Public Consultation on the Proposed Anti-Money Laundering and Countering the Financing of Terrorism Regulatory Regime for Precious Stones and Metals Dealers

13 SEP 2018

Consultation Period:

13 Sep 2018 to 12 Oct 2018

I. Introduction

  1. The Ministry of Law announced on 17 July 2018 that it will be introducing a new anti-money laundering and countering the financing of terrorism (AML/CFT) regulatory regime for precious stones and metals dealers (PSMD). See Annex A(397KB).

  2. The public is invited to provide feedback on the proposed regime. This public consultation will run from 13 September 2018 to 12 October 2018.

II. Background

  1. Money laundering (ML) enables criminals to commit crimes by obscuring the proceeds of their crimes, while terrorism financing (TF) refers to the use of funds/assets to support terrorist organisations and terrorism. Singapore has a strong regulatory AML/CFT framework for prevention, supervision, enforcement, confiscation of the proceeds of crime, and targeted financial sanctions against terrorism and proliferation financing. Singapore also has a good framework for international coordination on AML/CFT and has in place mechanisms to assess and mitigate the ML and TF risks identified. There is robust supervision of the financial sector, with regular engagements fostering a deep understanding of AML/CFT issues within the industry. Designated non-financial sectors, such as pawnbrokers, are also subject to a comprehensive range of AML/CFT measures.

  2. Precious stones and metals are portable, valuable, and easily convertible to cash. This exposes the PSMD sector to inherent ML and TF risks. Currently, all PSMDs need to comply with the requirements under the cash transaction reporting (CTR) regime[1] which includes the need to conduct customer due diligence for cash transactions exceeding S$20,000. However, unlike other designated non-financial sectors, the PSMD sector does not have to meet other AML/CFT requirements, such as conducting assessments of the ML/TF risks they face or introducing appropriate internal controls to address these risks.

  3. The Ministry of Law proposes to enact a new law to establish an AML/CFT regulatory regime for the PSMD sector to close these gaps. The regime will mitigate ML/TF risks and level up AML/CFT standards and trust in the sector. This is crucial to combating crime and improving security, both domestically and globally.

  4. In developing the proposed regulatory regime, MinLaw had conducted an industry survey and informal discussions with industry stakeholders, including industry associations, manufacturers, wholesalers and retailers. MinLaw has also studied the FATF’s requirements and global best practices for AML/CFT regulation.

III. Requirements of the Regime

  1. A risk-based approach was adopted in designing the regime with the aim of effectively mitigating ML/TF risks while taking into account the impact on compliance costs. Under the new regime, PSMDs will be required to:
  1. Register with the Ministry of Law, if the PSMD falls under the scope of the proposed regulation; and
  2. Comply with the following AML/CFT requirements
    1. File Suspicious Transaction Reports (STRs);
    2. File Cash Transaction Reports (CTRs);
    3. Perform customer due diligence (CDD);
    4. Keep records of CDD transactions and relevant documents;
    5. Conduct internal assessments of ML/TF risks; and
    6. Introduce internal policies, procedures and controls (IPPC) to address ML/TF risks.

IV. Scope of the Regime

  1. Under the regime, a PSMD is any person[2] who, in the course of the person’s business, manufactures, sells, offers for sale, imports for sale or possesses for sale, any precious stone, metal, or product. This adopts the same definition as that provided in the Corruption, Drug Trafficking and Other Serious Crimes (Cash Transaction Reports) Regulations 2014. Auctioneers and providers of trading platform services for other PSMDs will also be regulated.

  2. The definitions of precious stones, metals, and products will be identical to the existing definitions under the Corruption, Drug Trafficking and Other Serious Crimes (Cash Transaction Reports) Regulations 2014:

  1. Precious stones include diamonds, sapphires, rubies, emeralds, jade (including nephrite and jadeite), and pearls;
  2. Precious metals include gold, silver, platinum, iridium, osmium, palladium, rhodium, ruthenium, or an alloy with at least 2% of weight in any of the aforementioned metals; and
  3. Precious products include any finished product (other than any industrial tool or medical device) that derives 50% or more of its value from any precious stone or precious metal contained in or attached to that product.

V. Registration

  1. All PSMDs will be required to register with the AML/CFT Registrar under the Ministry of Law. Registration is expected to commence in the second quarter of 2019. As part of the registration process, PSMDs will minimally be required to:
  1. Submit a prescribed list of basic information on their business.[3] The information will be used to conduct checks if the applicant is fit and proper, to prevent criminal influence in the sector; and
  2. Declare if they will or will not conduct cash transactions exceeding S$20,000[4] during the period of registration
  1. Applications must be submitted online. Each registration will be granted for a period of three (3) years. More information on the registration process will be provided at a later date.

VI. AML/CFT Requirements[5]

  1. All PSMDs will be required to implement and comply with the following requirements when conducting transactions[6] involving precious stones, metals, or products:
  1. Perform CDD during transactions:
    1. When carrying out cash transactions exceeding S$20,000;
    2. When there is suspicion of ML/TF; or
    3. When there are doubts about the veracity or adequacy of previously obtained customer identification data.
    When performing CDD, PSMDs are required to perform enhanced due diligence (EDD) for customers whom the PSMD assesses to be of higher ML/TF risk (e.g. politically exposed persons and their family members and close associates, persons from higher risk countries, etc.);
  2. Keep records of all cash transactions exceeding S$20,000, including any relevant information obtained through CDD measures. The records must be kept for five (5) years and must be sufficient to permit reconstruction of transactions to provide, if necessary, evidence for prosecution of criminal activity;
  3. File STRs when there are reasonable grounds for suspecting that any property is linked to criminal activity (this is an existing requirement for all PSMDs under the CDSA); and
  4. File CTRs for cash transactions exceeding S$20,0005 (this is an existing requirement for all PSMDs under the CDSA).
  1. In addition, PSMDs will be required to fulfil the following entity-based requirements:
  1. Conduct risk assessments, i.e. take appropriate steps to identity, assess and understand the ML/TF risks faced by the business, and document these risk assessments; and
  2. Develop and implement IPPC to monitor, manage and mitigate the risks identified in the risk assessment. This includes:
    1. Appropriate compliance management arrangements, such as the appointment of a compliance officer;
    2. Employee screening procedures; and
    3. Ongoing training of employees.
    1. In addition to the requirements above, PSMDs which conduct cash transactions exceeding S$20,000, will be required to:
    1. Include an independent audit function as part of their IPPC;
    2. Implement group-wide programmes against ML/TF; and
    3. Ensure that foreign branches and majority-owned subsidiaries apply AML/CFT measures consistent with Singapore’s requirements if the host country’s requirements are less strict
    1. For entity-based requirements (paragraphs 13 and 14), the Ministry of Law will provide comprehensive guidance on how PSMDs may conduct risk assessments and develop and implement IPPC. Where appropriate, templates and checklists will be provided to aid PSMDs.

    VII. Exemptions

    1. Pawnbrokers are currently regulated under the Pawnbrokers Act. They will be subject to the AML/CFT requirements[7] in the Pawnbrokers Act instead of the new AML/CFT regime for PSMDs. However, Pawnbrokers will be subject to the requirement to file CTRs, as stipulated in paragraph 12(d).

    2. Foreign PSMDs are defined as dealers which are not registered as businesses in Singapore, but conduct business in Singapore on a temporary basis, e.g. during a trade fair. Consistent with international standards, they should be subject to AML/CFT requirements in the jurisdiction where they are registered. However, to ensure that relevant records of transactions[8] made in Singapore are kept, foreign PSMDs will be exempted from all AML/CFT requirements, except the following:

    1. Perform CDD during transactions, as stipulated in paragraph 12(a);
    2. Keep records of CDD transactions and relevant documents, as stipulated in paragraph 12(b);
    3. File STRs, as stipulated in paragraph 12(c), as long as trade or business is conducted physically in Singapore; and
    4. File CTRs for cash transactions exceeding S$20,000, as stipulated in paragraph 12(d).
    1. Financial institutions (FIs) in Singapore are regulated by the Monetary Authority of Singapore (MAS) for AML/CFT. FIs may also perform activities that would fall within the definition of a PSMD, and consequently, fall within scope of the proposed new legislation. There are no planned exemptions for such FIs that are also PSMDs. However, we note that due to the MAS’ AML/CFT requirements, there could be duplicative requirements being imposed on FIs in relation to potential transactions relating to precious stones and metals. Relevant FIs are thus invited to provide feedback on the nature and scope of their activities relating to a PSMD, and whether such activities would already be subjected to their AML/CFT controls, and if so, the basis for it. This would enable the Ministry of Law to consider whether exemptions could be considered for relevant FIs in this new regime.

    VIII. Supervision and Compliance

    1. The AML/CFT Division in the Ministry of Law will supervise the sector through a combination of off-site monitoring and on-site inspections. PSMDs will be required to submit to or provide the Ministry of Law access to records kept, including documents on their risk assessment and IPPC.

    2. The Ministry of Law will also conduct outreach and engagement sessions to help PSMDs understand the requirements of the new regime, manage compliance costs, and identify and address potential difficulties the sector might face in meeting the requirements under the new regime.

    3. Failure to comply with the requirements under the regime will result in administrative or criminal penalties, which will be meted out depending on the nature and severity of the contravention or offence committed.

    IX. Invitation to give feedback

    1. The industry and public are invited to give feedback on the proposed AML/CFT regulatory regime for PSMDs from 13 September 2018 to 12 October 2018.

    2. Respondents are requested to observe these guidelines:

    1. Indicate your name and the organisation you represent (if applicable) as well as contact details (email address and/or telephone number) to enable us to follow up on your feedback and seek clarification, if necessary;
    2. State clearly which aspect of the regime you are giving feedback on by referring to the relevant paragraph in this public consultation paper; and
    3. Focus your comments on how the AML/CFT regime can be improved.
      4. </ol> 24. Comments and feedback can be submitted via post or email to:

      Anti-Money Laundering and Countering the Financing of Terrorism Division
      Ministry of Law
      45 Maxwell Road
      URA East Wing, #07-11
      Singapore 069118
      E-mail:MLAW_Consultation@mlaw.gov.sg

      25. The Ministry of Law can only consider comments and feedback that are received no later than 12 October 2018. We seek your kind understanding on this. [1] The legal requirements were enacted under Part VIB of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act and the Corruption, Drug Trafficking and Other Serious Crimes (Cash Transaction Reports) Regulations 2014. [2] “Person” includes both individual persons and entities. [3] Examples include business particulars (registered name, UEN, registered address), directors, substantial shareholders, and beneficial owners (if different from shareholders). [4] This refers to any cash transaction with a value, or any 2 or more related cash transactions in a single day with a total value, which exceeds S$20,000 (or its equivalent in foreign currency). This applies for all other requirements applicable to cash transactions above S$20,000. [5] We will take reference from international standards established by FATF to determine how the AML/CFT requirements should be performed. Details on these standards can be found at: [http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF%20Recommendations](#) [6] This refers to transactions for which payment is partly or wholly made in Singapore. [7] Part 5 of the Pawnbrokers Act. [8] This refers to transactions for which payment is partly or wholly made in Singapore.

      Last Updated on 13 sep 20118