Debated in Parliament on 5 Feb 2024.
Order for Second Reading read.
Mr Speaker : Minister for Law.
Mr Speaker, on behalf of the Minister for Law, I beg to move, “That the Bill be now read a Second time.”
Sir, Singapore is a leading financial centre and a global trading hub. Our economic openness makes us attractive for investments and businesses, but also makes us an attractive target for money laundering, terrorism financing and proliferation financing. I shall refer to these as "financial crimes" for convenience, throughout my speech.
As a trusted international financial and trading hub, Singapore takes a firm stance against these activities. We therefore take a robust approach to supervision, (a) both in the financial sector and non-financial sectors, (b) in order to prevent financial crimes.
In 1992, Singapore joined the Financial Action Task Force, or FATF. The FATF is the recognised international standards setter for the prevention of financial crimes. Over 200 jurisdictions subscribe to the international FATF Standards.
Aside from the financial sector, the FATF has highlighted that other non-financial sectors also have an important role. This would include the following sectors which come under the Ministry of Law, or MinLaw’s purview: precious stones and precious metals dealers, or PSMDs; moneylending; pawnbroking; and legal services.
As the regulator of these sectors, MinLaw regularly reviews our laws to ensure that they remain relevant, effective, and fully in line with the latest international standards set by the FATF.
In recent years, the FATF has updated its standards, in particular, to set out clearly the identification, assessment and mitigation of risks associated with the financing of proliferation of weapons of mass destruction, or “proliferation financing” in short. This is in addition to existing FATF requirements on money laundering and terrorism financing risks.
This Bill, therefore, seeks to clearly align the regulatory regimes for the PSMD, moneylending, pawnbroking and legal services sectors with the updated FATF standards on countering proliferation financing.
This will be achieved through proposed amendments to four Acts, namely: the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act, or the PSPM Act; the Moneylenders Act; the Pawnbrokers Act; and the Legal Profession Act.
In addition, this Bill proposes amendments to the PSPM Act to strengthen the regulatory regime and enhance operational effectiveness in regulating PSMDs.
As a brief background, the PSPM Act was enacted in 2019 to provide a comprehensive regulatory and supervisory regime to prevent dealings in precious stones and precious metals from being used to facilitate money laundering or terrorism financing.
Since its enactment, MinLaw has continued to engage the PSMD sector for feedback and to review our measures and practices, emerging risks, global trends and developments and international standards. The proposed amendments today are the culmination of these engagements and reviews.
Let me now elaborate on the key amendments in this Bill.
First, the Bill updates the PSPM Act, Moneylenders Act, Pawnbrokers Act and Legal Profession Act to clearly align the regulatory regime for the PSMD, moneylending, pawnbroking and legal services sectors with the updated FATF standards; and require businesses or persons covered by these Acts to implement adequate measures to counter proliferation financing.
Examples of required measures include: performing risk assessment; and developing and implementing internal policies, procedures, and controls to counter proliferation financing.
Such measures are not new to these businesses or persons. For many entities, such measures are already part of their existing anti-money laundering controls as the underlying proliferation financing offences are also money laundering predicate offences.
In addition, the controls in the Moneylenders Act and Pawnbrokers Act against criminals owning or managing moneylending and pawnbroking businesses will be strengthened, in line with the FATF Recommendations.
In particular, the Bill includes amendments to prevent persons convicted of offences relating to the prevention of financial crimes from obtaining relevant licences, or holding management functions in moneylending and pawnbroking businesses.
Second, the Bill strengthens the regulatory regime for PSMDs through amendments to the PSPM Act.
The Bill seeks to update the definition of "precious product". The PSPM Act covers precious stones and precious metals, or PSPM in short, and precious products.
Under the current definition, "precious product" means any jewellery, watch, apparel, accessory, ornament, or other finished product – made up of, containing, or having attached to it, any PSPM; and where at least 50% of the value of the product is attributable to the PSPM.
Based on the current definition, products with majority of value attributed to other factors, such as branding or workmanship, are not captured. However, we have observed that such products can also pose risks of financial crimes.
To close this gap, clause 4 of the Bill amends the definition of "precious product" to also cover any "precious product" priced above a prescribed value, which will be set at S$20,000, regardless of the value attributable to the PSPM.
To illustrate, following the amendment, a platinum watch retailed by a luxury brand, with a net sales price of S$100,000, will be covered under the Act, even if the value of the platinum in the watch is less than 50% of the net sales price.
The prescribed threshold value of S$20,000 is aligned with FATF standards and international best practices.
Clause 4 of the Bill also amends the existing definition of "asset-backed token" to exclude digital payment tokens from the PSPM Act. This will avoid double regulation of PSMDs, as the Monetary Authority of Singapore (MAS) already regulates digital payment token service providers under the Payment Services Act.
Clause 12 of the Bill introduces a new offence in the PSPM Act for regulated dealers that submit incomplete or inaccurate cash transaction reports without reasonable excuse.
Compliance officers are instrumental in the implementation of controls to prevent financial crimes.
Therefore, the Bill makes it clear that compliance officers appointed by PSMDs must be assessed by the Registrar to be "fit and proper" persons.
To prevent errant dealers from disposing of records to thwart investigations after they cease being regulated dealers, the Bill introduces a record-keeping requirement for regulated dealers to keep records, for a prescribed period after ceasing to be a regulated dealer. Failure to comply would be an offence.
In addition, the Bill will empower the Registrar to continue regulatory action against former registered PSMDs. For instance, the Registrar may order them to pay financial penalties if they had failed to comply with the registration conditions, or if their registration was obtained through fraud or misrepresentation.
Finally, the Bill amends the PSPM Act to improve operational effectiveness in regulating PSMDs. Clause 8 of the Bill amends section 10 to allow the Registrar to cancel or suspend the registration of PSMDs that are not conducting regulated dealing and/or fall under prescribed circumstances.
This will mitigate the risk of PSMDs misusing their registration status to gain access to the financial system to conduct illicit transactions, or to create an erroneous impression that their businesses are regulated by MinLaw, for any purpose other than the prevention of financial crimes.
Clause 7 of the Bill introduces a new section 9A to provide that the registration of a registered PSMD lapses if the PSMD, as an entity, is wound up or otherwise dissolved, or if the PSMD, as a sole proprietor, dies. This will enable the Registrar to update the register more expeditiously.
Clause 19 of the Bill introduces new sections 36A and 36B in the PSPM Act to prescribe methods of service of documents required or authorised by the Act to be served on any person. In particular, service through digital means will be prescribed to reduce the need for physical mail, better leverage technology and improve efficiency.
Sir, in conclusion, the Bill will allow clear alignment of the regulatory regimes for the PSMD, moneylending, pawnbroking and legal services sectors with updated FATF requirements, strengthen the regulatory regime for PSMDs, and improve operational effectiveness in regulating PSMDs. It will also reaffirm our strong commitment to be a responsible member of the international community. With that Mr Speaker, I beg to move.
Question proposed.
Mr Louis Ng.
Sir, this Bill will help Singapore comply with FATF requirements on assessing the risk of proliferation financing and taking measures to mitigate these risks.
I have two short clarifications to raise.
My first clarification is on the Government’s approach on prevention of proliferation financing, anti-money laundering and counter terrorism financing. Each of these areas represent risks which threaten the integrity of Singapore’s financial institutions. Each of these areas also have their own sets of safeguards and requirements.
Singapore has a national strategy for countering terrorism financing related activities.
My second clarification is on ensuring effective implementation of these safeguards on the ground. Robust safeguards are important due to the seriousness of the threat posed by proliferation financing. However, overly strict safeguards can be counter-productive if entities do not have the capacity to ensure meaningful compliance with these safeguards. What steps will be taken at the industry level to avoid these safeguards from becoming a box-checking exercise?
Sir, notwithstanding these clarifications, I stand in support of the Bill.
Mr Dennis Tan.
Thank you, Mr Speaker. I declare my interest as a practising advocate and solicitor in the Supreme Court of Singapore.
Mr Speaker, we are told that this Bill seeks to amend the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019, the Legal Profession Act 1966, the Moneylenders Act 2008 and the Pawnbrokers Act 2015 to provide for the prevention of the financing of proliferation of weapons of mass destruction.
This arises from new requirements introduced by the FATF in October 2020 for member states and reporting entities to assess the risk of proliferation financing in relation to their business and to take measures to mitigate the assessed risk. The proposed amendments to the said Acts add to the existing provisions in respect of prevention of money laundering and prevention of terrorism financing.
In August last year, the Singapore Police Force (SPF) arrested 10 foreigners holding multiple citizenships for alleged money laundering offences involving cash, luxury properties, cars, gold bars, handbags, jewellery, branded watches and cryptocurrency, including more than 68 gold bars, 294 luxury bags, 164 branded watches and 546 pieces of jewellery we are told. The assets seized in what is Singapore's biggest money laundering case have risen to more than S$3 billion by January. In October 2023, we were told that 152 properties and 62 vehicles were involved, and we were told last month that 55 new properties and 15 vehicles were given prohibition of disposal orders by the police. Minister Josephine Teo had said that the proceeds "most likely came from criminal activities abroad, including illegal online gambling and unlicensed moneylending".
Mr Speaker, this is very disconcerting, not least because of the value of the funds and assets involved but that they had taken place despite existing money laundering laws and regulations having been introduced over the years.
The inability of our existing laws and regulations to prevent the current money laundering case is worrying. If banks, law firms, property companies or other businesses or professionals who assisted in property purchase or transfer of funds could have failed to detect or prevent transfer or use of money laundering proceeds, it can also happen to money lenders, dealers of precious stones and precious metals, not to mention, our neighbourhood pawnbrokers.
I am mindful that investigation is pending but I would like to ask the Government whether it is able to share what are, to date, the lessons which we have learned from the case so far as far as anti-money laundering (AML) compliance is concerned? Has any lesson been applied to today’s amendments?
How have our existing laws or regulations failed to stop the accused persons from bringing into Singapore, funds which have been the subject of money laundering and/or from proceeds of organised crime activities and to be allowed to invest such funds in different ways in Singapore such as buying properties? Has the Government started reviewing the existing laws and if not, whether and when it will do so? These are highly relevant to today’s Bill as we are seeking to apply the current suite of laws and regulations against the financing of proliferation of weapons of mass destruction and we need to be assured that the current laws or the proposed amendments can provide adequate gatekeeping to prevent entry to Singapore of funds for financing of proliferation of weapons of mass destruction.
I also hope that the authorities will review the adequacy of the due diligence efforts of banks, law firms and other professionals or stakeholders who were involved in respect of the funds brought in by the said foreign nationals in the ongoing money laundering case or in respect of funds used for the purchases of different properties and to consider what laws, regulations and measures need to be enhanced to strengthen the current due diligence process required of all professionals and stakeholders and hopefully minimise the risks of such cases recurring, which is embarrassing for our country and tarnishes Singapore’s reputation as a financial centre.
Mr Speaker, notwithstanding my questions, I support this Bill.
PAPERCUTS