Debated in Parliament on 7 Jul 2014.
Order for Second Reading read.
Mr Deputy Speaker, I beg to move, "That the Bill be now read a Second time".
Sir, the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act, or CDSA, criminalises the laundering of benefits derived from serious criminal offences and provides for powers to investigate and confiscate such benefits.
The Act was last amended in 2010 to enhance our anti-money laundering measures and adapt them to the changing criminal landscape.
With the increasingly transnational, lucrative and sophisticated nature of criminal activities, the risk of Singapore being used as a conduit to launder criminal proceeds continues to be a concern.
Money laundering undermines the rule of law, erodes the integrity of our financial system and damages our reputation as a trusted international financial centre. Illicit proceeds can also be used to finance terrorism, giving rise to serious national security concerns.
The Police's enforcement efforts and work with various stakeholders have led to an increase in the number of money laundering convictions from 18 in 2010 to 39 in 2013.
To maintain our vigilance and stay ahead of this threat, our criminal laws and anti-money laundering measures must be regularly reviewed to ensure that we have the means to deal with criminal operations swiftly and deprive perpetrators of their illicit gains.
This Bill thus proposes amendments to strengthen our ability to detect, deter and prosecute money laundering offences.
Given the transnational nature of crime and the ease with which large sums can be moved across borders today, it is crucial that strong domestic regulations be complemented with effective international cooperation. Indeed, over the past three years, the number of requests for mutual legal assistance from our foreign counterparts on money laundering and
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terrorism financing matters has risen from 32 in 2010 to 73 in 2013.
It is, therefore, in our national interest to participate proactively in the global effort against cross-border crime and money laundering. And this affirms our strong stance against such crimes and sends a clear signal that illicit assets do not have safe harbour in Singapore, upholding our status as a well-regarded and well-regulated financial centre.
Therefore, the proposed amendments also seek to facilitate information sharing with foreign law enforcement agencies where transnational criminal elements are involved.
Collectively, these amendments will also better align our laws with the international standards set by the Financial Action Task Force, or FATF, of which Singapore is a member.
Sir, let me now elaborate on the key amendments. First, two amendments that enhance our ability to investigate and prosecute the laundering of criminal benefits derived from foreign predicate offences. Predicate offences are crimes that generate criminal proceeds for laundering.
First, before prosecution can proceed against money laundering involving a foreign predicate offence, the CDSA currently requires that our law enforcement agencies obtain a certificate from a foreign country to establish the foreign predicate offence. However, our agencies have faced difficulties in obtaining such certificates as it is not an internationally established practice.
Many jurisdictions, in fact, do not have this requirement in their laws and thus have no designated authority or powers to issue such certificates. This has adversely affected our prosecution effectiveness.
Clauses 2(a) and (f) serve to allow for a wider range of evidence to be adduced to prove the foreign law which gives rise to the predicate offence.
Such evidence can include foreign court judgments, statements by experts, as well as any statement provided by an appropriate foreign authority confirming that an offence had been committed under its laws.
Second, the CDSA currently has the requirement of dual criminality, that is, it recognises a foreign offence only if the same act also constitutes an offence in Singapore. However, a strict application of dual criminality constrains our ability to prosecute money laundering
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cases involving the evasion of foreign taxes where there is no local equivalent.
To address this, the amended definition of a "foreign serious offence" will include a foreign tax evasion offence, so long as the offence has been criminalised in the foreign jurisdiction and it is committed wilfully with intent to evade tax. These amendments are consistent with Singapore's commitments under tax treaties and will deter tax-illicit monies from flowing into Singapore.
Sir, next I will touch on measures to increase deterrence against money laundering activities.
Clauses 11 to 14 increase the maximum imprisonment term for money laundering offences from seven to 10 years. This is consistent with the maximum penalties for terrorism financing, recognising the similar gravity of both types of criminal activities.
Today, our laws allow us to confiscate the instruments used, or intended to be used, in the commission of a crime, in addition to any benefits derived from such conduct. This ensures that criminals are deprived of all resources used for, and obtained from, their illegal activities.
Such instruments can also easily re-enter circulation to perpetuate illegal activities, thereby further frustrating the intent of our legislation and enforcement efforts. To address this, clause 5 introduces new provisions to allow the Public Prosecutor to apply to the Court – upon securing a conviction for a predicate offence – to make a substitute property confiscation order against the defendant, if he had used or intended to use any instrument for the commission of the offence and it is not available for confiscation.
The offender will be required to pay to the Government the value of the instrument as assessed by the Court.
The current confiscation processes for benefits of crime, and the attendant safeguards, will also be applied to the substitute property confiscation order with modifications as necessary. This proposed power is in line with international requirements under FATF and will keep our confiscation regime robust.
To further enhance our vigilance against potential money laundering activities, two measures will be implemented.
First, the CDSA currently requires travellers, who carry physical currency and bearer negotiable instruments exceeding S$30,000 into or out of Singapore, to declare the amount
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in their possession at the checkpoints.
Henceforth, we will prescribe the cross-border cash reporting threshold in subsidiary legislation instead, and lower the threshold from S$30,000 to S$20,000. The current threshold of S$30,000 was set in 2007 to meet FATF's recommended reporting threshold of €15,000. The revision to S$20,000 takes into account the appreciation of the Singapore dollar against the Euro in recent years and allows us to keep closer watch over large volume cash movements.
Prescribing the reporting threshold in subsidiary legislation also allows timely changes to be made in response to currency fluctuations. The revised reporting threshold also aligns us better with practices of comparable international jurisdictions, such as the United States, Australia and New Zealand.
Second, clause 19 introduces new provisions for certain prescribed persons to conduct customer due diligence, keep records and file cash transaction reports when they transact with a customer in cash exceeding a certain threshold amount.
Such a regime is already in place for the casinos in Singapore.
In line with FATF standards, we will expand such requirements to the Precious Stones and Metal Dealers, or the PSMD sector, in view of the potential risk it poses as a conduit for money laundering and terrorism financing activities.
PSMDs will be required to verify the customer's identity and file a report with the Suspicious Transaction Reporting Office (STRO) when they transact a sale with a customer in cash exceeding S$20,000. Such cash transaction records and relevant supporting documents are to be kept for a period of five years from the date of filing.
The definition of PSMDs and customer due diligence requirements will be set out in regulations made under section 64 of the CDSA. Clause 22 amends that section to empower the Minister for Home Affairs to make a contravention of any provision of those regulations an offence.
In developing this regulatory regime, MHA, MOF and MAS have jointly consulted the public and key industry players, such as the Singapore Jewellers Association and the Singapore Clock and Watch Trade Association, and received broad support for the measures. The implementation details of the PSMD and revised cross-border cash reporting measures will be announced in due course.
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Sir, I now come to the amendments to enhance international cooperation and to facilitate information sharing.
The Suspicious Transaction Reporting Office, or STRO, was established administratively in the year 2000 within the Commercial Affairs Department. It is the office responsible for the receipt and analysis of suspicious transaction reports and other financial intelligence reports.
Clause 4 formalises STRO's mandate by establishing its functions in the CDSA. To discharge its functions, STRO officers are given powers to obtain relevant information for the purpose of analysing the reports made to it.
Financial intelligence derived can be shared with foreign counterparts for their investigations into foreign offences, subject to appropriate safeguards. Clause 10(c) provides more flexibility for intelligence sharing, given its importance as a channel of cooperation in our anti-crime effort.
The amendments will permit sharing without the need for a formal arrangement, such as a memorandum of understanding (MOU) between STRO and its foreign counterpart, as long as the safeguards for the use and confidentiality of the information are secured through an undertaking by the foreign authority. This aligns us with the practices of key foreign jurisdictions, such as Hong Kong, the United Kingdom, the United States and Switzerland, which also do not require MOUs to share intelligence.
Sir, I will now touch briefly on the other amendments proposed in the Bill.
Clause 2(e) aligns the definition of "financial institution" with the corresponding definition under the Monetary Authority of Singapore Act, or MAS Act, to ensure consistency in coverage.
As dispute adjudicators, arbitrators also have access to confidential information in the course of their work. Clause 8(b) thus extends the exemption from suspicious transaction reporting to arbitrators in respect of any matter which came to their attention during arbitration proceedings. The exemption preserves confidentiality, which is essential in the arbitration process. Established arbitration jurisdictions like the United States, the United Kingdom and Australia similarly exempt arbitrators from reporting suspicious transactions.
Lastly, the Bill makes some technical amendments. For example, the term "drug dealing" is preferred to "drug trafficking" in describing the predicate drug offences in the CDSA, as it better reflects the drug-related offences scheduled in the CDSA by covering
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activities beyond trafficking, such as unauthorised drug manufacturing.
Sir, money laundering is a sophisticated international scourge that requires a comprehensive suite of counter-measures to effectively detect and combat. To prevent such criminal activities from taking root in our financial system, our laws have to remain up-to-date, possess sufficient deterrence and facilitate international cooperation.
The proposed amendments strengthen these aspects of our legislation and enhance our ability to take enforcement action against money laundering. They are also in line with international practices and standards and signal our resolute commitment to the global anti-money laundering effort. Sir, I beg to move.
Question proposed.
Mr Deputy Speaker, I rise in support of the Bill. The Bill aims to strengthen our fight against money laundering and terrorism financing. It is good for two main reasons.
First, its importance to Singapore's continued growth as a major offshore financial centre cannot be overstated. As an international financial and investment centre, we are vulnerable to cross-border money laundering and terrorist financing risks. The Singapore National Money Laundering and Terrorist Financing Risk Assessment Report issued in January this year revealed that while we do have tough laws and regulations in place, more can be done in certain sectors which lack the relevant legislative and supervisory framework. The Bill, therefore, represents our continuous efforts to keep our laws relevant and effective.
Second, this Bill tightens the regulation of money flows in accordance with the international standards set by the Financial Action Task Force, an inter-governmental body that Singapore has been a member of since 1992. It complements the recent changes made to the Terrorism (Suppression of Financing) Act (TSOFA) in relation to terrorism financing in 2013 and it is, therefore, another step in a series of regulatory reforms taken to honour our international commitments.
That said, I wish to raise two points of clarification.
First, section 40A of the current CDSA serves to protect "informers". And this, in the Bill, clause 9 amends section 40A(4) of the Act such that it will read: "In this section, 'informer' means a person who makes a disclosure pursuant to a requirement under section 3A(3) or
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pursuant to section 39(1)." The new section 3A(3) refers to persons who are required by the Suspicious Transaction Reporting Officer (STRO) to disclose documents or information, while section 39(1) refers to persons under a duty to disclose their knowledge or suspicion where such information or matter on which the knowledge or suspicion is based came to his attention in the course of his trade, profession, business or employment.
The question is whether the law affords protection to a voluntary "informer", someone who reports his knowledge or suspicion of money laundering even if he is not required under a law to do so is not under the duty to do so. The wording of the provision indicates otherwise. Should we not encourage more people to come forward and afford them protection from civil claims? How would this tie in with protections for whistle-blowers? Could the Minister clarify, therefore, the intended scope of the provision?
Second, section 39(1) of the CDSA. I accept this is not part of the amendment of the Bill but important for its understanding. Section 39(1) of the CDSA places an obligation on a person to disclose knowledge or suspicion of any act which may constitute drug dealing or criminal conduct should the pertinent information come to his attention in the course of his trade, profession, business or employment. "Criminal conduct" in this provision refers to "any act constituting a serious offence or a foreign serious offence", and "serious offence" encompasses a whole host of offences as specified in the Second Schedule of the CDSA.
Mr Deputy Speaker, it can be argued that this provision casts too wide a net – it deals with an array of offences that are not likely to have anything to do with money laundering, terrorism or drug dealing. Indeed, the Second Schedule includes the offence of importing fresh fruits or vegetables without a licence under section 7 of the Control of Plants Act, the offence of importing or manufacturing animal feeds without a licence under section 4(5) of the Feeding Stuffs Act, and the offence of supplying adulterated or counterfeit health products under section 16 of the Health Products Act.
The result of such an overly inclusive provision is that institutions, such as banks, will have to shoulder the onerous burden of reporting details of such seemingly disparate and wide-ranging offences. This might unnecessarily hinder the productivity of these institutions and result in indiscriminate reporting. Could the Minister help explain the reasoning behind such a wide definition of "serious offence"?
Mr Deputy Speaker, while the proposed amendments do indeed help to facilitate the detection and prosecution of money laundering offences, we must continue to monitor local risks, such as the use of our casinos or even property purchases as a possible vehicle for money laundering. We also need to keep pace with threats brought about by technology. Technology has created new vehicles for money laundering, such as digital currency like bitcoins, or even virtual goods in online gaming that have real cash value. In this regard, I
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note that MAS has already taken some steps to regulate virtual currency intermediaries for money laundering and terrorism financing risks. I support the Bill.
Mr Deputy Speaker, Sir, as crimes are increasingly cross-border and the proceeds of crime are easily anonymised, it is important that we continue to address weaknesses that may make Singapore an unwitting facilitator of organised and transnational crime. To this end, the global Financial Action Task Force (FATF) has been prolific in its issuance of guidelines and mutual evaluations to help countries tighten up their system weaknesses. Singapore has been subject to such evaluations and criticisms by FATF, and has been responding to them.
In recent years, the Government has introduced or supported due diligence and reporting requirements to specific sectors that may facilitate money laundering, for example, corporate service providers and the legal profession. On the enforcement side, the Director of the Commercial Affairs Department (CAD) recently revealed in a Business Times interview on 30 June 2014 that CAD had tripled its financial investigation resources as it was seeing a trend of overseas criminals seeking to launder money through Singapore bank accounts.
Given the challenges we face as an open economy, the amendments being proposed in this Bill are another anti-money laundering measure meant to bring Singapore in further compliance with the many recommendations of FATF. I support the principles of the Bill.
That said, I have some comments and clarifications about two aspects of the Bill. First, cash transaction reporting for precious stones and metal dealers and, second, substitute property confiscation orders.
First, cash transaction reporting for precious stones and metal dealers. Clause 19 introduces a new Part VIB on Cash Transaction Reports. This Part will require prescribed persons to perform customer due diligence and internal control measures before entering cash transactions exceeding a prescribed amount. Though the class of persons has not yet been prescribed, it is clear from the Ministry's media release of 28 May this year that it is to apply to dealers of precious stones and metals (PSMDs).
PSMDs are within the FATF list of Designated Non-Financial Businesses and Professions considered vulnerable to money laundering. Diamonds and gold are high-value commodities. FATF noted in a special report in 2013 – the Money Laundering and Terrorist Financing Through Trade in Diamonds, October 2013 – that by changing proceeds of crime into diamonds and jewellery, criminals can conceal proceeds of crime over long periods of time
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to avoid seizure and confiscation, transfer very high value across borders while keeping their investment relatively safe and use them as a form of payment later. Alternatively, it has been found that syndicates may use the bank accounts of diamond dealers as conduits to transfer large sums of money to persons not in the diamond trade. Domestically, the Government has identified pawnbrokers as a sector needing attention, as they are dealing in gold on a cash basis.
It thus makes sense to require PSMDs to take extra care that they are not unwitting accomplices in money laundering by criminals. However, in order for businesses to do due diligence and suspicious transaction reporting, they need to have a sound understanding of the risks and be able to exercise sound judgement. Businesses would clearly benefit from information sharing by Government authorities on matters, such as which countries are of higher risk, how money launderers have abused dealers in actual cases and even certain intelligence information.
The requirements placed on such businesses should also not be too onerous as there are compliance costs involved; businesses would need to build expertise through training, seek professional advice and keep records.
I understand that at a recent local seminar on "Know Your Customer" requirements, even corporate service providers, like corporate secretarial firms, were wary and worried about how to do risk-based assessments of their clients, the extent of record-keeping needed and how much their business costs would increase.
PSMDs in Singapore encompass a wide range of businesses, from those with international reputations like De Beers to small family-owned gold or jewellery businesses and pawn shops. Requiring such businesses to assess the risk of their customers and to do appropriate reporting and tracing may be novel and unfamiliar. The proposed reporting requirements appear rules-based, requiring reporting of cash transactions above a certain value. How far will PSMDs be required to assess risk rather than just follow rules? How will the Suspicious Transactions Reporting Office (STRO) or other Government agency assist such dealers to understand what is required and to make any necessary risk assessments?
One final observation about PSMDs. Under the Bill, due diligence is required only for cash transactions. However, in a report by FATF last year, it was noted that the usage of cash in the diamond trade had diminished. Almost 50% of laundering cases reported concerned non-cash payments, such as wired funds and credit terms, while only 10% of cases seen involved cash as the sole method of payment. In this regard, FATF observed that there might be a need to scrutinise non-cash transactions as well.
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Next, Sir, I move on to substitute property confiscation orders. Under the existing Act, proceeds or benefits of crime are liable for confiscation. Clause 5 of this Bill introduces a new Part IVA on Substitute Property Confiscation Orders, which will apply when a defendant has used or intended to use any property, called "an instrumentality", to commit the offence and the instrumentality is not in the hands of the defendant. The new provisions will allow confiscation of other properties of the defendant of equivalent value to the instrumentality. An example would be where a defendant used a car to deliver drugs and the car is not in the defendant's ownership. The new section 29B would enable the Court to confiscate other properties belonging to the defendant of equivalent value to the car, say, money in the bank or furniture. In addition, the new section 29B (3) and (4) make clear that the substitute confiscation order will be for the defendant to pay the full value of the instrumentality, that is, the full value of the car. Thus, if the substitute property confiscated is realised for less than the full value of the car, the defendant is still liable to pay the difference.
The wording of section 29B makes it mandatory for the Court to make the substitute confiscation order if the Public Prosecutor applies for it.
Sir, provisions for confiscation of substitute property are found in the laws of other countries as well. Their purpose is to ensure that crime does not pay, by reducing the economic incentives and increasing the pecuniary loss from criminal activity. While I appreciate the efficacy of such provisions to cripple syndicates financially, I believe the clause, as worded in the Bill, could operate too harshly in certain circumstances.
First, under the Bill, the instrumentality used to or intended to be used to commit the crime need not have belonged to the defendant at all, as the section simply requires that the defendant used or intended to use "any property" for the crime. Secondly, property used for the crime can encompass a wide range of scenarios. Under the CDSA, "property" is defined to include "money and all other property, movable or immovable". Property used to facilitate crime thus includes not just firearms or getaway vehicles, but even premises used for commission of the crime. Thirdly, the property used or intended to be used for commission of the crime may have been used just once for the crime but was generally used for legitimate purposes, for example, a flat used as a dwelling. To take the example of a flat being used for drug dealing, if section 29B is triggered, the defendant will be liable to pay the full value of a flat he may have no share in.
By comparison, the model policy for confiscation of substitute assets proposed by the American Legislative Exchange Council allows asset substitution only if the State proves by a preponderance of evidence that the defendant intentionally transferred, sold or deposited property with a third party to avoid the Court's jurisdiction.
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In the Ministry's press release of 28 May on the Bill, there was a mention that the substitute property confiscation order is meant to apply where the defendant has dissipated or disposed of the instruments of crime. However, in the Bill itself, the section will kick in so long as the instrument of crime is not held by the defendant; there need not be any dissipation by him.
Sir, I have no issue with the benefits of crime and instruments of crime being subject to a confiscation order in every case. However, in the case of substitute confiscation orders, the confiscation of other property of equivalent value to an instrumentality is less clear-cut for the reasons I mentioned. It seems that the Public Prosecutor is expected to be the gatekeeper of this provision, since he is the one who decides whether to apply for the substitute confiscation order. Even so, would it not have been possible to give the Court limited discretion to refuse to make the orders if they would operate unjustly in particular cases? At least, the defendant should be allowed to make some representations to the Court before his substitute assets are confiscated.
Allow me to declare my interest as a banker and also the co-chair of the private banking industry group alongside the MAS. I will focus on the issues in this Bill pertaining to tax crimes and the implications for the Singapore financial sector as well as other parts of our economy. I will also focus on some of the implementation challenges arising from this Bill.
The proposed amendments to this Bill in relation to tax make important clarifications to Singapore's framework to combat tax evasion. I support the timeliness, relevance and importance of this Bill. It comes at a time when many jurisdictions around the world are focused on strengthening their tax evasion laws, enforcing anti-money laundering legislation and discussing international cooperation on tax and exchange of information.
This Bill enables certain types of foreign tax offences to be treated as serious offences, whether or not the foreign tax concerned is a type that is imposed in Singapore. This means any suspicion of tax illicit funds should be reported without having to worry about what specific type of taxes have been evaded.
This Bill, if implemented correctly, will promote Singapore as a financial centre with a strong legal framework. It will also help counter concerns that Singapore is a "tax haven" and avoid the reputational damage suffered by some other financial centres.
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Let us not forget that Singapore has worked hard to build our financial hub. We are, today, a successful financial centre precisely because of our strong governance structure and legal framework. Many international customers choose to bank here because it is a safe place to bank.
In recent years, both the regulator here and the financial industry have taken steps to combat tax evasion. The MAS has been proactive and adopted a consultative approach to guide the industry along a suitable path for the long term. Under this guidance, financial institutions have undertaken comprehensive reviews of their customer accounts for tax illicit monies. But we must be able to strike a balance if we are to be successful. The country, in a need to uphold its solid reputation, cannot threaten the individual's rights to safeguard his or her assets. As global pressure mounts to clamp down on supposed tax cheats and countries feel compelled to cooperate internationally, there also need to be safeguards in place to prevent abuse. At the same time, Singapore must ensure its banking industry is not disadvantaged.
Whilst the Bill is clear in its concepts, the implementation may give rise to some concerns. This is where correct interpretation or enforcement comes into play. So, what are the challenges?
Firstly, there lies the issue of clarity in understanding what constitutes tax evasion. Financial institutions are required to file an STR when it is "uncertain" if an act of evasion is committed. In practice, it is a matter of judgement if something amounts to "tax planning", "tax avoidance" or "tax evasion". Only the last is reportable. Hence, more guidance is needed here in terms of the distinction between tax avoidance and tax planning. MAS must, therefore, in practice, ensure it allows an avenue for banks to ask generic questions about whether a case pattern is a reportable event.
There may be instances, too, where a supposed tax crime filing may be politically motivated by a government going after whom they may deem to be their political foes.
Another specific practical concern arises with the requirement to file an STR when foreign tax laws may have been violated, even if the same act was not considered tax evasion here in Singapore. Whilst a global bank with branches in every country may have the ability to make such assessments at some cost and resource, smaller regional banks or local banks may not. Hence, some care must be taken when enforcing this principle.
Secondly, there is the potential issue of over-reporting. Over reporting is not "cost-free" or risk-free for a bank as its clients could be wrongly singled out and get requests via IRAS. Hence, FIs are caught in a situation where STR filing too little could be non-compliant but
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reporting too frequently would lead to loss of competitiveness. This can only be dealt with via a more rigorous onboarding and Know Your Customer process which could also be expensive and difficult to implement.
The third challenge lies in the rising costs of compliance for smaller industry players. There is also the cost of training to raise staff awareness of tax crimes. FIs have to hire more transaction monitoring and AML/Compliance staff. These costs all add up. Whilst bigger global or local banks are able to provide adequate resources for this, many smaller FIs may not be able to.
Hence, allow me to offer two suggestions at this juncture. The first is to allow, perhaps, the setting up of a common facility or shared resource for these smaller players. The second is made in the context of Singapore being a global financial centre – for us to leverage off big data analytics globally and to work with other such centres to better track the illegal movement of funds across borders.
Fourthly is the issue of Base Erosion and Profit Shifting (BEPS). The Bill, as such, does fit in well with the increased global focus on BEPS – the 15-point action plan sponsored by the G20 and supported by OECD. Whilst we have yet to see the full extent of this plan, no doubt, more will emerge. Global firms like Google, Starbucks, Apple have come under scrutiny for having complex tax structures that helped them save millions on their tax bills. These structures were perfectly legal but this perceived tax avoidance has now become a moral issue. Again, here, more clarity on such cases will be needed.
The fifth issue is the movement of tax illicit funds into non-banks. Whilst banks and financial institutions are tightly regulated by a clear set of industry standard protocol, other industries that deal in payments and transactions may not be governed by the same stringent criteria, for example, telcos and online payment companies that deal with money flows that bypass the banking system daily. Money launderers have wised up to the fact that banks cannot hide them from the law and some may find other avenues to hide their wealth, for example, in high-end properties, precious metals, gold bars, diamonds and so on. How will such money flows be monitored?
Lastly, the digital economy and the rise of the virtual currency. With the onset of the digital revolution and the increasing popularity of virtual currencies as a store of value and a means of online transactions, the Bill may need to look at the potential risk of how convertible virtual currencies that are exchanged for real money can become vulnerable to tax evasion or money laundering. The increasing use of such virtual currencies, for example, the bitcoin, would create a whole new payment system that could potentially offer more
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anonymity, perhaps, than traditional forms of transactions and payment systems today.
Finally, the Bill addresses the need for additional powers to be bestowed on the Suspicious Transactions Reporting Office (STRO). I am supportive of this move but will suggest that STRO be as transparent as it can possibly be about its role and where data may go or be used. A lack of clarity may cause undue concern for those filing reports. Hence, an open relationship between the FIs and STRO and perhaps an ability for FIs to engage STRO to obtain some guidance or pre-clearance on selected cases would be useful and will ensure the filing of high quality STRs. Similar set-ups abroad, called Financial Intelligence Units, already exist in other countries and we can learn more about them – of the difficulties they have faced.
Sir, this Bill does help Singapore safeguard our nation's reputation and sets high standards for governance and, hence, I support the Bill.
Mr Deputy Speaker, I stand in support of this Bill, especially in the current globalised, high technology and high travel climate. The enhancement of the maximum penalty for money laundering of up to 10 years of imprisonment will, hopefully, serve as a strong deterrent factor.
Also importantly, as we are debating this Bill, it is a call to financial institutions to continually review and monitor their processes and checking mechanisms, to prevent serious tax crimes.
I have a few queries to raise.
Firstly, pertaining to "transnational crime and money laundering" activities, how are we most often alerted to these? Is it via Intelligence units, INTERPOL, individuals, companies or the financial institutions themselves? Also, on average, how many such cases are there currently in Singapore?
Secondly, will there be any difference in the management and handling of these cases if they involve individuals, compared to when they implicate groups, associations or companies? Will the penalties meted out also vary accordingly?
Thirdly, pertaining to the amendments that state, I quote, "it will allow the courts to order the confiscation of any other property of an equivalent value belonging to an offender, if he disposes such instruments of crime", can I confirm if there will be a specific timeframe
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within which this can be or should be conducted?
Fourthly, as there are currently no internationally accepted standardised regulations for legislation that cuts across all countries and jurisdictions, we may still risk running into queries and uncertainties when handling cases. What will then be the best course of rapid action in such cases? And this should be available 24 hours, I assume.
Finally, with our open borders and economy, as well as our good standing as one of the important financial centres in the region and globally, everyone, especially our financial institutions, must remain vigilant at all times.
Mr Deputy Speaker, I rise in support of this Bill. Presently, the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act or CDSA criminalises the laundering of benefits derived from proceeds of criminal offences and provides the relevant authorities with the power to investigate and confiscate such proceeds of crime. This entrusts enforcement authorities with the power and authority to clamp down on the use of these criminal proceeds to perpetuate further crimes in and around Singapore.
In an effort to ensure consistency in our laws and to step up measures to combat the increasing scourge of transnational financial crimes in Singapore and the surrounding region, MHA has tabled an amendment to CDSA to enhance the detection and prosecution of money laundering offences, increase the deterrent effect of our laws and facilitate information sharing with foreign financial intelligence units.
I support this Bill for two reasons. First, the amendments that have been proposed in this Bill are timely. They ensure that Singapore's laws remain relevant in combating transnational financial crimes like money laundering. Secondly, the establishment of the Suspicious Transaction Reporting Office (STRO) ensures that there is a focused and coordinated effort to monitor, investigate and deal with offenders. It also facilitates information sharing between local and foreign financial intelligence units. Such information sharing is key to deterring transnational crime.
First, the Government must ensure that our laws are relevant and effective in combating the scourge of transnational financial crimes like money laundering and terrorist financing, and reducing their prevalence on our shores. In order to achieve this, this Bill provides for a two-pronged approach to effectively deal with these serious transnational crimes; through strong and firm deterrent penalties and the provision of robust investigation
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and enforcement powers for regulatory and enforcement authorities.
In terms of deterrence, this Bill proposes to increase the maximum imprisonment term for money laundering offences from seven to 10 years, consistent with the maximum penalty for terrorist financing under the Terrorism (Suppression of Financing) Act. The increased penalties for an offender convicted of money laundering offences indicate how firm and decisively offenders of such crimes will be dealt with.
Further, the proposed amendments aim to empower the Courts to order the confiscation of any property of an equivalent value belonging to the offender if he dissipates or disposes such instruments of crime. Essentially, with this proposed amendment, the Courts will have the power to issue a substitute property confiscation order against an offender, if it finds that the offender had used or intended to use any instrumentality for the commission of an offence, and the instrumentality, which is a phrase gleaned from clause 5 of the Bill, is no longer available for forfeiture.
This enables the Courts to effectively cut off the financial links of these transnational syndicates and to deprive offenders of their ill-gotten gains. This is essential to counter the recent increase in occurrence of syndicated financial crimes and will serve to minimise and possibly eliminate the occurrence of these offences and crimes and syndicates in the longer term.
Taken together, the harsher penalties for money laundering offences and the wider ambit of power given to the Courts to tackle syndicated crimes will have a firm and effective deterrent effect on offenders who will now, I think, think twice before committing such offences on our shores.
Further, the proposed amendments provide robust investigation and enforcement powers for regulatory and enforcement authorities. This is facilitated through the establishment of STRO, which is primarily responsible for the receipt and analysis of any information that would be relevant towards the investigation of serious crimes like corruption, drug trafficking and money laundering. By creating a specialised team that focuses on the investigation and enforcement of such crimes, there can be a focused and coordinated effort to monitor, investigate and deal with the offenders of such crimes.
The proposed Bill also empowers officers attached to STRO with the power to require any person to disclose documents and information for the purposes of analysis and investigation. This will be an important tool to enable investigation authorities to obtain key information that would expedite its investigations and to act quickly in dealing with
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suspected offenders. This is particularly essential when dealing with complex financial crimes.
However, despite the wide-ranging powers entrusted to STRO and its officers, the Bill ensures that these investigations respect legal professional privilege, except where any such communication, item or document was made, prepared or held with the intention of furthering a criminal purpose. This will ensure consistency of the proposed amendments to the CDSA with existing evidential laws.
All in all, the CDS (Amendment) Bill provides a two-pronged approach to ensuring that our laws continue to be relevant and effective in combating the scourge of transnational financial crimes like money laundering and terrorist financing, especially in the fast-paced and ever-changing criminal landscape.
Secondly, the CDS (Amendment) Bill goes further in facilitating a focused and coordinated transnational effort to investigate and deal with offenders of such crimes.
Beyond merely increasing the investigation and enforcement powers of enforcement agencies in Singapore, the Bill creates and facilitates avenues for STRO and its officers to share information and intelligence with foreign financial intelligence units. This will assist in creating a fertile and collaborative environment for enforcement agencies to clamp down on transnational financial crimes through free and open intelligence sharing among intelligence units. This further step will be particularly important in light of the establishment of the INTERPOL Global Complex for Innovation in Singapore and its expected operationalisation in 2014. And if possible, with respect, I would like the Minister's views on whether INTERPOL Global Complex being in Singapore will actually augment STRO in this regard.
With the increasingly challenging and fast-paced operational landscape, local and foreign enforcement agencies and intelligence units must ensure that there is a collaborative framework in place to facilitate the timely exchange, the quick exchange and the vital exchange of information and intelligence. Without such an exchange, without the fluidity of information sharing, this Bill will not achieve its purpose.
With the enactment of this Bill, STRO, together with other local intelligence units, will be able to work alongside foreign financial intelligence units to confront and stop the proliferation of such serious transnational financial crimes in Singapore and the surrounding region.
Further, a collaborative approach to investigation and information sharing provides an opportunity for the sharing of best practices amongst various units, which will serve to
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enhance the capabilities and capacity of STRO and other local intelligence units.
While the creation of a collaborative framework between local and foreign financial intelligence units must be applauded, could the Minister kindly clarify as to what safeguards will be put in place to ensure that information obtained and shared by our STRO is not abused or wrongfully disclosed? Given that the investigation and enforcement of such crimes and the proposed collaborative framework come under the purview of various Ministries, such as MHA, MinLaw and MFA, I would like to ask the Minister for clarification on which Ministry STRO will be established under and which Ministry will spearhead the Government's effort to deter the relevant crimes?
Taken together, the proposed amendments to the CDSA and the Mutual Assistance in Criminal Matters Act (MACMA), and the enactment of the Terrorism (Suppression of Financing) Act in August 2013, enhance Singapore's leading role in the wider global effort to curb money laundering and terrorist financing. By being able to cut off and confiscate the financial benefit of such crimes, while also preserving Singapore's status as a banking hub, which is the position taken by Ms Tan Su Shan, local authorities will be able to deter and curb the prevalence of these transnational crimes on our shores and in the region. Essentially, the Bill that is before Parliament today is but a piece of a much larger effort by the Government to combat transnational and syndicated crimes.
Moving forward, in order for Singapore to maintain its leading role in the fight against serious crimes like drug trafficking, terrorist financing and money laundering, or even corruption, we must ensure that our laws are kept current and relevant, as we are doing today, towards dealing with the emerging and fast-changing criminal landscape. Mr Deputy Speaker, I support the Bill.
Mr Deputy Speaker, I thank the Members who have spoken on the Bill and, in general, for their support of the policy intent and also on the need for strong anti-money laundering laws to remain relevant and effective in the face of what Assoc Prof Fatimah Lateef described as a current globalised, high technology and high travel climate. The points that Members have raised fall broadly into three themes and I will endeavour to address them in turn.
The first pertains to the scope of the CDSA and the reporting requirements. Mr Hri Kumar asked whether the wide list of predicate offences captured by the CDSA would impose
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an unduly onerous reporting requirement on financial institutions. Sir, the CDSA's current list of more than 400 serious offences is in line with international standards and expectations. The FATF prescribes designated categories of offences which include fraud, corruption, forgery, illicit trafficking in stolen and other goods, and counterfeiting and piracy of products.
These categories include the specific offences highlighted by Mr Hri Kumar. It is internationally recognised and acknowledged that such offences – while they may seem rather extensive in the way they have been described – pose a material risk in terms of the potential to generate illicit proceeds for laundering. Hence, the need to list them in the Schedule. And the provisions in the CDSA provide the basis for our law enforcement agencies to commence prosecution if there is evidence of money laundering and to confiscate criminal benefits derived from such conduct.
Ms Tan Su Shan stressed the importance of giving financial institutions, particularly the smaller ones, guidance in determining what constitutes suspicious transactions involving foreign tax offences, so that they do not fall afoul of the CDSA's reporting requirements.
We recognise that this is a developing area for financial institutions, given that these requirements were only imposed last year. The Suspicious Transactions Reporting Office (STRO) has conducted workshops on combating crimes, including tax crimes, as part of its outreach efforts. STRO has disseminated guidance notes with case studies and suspicious indicators on tax crimes and related money laundering. Financial institutions may also seek clarification from STRO, which the Member raised, or industry regulators where needed.
MAS has also been working with the industry to provide feedback and guidance on sound industry practices. This includes engagement with industry associations, such as the Association of Banks Singapore and the private banking industry. Most recently, on 16 June this year, MAS published the guidance on private banking controls which sets out best practices and areas to assist financial institutions to mitigate their risks.
What constitutes tax evasion under the CDSA is clearly set out in the definition for "foreign serious tax offence" and comprises the same elements as our domestic tax evasion offences under the Income Tax Act and the Goods and Services Tax Act. The aim, ultimately, as Ms Tan has described, is to promote the filing of quality suspicious transactions reports and, in the process, heighten our vigilance against potential criminal activities.
I must say, though, that while we are open to suggestions, such as shared facilities and so on, on how to further help smaller financial institutions comply with these requirements, I must emphasise that, ultimately, it is the responsibility of each financial institution operating in a global financial centre like Singapore to ensure that it has the necessary
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controls in place. Compliance to a high quality regulatory regime is, indeed, the advantage that a financial centre like us can provide and, in turn, enhance the competitive advantage of the institutions that operate in our environment.
With regard to the Base Erosion Profit Shifting (BEPS) Action Plan, as a responsible jurisdiction, Singapore is fully committed to work with other jurisdictions to fight cross-border tax offences. We note that that the BEPS recommendations have not been finalised and their impact is still uncertain. The Government will continue to monitor international developments and participate in relevant international discussions on the issue.
We share Ms Tan's concern about the need to closely monitor non-finance sectors beyond financial institutions that are susceptible to money laundering activities. I should highlight that non-financial sectors are subject to the same requirements – as indeed are all other entities – to report suspicious transactions in the same way as financial institutions, as the requirement to file suspicious transaction reports (STRs) apply to everyone who comes across them in the course of work.
In January this year, Singapore published a National Risk Assessment report that covered the money laundering and terrorist financing risks of both the financial and non-financial sectors. The stored value facilities of online payment companies are among the areas that have been identified in the report as being of higher risk and they are already subject to specific anti-money laundering and terrorism financing requirements.
Another area that Ms Tan has highlighted is the virtual currency space. This was also highlighted in the National Risk Assessment report as an area for further study. In March this year, MAS announced that intermediaries that buy, sell or facilitate the exchange of virtual currencies will be regulated for anti-money laundering measures. MAS is currently studying the appropriate regulatory regime to be put in place and will consult the industry in due course.
Ms Sylvia Lim has asked whether and how Precious Stones and Metals Dealers (PSMDs) are required to assess risk on top of the proposed cash transaction reporting requirements, and if there is a need to scrutinise the non-cash aspects of their transactions as well. The focus is on cash transactions as they pose a higher risk, compared to non-cash transactions. Cash transactions, for example, allow the transacting parties to preserve anonymity and this is a key issue. Non-cash transactions will generally pass through financial institutions that already have anti-money laundering controls in place. Further, the current suspicious transaction reporting requirements apply also to PSMDs and cover their cash and non-cash transactions. So, if there is reasonable suspicion, they should report it.
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I want to assure the Member that STRO has held several rounds of discussions with trade associations in the PSMD industry and will continue to engage the industry to address any concerns or doubts pertaining to reporting and other requirements. But I do want to make the point again about compliance. The point about compliance cost was raised by Ms Lim as well.
The tighter the focus, the lesser the compliance cost. The larger the focus – if we extend the coverage to non-cash transactions by PMSDs – then the burden in terms of compliance will be far greater. So, I think in coming up with these legislative amendments and the regulatory elements that will give force to them, we are trying to find the balance that will impose a reasonable burden of compliance on the industry players in order to preserve the overall integrity of the system, which is something that they all value as an asset for their business.
Sir, the second theme of Members' queries and comments is on international cooperation. Mr Hri Kumar has described that Singapore is an open economy with advanced technological linkages and we are, therefore, particularly vulnerable to cross border money laundering risks. Almost 30% of our money laundering convictions in the past five years involved predicate offences that were committed outside Singapore. Effective international cooperation is key to our enforcement efforts.
Our agencies' ability to cooperate internationally is also subject to legal safeguards and procedures to ensure that such cooperation is legitimate and the information is kept confidential and not misused.
Mr de Souza asked about the safeguards in place to ensure that information obtained and shared by STRO is not abused or wrongfully disclosed. Under the proposed amendments, as a prerequisite for information sharing, a foreign authority would need to give an undertaking and assure us of confidentiality and that the information would be used only for the purposes of advancing investigations. The foreign authority must provide sufficient detail on the offence being investigated and explain how the information that is requested is relevant to the investigation. Further, STRO officers cannot disclose information obtained for the exercise of its functions unless it is relevant to an investigation or when they are compelled to do so by the Court or any written law. So, there is a ring of safeguards around how the information can be shared and how it can be utilised.
Members have also raised questions pertaining to investigations and enforcement. Mr de Souza asked about the reporting structure of STRO and which agency will spearhead efforts against money laundering. STRO will continue to be embedded within the Commercial Affairs Department as one of its key Divisions. CAD is the main enforcement agency for money laundering under MHA. At the policy level, our anti-money laundering
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regime is overseen by a multi-agency Steering Committee, which is co-led by MHA, MOF and MAS.
On the question of INTERPOL, clearly, as part of the effort to work with international bodies and international corporations, INTERPOL's presence here will be an asset but, operationally, they will have to work out how they will give effect to such cooperation and whether the specific siting of INTERPOL's offices here will bring particular benefits.
Assoc Prof Fatimah asked how our law enforcement authorities are alerted to transnational crime and money laundering activities. Generally, information can be received from foreign intelligence units or law enforcement agencies on criminal activity that may have a bearing on Singapore.
Other sources of valuable intelligence are the suspicious transaction reports filed with STRO, as well as reports/complaints lodged by individuals and companies. Our agencies follow up and commence investigations where possible criminal activity is disclosed, with a view towards eventual prosecution. As I had mentioned before, there were 39 successful money laundering prosecutions in 2013.
Assoc Prof Fatimah has also asked if there are any differences in the handling of money laundering cases if they involve individuals as compared to organisations. The CAD does not make such a distinction and will pursue each case based on the facts to identify the perpetrators and determine their culpability. If an individual is found to have acted on behalf of, or at the direction of an organisation, then he and the entity will be taken to task. These considerations are enumerated in sections 52 and 59 of the CDSA.
With regard to money laundering penalties, the CDSA prescribes distinct penalties for individuals and organisations under sections 44 to 47. An individual faces a fine not exceeding $500,000 or imprisonment of up to 10 years while an organisation faces a fine not exceeding $1 million. The actual penalties meted out depend on the severity of the offence, monetary amount involved and the number of charges levied.
I will now move on to some specific questions that Members have raised on the Bill or on the CDSA provisions.
On the power to confiscate property of corresponding value in place of instruments of crime, Assoc Prof Fatimah has asked if there is a specific timeframe for the application of the new substitute property confiscation order. The CDSA does not provide for a specific timeframe within which the process must be conducted. In practice, it will be carried out as soon as possible after the defendant's conviction. This is similar to the current practice for
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confiscation of criminal benefits.
Ms Sylvia Lim opined that the proposed substitute property confiscation orders could be too harsh in certain circumstances. I think we have to balance this against the need to have a strong deterrence against such crimes – a point that Mr Hri Kumar has also mentioned. The intent of the provision is precisely to preserve that deterrent element so that criminals are deterred from being able to use any instrument to commit offences and escape the consequences simply because, for example, these instruments do not belong to them. We want to ensure that there is a strong deterrent effect there.
The limited discretion given to the Courts is in line with the approach taken for the confiscation of criminal benefits under sections 4 and 5 of the CDSA, the confiscation of property controlled by terrorists under the Terrorism (Suppression of Financing) Act, and the imposition of a monetary penalty under the Prevention of Corruption Act.
I want to assure Members that the same stringent requirements apply to a substitute property confiscation order as they would a normal confiscation order against criminal benefits under Parts II, III and IV of the CDSA. First, the offender must be convicted of a drug dealing or serious offence. Second, the application for a substitute property confiscation order must be made by the Public Prosecutor to the Court after careful assessment that it is commensurate with the severity of the crime. So, yes, the Public Prosecutor is the gatekeeper, as Ms Lim has characterised. But it is an important responsibility and it has to be with reference to the severity of the crime. The Court has to be satisfied that the offender had used or intended to use the instrumentality for the commission of the offence, and that instrumentality is not available for forfeiture. The power cannot be invoked where the actual instrument of crime is available. In addition, the quantum payable is also an amount that the Court assesses to be the value of the instrumentality and is imposed as a monetary fine. It does not allow the Public Prosecutor, therefore, to cherry pick and choose other property to confiscate.
So, there is a range of safeguards in place and these have already been applied in practice and, in considering whether to apply for a substitute property confiscation order, the Public Prosecutor will consider the full facts and circumstances of the case and the totality of the actions taken to punish the defendant and deprive him of his criminal proceeds.
Mr Hri Kumar asked for clarification on the protection accorded to persons who inform STRO of suspicious transactions. Section 39 imposes a general duty on all persons to report their suspicions if they come across information in the course of their work that a property was used or intended to be used to commit crime. A person who discloses such information in good faith to a STRO officer is protected from liability for any loss arising out of the disclosure under section 39(6) of the CDSA. He would be considered an "informer" under
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section 40A, which provides for protection of the person's identity and the information disclosed. This covers the vast majority of the suspicious transaction reports received.
Nevertheless, I agree with Mr Hri Kumar. He makes a good point on extending such protection to any persons who disclose information voluntarily outside the circumstances described in section 39. We will study this further to see what can be done.
Sir, I think I have covered the substantive points that Members have raised. Once again, I want to thank all of them for speaking on the Bill and for their general support, and for their useful comments and feedback which will inform the implementation of the provisions of the Bill and any subsequent review that we undertake.
Sir, the enhanced CDSA will allow our agencies to better prevent illicit monies from flowing through Singapore, deter associated criminal activities and facilitate cooperation with the international community. These amendments also bring us into greater compliance with international standards and signal clearly our commitment to the global anti-money laundering fight. Collectively, these efforts will uphold the integrity and reputation for our financial sector, which Singapore has painstakingly built over the years. I urge Members to give your full support to the Bill. Sir, I beg to move.
*Question put, and agreed to.*
*Bill accordingly read a Second time and committed to a Committee of the whole House.*
*The House immediately resolved itself into a Committee on the Bill. – [Mr S Iswaran].*
*Bill considered in Committee; reported without amendment; read a Third time and passed.*
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