The Prevention of Proliferation Financing and Other Matters Bill (“Bill“), introduced in Parliament on 9 January 2024, was passed on 6 February 2024. At the Second Reading Speech by Senior Parliamentary Secretary Rahayu Mahzam on Prevention of Proliferation Financing and Other Matters Bill on 5 February 2024, she highlighted that while “Singapore’s economic openness as a leading financial and trading hub makes it attractive for investments and businesses”, it also makes it an “attractive target for money laundering, terrorism financing and proliferation financing” (hereinafter referred to as “financial crimes“). A robust approach must therefore be adopted to regulate both the financial and non-financial sectors to combat financial crimes.
Response to Updated FATF Standards
By way of background, the Financial Action Task Force (“FATF“), of which Singapore is a member, has updated its standards for the prevention of financial crimes. In particular, it sets out new requirements in relation to the identification, assessment and mitigation of risks associated with the financing of proliferation of weapons of mass destruction (“proliferation financing“). FATF member states and reporting entities must comply with these updated standards.
In response to this, the Ministry of Law (“MinLaw“) introduced the Bill for the following non-financial sectors which MinLaw regulates: (i) precious stones and precious metals dealers (“PSMDs“); (ii) moneylending; (iii) pawnbroking; and (iv) legal services. The Bill amends the following:
(a) Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act (“PSPM Act“);
(b) Moneylenders Act;
(c) Pawnbrokers Act; and
(d) Legal Profession Act (“LP Act“).
Key Changes
The key amendments introduced by the Bill are set out below.
Alignment with Updated FATF Standards
The Bill amends the PSPM Act, Moneylenders Act, Pawnbrokers Act, and LP Act to align the regulatory regime for the PSMDs, moneylending, pawnbroking, and legal services sectors with the updated FATF standards. These sectors are required to perform assessment of risks associated with proliferation of financing and put in place measures, policies and procedures to mitigate the assessed risks. This is not new to these sectors as this is already part of their existing anti-money laundering controls “as the underlying proliferation financing offences are also money laundering predicate offences”.
Consistent with the FATF updated standards, the controls in the Moneylenders Act and Pawnbrokers Act against criminals owning or managing moneylending and pawnbroking businesses will be strengthened. Under the Bill, persons convicted of offences relating to the prevention of financial crimes will not be allowed to obtain relevant licenses and hold management functions in moneylending and pawnbroking businesses.
Enhanced Regulatory Regime for PSMDs
The Bill enhances the regulatory regime for PSMDs by amending the PSPM Act. The changes relate to, among others, the following:
(a) Updated Definition of “precious product”. The PSPM Act covers precious stones and precious metals (“PSPM“), and precious products. Currently, “precious product” means any jewellery, watch, apparel, accessory, ornament, or other finished product (i) made up of, containing, or having attached to it, any PSPM; and (ii) where at least 50% of the value of the product is attributable to the PSPM. Based on the definition, products with majority of value that is attributable to other factors (e.g. branding or workmanship) are not captured by the PSPM Act. It has been noted that such products can also pose financial crime risks. To address this, the definition of “precious product” will be amended to also cover any “precious product” priced above a prescribed value regardless of the value attributable to the PSPM. The prescribed value is set at S$20,000.
(b) Amendment of definition of “asset-backed token” to exclude digital payment tokens (“DPTs”). The Bill amends the current definition of “asset-backed token” to exclude DPTs from the PSPM Act. This is to avoid double regulation of PSMDs since DPT service providers are already regulated by the Monetary Authority of Singapore (MAS) under the Payment Services Act.
(c) New offence for regulated dealers submitting incomplete and inaccurate cash transaction reports. The PSPM Act mandates a regulated dealer to submit a cash transaction report to a Suspicious Transaction Reporting Officer (STRO) when it enters into any designated transaction. Submitting an incomplete or inaccurate cash transaction report without reasonable excuse is an offence under the Bill.
(d) “Fit and proper” persons to be appointed as compliance officers. The Bill provides that the compliance officers to be appointed by PSMDs must be assessed by the Registrar of Regulated Dealers to be “fit and proper” persons.
(e) Requirements for former regulated PSMDs. The Bill introduces a record-keeping requirement for former regulated dealers. A regulated dealer who becomes a former regulated dealer must retain documents and information that the PSPM Act mandates it to keep, until the end of the applicable prescribed period. Failure to comply with this requirement is an offence. The purpose of the new requirement is to prevent errant former regulated dealers from disposing of records to impede investigations after they cease being regulated dealers.
Click on the following link for more information:
- Prevention of Proliferation Financing and Other Matters Bill (available on the Parliament of Singapore website at www.parliament.gov.sg)
