Second Reading Speech by Senior Parliamentary Secretary Rahayu Mahzam on Prevention of Proliferation Financing and Other Matters Bill

05 FEB 2024

5 Feb 2024 Posted in Parliamentary speeches and responses

Mr Speaker,

  1. On behalf of the Minister for Law, I beg to move, “That the Bill be now read a Second time.”
  1. 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.
  1. I shall refer to these as “financial crimes” for convenience, throughout my speech.
  1. As a trusted international financial and trading hub, Singapore takes a firm stance against these activities.
  1. We therefore take a robust approach to supervision, both in the financial sector and the non-financial sectors, in order to prevent financial crimes.
  1. 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.
  1. Aside from the financial sector, the FATF has highlighted that other non-financial sectors also have an important role.
  1. This would include the following sectors which come under the Ministry of Law, or MinLaw’s purview:
    (a) Precious stones and precious metals dealers, or PSMDs;
    (b) Moneylending;
    (c) Pawnbroking; and
    (d) Legal services.
  1. 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.
  1. 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.
  1. This is in addition to existing FATF requirements on money laundering and terrorism financing risks.
  1. 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.
  1. This will be achieved through proposed amendments to four Acts, namely:
    (a) The Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act (“PSPM Act”);
    (b) The Moneylenders Act;
    (c) The Pawnbrokers Act; and
    (d) The Legal Profession Act.
  1. In addition, this Bill proposes amendments to the PSPM Act to strengthen the regulatory regime and enhance operational effectiveness in regulating PSMDs.
  1. As a brief background:
    (a) 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.
    (b) 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.
    (c) The proposed amendments today are the culmination of these engagements and reviews.
  1. Let me now elaborate on the key amendments in this Bill.

Key Amendments

(A) Alignment with Updated FATF Standards

  1. First, the Bill updates the PSPM Act, Moneylenders Act, Pawnbrokers Act, and Legal Profession Act to:
    (a) Clearly align the regulatory regime for the PSMD, moneylending, pawnbroking, and legal services sectors with the updated FATF standards; and
    (b) Require businesses or persons covered by these Acts to implement adequate measures to counter proliferation financing.
  1. Examples of required measures include:
    (a) Performing risk assessment; and
    (b) Developing and implementing internal policies, procedures, and controls to counter proliferation financing.
  1. 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.
  1. 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.
  1. In particular, the Bill includes amendments to prevent persons convicted of offences relating to the prevention of financial crimes from:
    (a) Obtaining relevant licenses, or
    (b) Holding management functions in moneylending and pawnbroking businesses.

(B) Strengthening the Regulatory Regime for PSMDs

  1. Second, the Bill strengthens the regulatory regime for PSMDs through amendments to the PSPM Act.

Updating the definition of “precious product”

  1. The Bill seeks to update the definition of “precious product”.
  1. The PSPM Act covers precious stones and precious metals, or PSPM in short, and precious products.
  1. Under the current definition, “precious product” means any jewellery, watch, apparel, accessory, ornament, or other finished product —
    (a) Made up of, containing, or having attached to it, any PSPM; and
    (b) Where at least 50% of the value of the product is attributable to the PSPM.
  1. Based on the current definition, products with majority of value attributed to other factors, such as branding or workmanship, are not captured.
  1. However, we have observed that such products can also pose risks of financial crimes.
  1. 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.
  1. 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.
  1. The prescribed threshold value of S$20,000 is aligned with FATF standards and international best practices.

Excluding digital payment tokens

  1. Clause 4 of the Bill also amends the existing definition of “asset-backed token” to exclude digital payment tokens from the PSPM Act.
  1. This will avoid double regulation of PSMDs, as MAS already regulates digital payment token service providers under the Payment Services Act.

Submitting incomplete or inaccurate cash transaction reports

  1. 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.

Requirement for compliance officers appointed by PSMDs

  1. Compliance officers are instrumental in the implementation of controls to prevent financial crimes.
  1. Therefore, the Bill makes it clear that compliance officers appointed by PSMDs must be assessed by the Registrar to be “fit and proper” persons.

Requirements for former regulated PSMDs

  1. 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.
  1. Failure to comply would be an offence.
  1. In addition, the Bill will empower the Registrar to continue regulatory action against former registered PSMDs.
  1. For instance, the Registrar may order them to pay financial penalties:
    (a) If they had failed to comply with the registration conditions, or
    (b) If their registration was obtained through fraud or misrepresentation.

(C) Improving Operational Effectiveness in Regulating PSMDs

  1. Finally, the Bill amends the PSPM Act to improve operational effectiveness in regulating PSMDs.
  1. 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.
  1. This will mitigate the risk of PSMDs misusing their registration status:
    (a) To gain access to the financial system to conduct illicit transactions, or
    (b) To create an erroneous impression that their businesses are regulated by MinLaw, for any purpose other than the prevention of financial crimes.
  1. Clause 7 of the Bill introduces a new section 9A to provide that the registration of a registered PSMD lapses:
    (a) If the PSMD, as an entity, is wound up or otherwise dissolved, or
    (b) If the PSMD, as a sole proprietor, dies.
  1. This will enable the Registrar to update the register more expeditiously.
  1. 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.
  1. In particular, service through digital means will be prescribed to reduce the need for physical mail, better leverage technology, and improve efficiency.

Conclusion

  1. Sir, in conclusion, the Bill will
    (a) Allow clear alignment of the regulatory regimes for the PSMD, moneylending, pawnbroking, and legal services sectors with updated FATF requirements;
    (b) Strengthen the regulatory regime for PSMDs; and
    (c) Improve operational effectiveness in regulating PSMDs.
  1. It will also reaffirm our strong commitment to be a responsible member of the international community.
  1. With that Mr Speaker, I beg to move.

Last updated on 05 February 2024