Second Reading Speech by Senior Minister of State for Law, Mr Edwin Tong on Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Bill
1. I beg to move, “That the Bill be now read a second time.”
2. Singapore takes a firm stance against money laundering and terrorism financing, or “ML/TF”.
3. In 1992, we joined the Financial Action Task Force, which is an inter-governmental body that sets international standards and promotes the effective implementation of measures, to combat ML/TF and the financing of proliferation activities relating to weapons of mass destruction.
4. We have implemented a strong anti-money laundering and countering the financing of terrorism, or “AML/CFT”, framework, in line with the international standards set by the Task Force. This includes the prevention, supervision, enforcement, confiscation of proceeds of crime, and targeted financial sanctions against terrorism and proliferation financing.
5. The financial sector and non-financial sectors, such as casinos and pawnbrokers are subject to a comprehensive range of AML/CFT measures. The financial sector in particular, has been subject to robust supervision for many years.
6. ML/TF enables criminal activity to go undetected and poses serious national security concerns. It also damages our reputation as a trusted international financial and trading centre. A robust AML/CFT framework would therefore benefit Singapore and Singaporeans.
CURRENT AML/CFT MEASURES IN THE PSMD SECTOR
7. In line with the broader AML/CFT framework, we have introduced various measures to mitigate ML/TF risks in the precious stones and precious metals dealers, or the “PSMD”, sector.
8. In 2014, the cash transaction reporting regime under the Corruption, Drug Trafficking and Other Serious Crimes Act, or “CDSA”, was introduced. This requires PSMD to perform customer due diligence, keep records and file cash transaction reports for cash transactions exceeding S$20,000.
9. In 2015, more comprehensive AML/CFT measures were introduced for Pawnbrokers, a subset of the sector.
10. Given the inherent risks in the PSMD sector however, there is a need to take additional and further steps. This would also bring our regime fully in line with international standards set by the Financial Action Task Force.
11. The Bill will strengthen existing measures by establishing a comprehensive supervisory and regulatory regime that is risk-focused and which addresses the specific ML/TF risks in the PSMD sector.
12. It will allow us to prevent dealing in precious stones and precious metals from being used to facilitate ML/TF, by:
a. Firstly, regulating persons who carry on a business of regulated dealing or business as an intermediary for regulated dealing; and
b. Secondly, providing for additional measures beyond the current cash transaction reporting regime for the PSMD sector.
DEVELOPMENT OF THE BILL
13. We have developed the Bill in consultation with key stakeholders through:
a. Firstly, a survey of the industry;
b. Secondly, consultations with industry associations such as the Singapore Jewellers Association, Diamond Exchange of Singapore, and the Singapore Bullion Market Association; and
c. Finally, through a public consultation held between 13 September and 12 October 2018.
14. In response to the feedback received, we have streamlined the requirements of the Bill to manage regulatory and compliance costs. We have also benchmarked the requirements against practices in other jurisdictions such as the United Kingdom and also, Belgium.
15. Let me also run through the key features of the Bill with the House.
16. The Bill:
a. Firstly, provides for the appointment of a Registrar to supervise the PSMD sector;
b. Secondly, imposes comprehensive AML/CFT measures on regulated dealers; and
c. Thirdly, provides for investigation and enforcement powers, as well as the prescription of penalties for failure to abide by the requirements.
(I) Scope of the Bill
17. The Bill provides for the regulation of any person who carries on
a. A business of regulated dealing; or
b. A business as an intermediary for regulated dealing.
18. This includes persons involved in the manufacturing, importing or possessing for sale, and selling or offering for sale any precious stone, precious metal or precious product. These persons are currently subject to the cash transaction reporting regime. The Bill will seek to impose additional measures on these classes of dealers.
19. The Bill goes further to include:
a. The sale or redemption of asset-backed tokens, which are instruments backed by precious stones, metals or products. Such tokens may be used for ML/TF as they are good stores of value; and
b. The purchase of precious stones, precious metals or precious products from a customer for the purpose of resale, as these items may be proceeds from crime, or used as means for ML/TF.
20. Intermediaries such as auction houses and providers of trading platforms services for PSMD, whether by electronic means or otherwise, are also covered under the regime, as they facilitate transactions between buyers and sellers. Regulating these intermediaries will prevent such transactions from being used for ML/TF purposes.
(II) Registration of Dealers
21. Clause 4 of the Bill provides for the Minister to appoint a Registrar, Deputy Registrars, and Assistant Registrars, to supervise the PSMD sector.
22. Regulated dealers, unless exempted, must register with the Registrar, in order to carry out the regulated dealing.
23. Clause 7 of the Bill provides that the Registrar may refuse to grant or refuse to renew registration, under certain circumstances, for example, if applicants were convicted of offences such as those involving fraud, dishonesty, or money laundering. This will help ensure that individuals who are not fit and proper do not operate as regulated dealers in Singapore.
24. Clause 9 of the Bill provides for the Registrar to impose conditions of registration on registered dealers. Conditions which may be imposed include the requirement to inform the Registrar of changes to registration details, to ensure that registered dealers remain fit and proper.
25. The Registrar may cancel or suspend the registration of dealers under certain circumstances, for example:
a. If the registered dealer fails to comply with any condition of registration; or
b. If the registered dealer is no longer a fit and proper person.
(III) AML/CFT Measures
26. Part 3 of the Bill sets out the measures for prevention of money laundering and financing of terrorism which will apply to all regulated dealers who carry out any part of their business of regulated dealing or business as an intermediary for regulated dealing in Singapore. The requirements are broadly categorised as transaction-based or entity-based. Let me explain that.
27. The transaction-based requirements are largely similar to existing requirements under the cash transaction reporting regime and these include:
a. Clause 16 which requires regulated dealers to perform customer due diligence, or “CDD”, measures under prescribed circumstances, in addition to the existing requirement to do so for cash transactions above $20,000;
b. Clause 17 which requires regulated dealers to submit a copy of the cash transaction report to the Registrar, in addition to existing requirements to file a cash transaction report;
c. Clause 18 which requires regulated dealers to keep records of transactions where CDD measures are performed, and information obtained through these CDD measures; and
d. Clause 21 which requires regulated dealers to submit a copy of the information of suspicious transactions to the Registrar, in addition to the existing requirement already under the CDSA to disclose suspicious transactions and also under the Terrorism (Suppression of Financing) Act to report terrorism financing information.
28. The Bill sets out entity-based requirements and these are new and provided under Clause 19 which requires regulated dealers to implement adequate programmes and measures to prevent ML/TF, such as the introduction of internal policies, procedures, and controls.
29. In line with the risk-based approach to prevent ML/TF, businesses will only be required to develop procedures to address the risks identified in their risk assessment, in addition to the principal obligations prescribed.
30. Taking in feedback from the public consultation, we have streamlined the principal obligations provided in the Bill. We will also provide guidance on the obligations and procedures to address the varying degrees and levels of risks, to help regulated dealers mitigate risks of ML/TF, whilst at the same time, also managing compliance costs.
Power to Give Directions
31. The Registrar may give written directions to regulated dealers under certain circumstances, such as to stop a particular employee who has been negligent in performing AML/CFT measures on multiple occasions from conducting any part of the regulated dealer’s business.
32. This is necessary to enable the Registrar to immediately address any activity which contravenes requirements in the Bill or which may pose a ML/TF risk.
(IV) Powers of Monitoring and Enforcement
33. The Bill provides the Registrar with powers of inspection and monitoring; investigation; and seizure of property, to deal with possible contraventions of the Bill.
34. Upon conviction, non-compliance with the Bill may lead to fines not exceeding $100,000, and imprisonment terms of up to three years, depending on the nature and severity of the particular contravention.
35. This is in line with penalties introduced in other Acts, such as the Pawnbrokers Act, as the culpability of persons who commit ML/TF offences would be similar.
36. Clause 38 of the Bill provides for the Minister to exempt any person or class of persons, or any activity, from any provision of the Bill, subject to conditions or restrictions specified.
37. This allows regulated dealers who are already covered under other AML/CFT regimes to be exempted. For example, it is intended for all MAS-regulated financial institutions to be exempted from registration and AML/CFT requirements under the Bill where they are already subject to MAS regulation. Classes of financial institutions that conduct regulated dealing, for example banks, insurers, stored value facilities, will continue to be supervised by MAS.
38. Finally, the Bill provides for a transition period of up to 6 months upon the commencement of the Bill to provide sufficient time for regulated dealers to register with the Registrar.
39. The Registrar will work with the industry, including conducting outreach to raise AML/CFT awareness, as well as, issuing guidance to regulated dealers, to ensure that they are well-placed to comply with the new requirements proposed in this Bill.
40. In conclusion, Mr Speaker, the Bill will allow us to establish an AML/CFT regime which will raise AML/CFT standards in the PSMD sector and strengthen Singapore’s AML/CFT framework.
41. This will help us to better manage ML/TF risks, combat crime and improve security both domestically and globally.
42. It will also reaffirm our commitment to be a responsible member of the international community, upholding our status as a well-regarded and well-regulated financial centre.
43. With that, Mr Speaker, I beg to move.