Singapore has grown significantly over the past decade or so to become one of the world's leading wealth management centres. This growth reflects the trust that

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high net worth individuals have in Singapore. And this trust is precious and hard-earned. Singapore must defend her reputation for being a well-regulated financial centre that abides by international standards for anti-money laundering and counter terrorism financing.

With the crackdown on corruption intensifying in China and Indonesia and with the expanding grip of ISIS, the Bill could not be more timely. I would, however, like to make two observations.

One, the codification of customer due diligence requirements is, certainly, a large step in the right direction. We have heard stories of how businesses have migrated from one financial institution to another in search of lower account opening due diligence requirements. Some have experienced how one bank might ask fewer questions about the provenance of funds compared to another bank. How will MAS ensure that the playing field is level for all banks and that there are no loopholes or leakages?

Two, stepping up international cooperation and information exchange is important, given the increased cross-border mobility of capital. However, banking confidentiality, which has been an important foundation of success, continues to be critical. We must safeguard against spurious international requests, and also safeguard bona fide client confidentiality. In addition to paragraph 30Z on the Conditions for Provision of Assistance to AML/CFT authority, can the House be provided with more concrete details about how these safeguards will work in practice?

Mdm Speaker, I declare my interest as a professional working in the banking industry. I spoke in the House during the Second Reading of the amendment of the Terrorism (Suppression of Financing) Act (TSOFA) in 2013. The amendments were to increase the maximum fine for terrorism financing offences, make tipping-off an offence, protect the identity of informers, refine the exemption provisions and to consolidate the terrorism financing provisions under TSOFA. Singapore has, over the last few years, aligned the Banking Act and the Insurance Act as well. These reviews and updating of our laws show our commitment to fight money laundering and to counter terrorism financing.

We are a fast-developing pre-eminent financial centre. Over the years, the financial sector has seen an exponential increase in the number of transactions and an increase in players in the form of financial institutions globally operating in and through our front yard. The Government and the regulators have put in place a tough regime that includes much of the prudence I spoke about during the Second Reading of TSOFA. I likened the regulators to

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the constructors of a shark net protecting the swimmers in a lagoon. They are also the lifeguards, the inspectors of the nets and the ones keeping up-to-date with technology and innovation to improve the reliability of the shark nets and, therefore, the safety of the swimmers.

Our financial sector is the lagoon that financial professionals and financial institutions operate in. Sharks are known to penetrate shark nets and cause serious injuries to swimmers and fatal attacks are not rare. Translate that into our financial sector, an important engine of Singapore's survival, it would damage our reputation as a financial centre. To not have AML and CFT elements penetrate our strict standards and regime is unrealistic.

The proposed amendments to the MAS Act will once again show our commitment to be part of the international effort to fight money laundering and counter financing of terrorism. The amendments will further place Singapore in the forefront in banking supervision and demonstrate our commitment to be a pre-eminent financial centre.

Mdm Speaker, I would like to touch on three aspects that I feel is important to highlight, which the Bill serves to achieve.

First, the Bill gives MAS the power to conduct AML/CFT inspections to an expanded range of financial institutions, particularly holders of stored value facilities and non-bank credit card or charge card issuers. This is an important move in the fight on AML. Ask any banker and they will tell you their antennae are raised if they hear from prospective clients that they deal with non-bank financial institutions. In practice, this would trigger enhanced due diligence processes. Bringing such vehicles into the fold under the Bill is to be applauded. Such vehicles count amongst the tools in the arsenal of money launderers.

The second aspect I would like to touch on is the introduction of "Assistance to Foreign Authorities and Domestic Authorities for their Supervisory and Actions in respect of Money Laundering, Financing of Terrorism and other Offences". While I am glad to see that there are legislative safeguards to prevent "fishing expeditions" and the abuse by a foreign AML/CFT supervisory body, I would like to hear even more from the Minister the oversight and administration to ensure that the safeguards are, indeed, adhered to in practice. Some of the concerns were alluded to by Dr Benedict Tan a moment ago.

As important as Singapore's financial sector to be part of the global effort in anti-money laundering and counter-terrorism financing is, we must also ensure that this role, commitment and stance do not impinge upon the understanding and branding of Singapore as a banking centre where the clients or would-be clients of financial institutions place their

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trust that their banking and personal information is well-guarded.

Lastly, to have customer due diligence enacted as a primary legislation to be consistent with other jurisdictions also demonstrates our commitment to FATF and the Basel Committee on Banking Supervision. This would even send a stronger signal to professionals in the industry that customer due diligence and the maintenance of transaction records and the review of the same will ensure that our surveillance "radar" is always up. Proper retention and maintenance of records will be a focus when the situation arises where MAS or the foreign supervisors need to carry out investigations related to AML and CFT.

The current situation where radicalisation and ease of terrorist recruitment, helped by the social media, is a concern for many security agencies across the world. Amongst clients that a financial institution may have or may already have, there may exist one or some who may be or have grown to be sympathisers of a particular group. They may have had a long and cosy banking relationship stretching back many years. Customer due diligence and transaction records will certainly throw light on the changes in the account conduct and client behaviour. Madam, I support the Bill.

Mdm Speaker, I thank the Members who have spoken and for their support of the Bill.

I think all the Members who spoke – all three – highlighted the importance and relevance of ensuring that our AML and CFT laws remain relevant and effective in the face of recent developments. The Members have also raised several issues and I will address them in turn.

First, Dr Benedict Tan asked how MAS can ensure a level playing field for banks with regard to the implementation of customer due diligence requirements. Madam, as I mentioned earlier, detailed customer due diligence requirements are set out in the AML/CFT Notices issued by MAS to financial institutions. The Notices specify what customer due diligence entails and the specific requirements.

Mrs Lina Chiam alluded to the fact that these requirements may put banks in a conflicting position between developing and growing their business and being subject to these regulatory requirements. But, Madam, I would say that all the banks and financial institutions around the world understand that there is a need, in today's environment, to perform such functions to be able to identify and verify the customer's identity, screen customers against sanctions lists and other published databases. This is not an imposition or

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additional requirement. This is basic to what a bank should do and it is essential, in fact, in preserving trust and integrity in order to develop the banking sector. In fact, these requirements are benchmarked against international standards set by FATF, as well as industry best practices.

MAS supervises the financial institutions for compliance with these Notices. Where deficiencies are identified in a financial institution, MAS will require it to take prompt remedial actions and update MAS on the completion of these remedial actions. MAS may also require the financial institution to appoint an independent third party to certify that the measures have addressed the deficiencies.

I would like to assure Members that MAS takes a serious view of any breach of the Notice and will take appropriate regulatory actions. Depending on the severity of the breaches, these range from formal warnings, reprimands, restrictions on operations, financial penalties to the revocation of licences.

Mr Arthur Fong likened financial regulators, like MAS, to builders of a shark net to protect swimmers in a lagoon from the sharks. I would say it is a very vivid analogy. While MAS may be responsible for setting the AML/CFT rules, the integrity of our financial sector is a collective responsibility. Industry stakeholders play a critical role in making sure that these rules translate into an effective regime. We must all work together to make an effective net.

Both Mr Arthur Fong and Dr Benedict Tan asked for more details about how the safeguards for international cooperation will work in practice. Madam, the sharing of information with foreign supervisors is intended to support the effective AML/CFT supervision of international financial groups. While customer information may be relevant in certain cases, information requests will, generally, relate more to the financial institution itself, such as its policies and procedures, management or control structure information, control lapses that may be identified through inspection and supervisory actions taken against the institution.

I had earlier highlighted the key safeguards for ensuring that only bona fide requests are acceded to and that the information shared is kept confidential. To facilitate MAS' assessment, the Bill requires that the foreign supervisor be specific on the purpose of the request, the nature of the assistance and the relevance of the information requested, to the foreign supervisor's oversight of the institution it is in charge of. This will address some of the broad requests with tenuous grounds that are typical of the "fishing expeditions" that Mr Arthur Fong mentioned.

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To mitigate the risk of misuse or leakage of the information, the foreign supervisor is required to undertake to safeguard the confidentiality of the information and to use the information only for the specified purpose. MAS will be able to reject any future requests for information by the foreign supervisor if MAS finds that it has breached any of the undertakings.

The Act further requires that the information requested be proportionate to and is of sufficient importance to the supervisory issues that are raised, and that the matter to which the request relates to should be of sufficient gravity. Based on these criteria, detailed assessments will then be made, taking into account the specific facts of each case. This proportionate approach taken by MAS is provided for in international standards, including those set by FATF.

Mrs Lina Chiam mentioned that this MAS Bill has to be taken holistically, together with the ACRA Bill and other enforcement and legal aspects, and I agree that combating money laundering and terrorism financing is really a multi-agency effort, I would like to assure her that we do have an overall multi-agency effort in place to look at this holistically.

There is a Steering Committee on AML/CFT. All the various agencies – the Ministry of Home Affairs, MAS and Ministry of Finance – are involved. On the enforcement side for money laundering and terrorism financing, we have agencies like the Police, Commercial Affairs Department and Central Narcotics Bureau working on this. On the legal side, the Ministry of Law and Attorney-General's Chambers are involved and, on the financial side, MAS is the integrated financial supervisor overseeing AML/CFT issues for the entire sector, including the banking, securities and insurance industries. MAS works very closely with other non-financial sector supervisors, including the Casino Regulatory Authority and ACRA.

This is our whole-of-Government, multi-agency effort. We are not doing this in a piecemeal fashion. We are doing it holistically but, for now, we are presenting the MAS Bill, focusing on the amendments relevant to MAS' role.

Madam, I believe I have addressed the questions raised by Members. Once again, I thank the Members who have spoken for their support of the Bill and for their clarifications and I would encourage Members of the House to give their support to the Bill.

Madam, the amendments will reiterate Singapore's commitment to the global fight against money laundering and terrorism financing. Singapore's financial sector is built on integrity, trust and professionalism. Our continued growth is only possible if we have a clean regime that safeguards legitimate funds and weeds out tainted money.

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*Question put, and agreed to.*

*Bill accordingly read a Second time and committed to a Committee of the whole House.*