Singapore widens legal net to counter financing of weapons of mass destruction

JEWELLERY dealers, pawnbrokers, moneylenders and law practitioners will now need to strengthen their internal controls and procedures to match international standards designed to prevent the financing of proliferation of nuclear, chemical and biological weapons.

A Bill passed in Parliament on Feb 6 makes several amendments to the existing legal regime that monitors how money is handled by precious stones and metals dealers (PSMDs), moneylenders, pawnbrokers and legal practitioners – businesses that are considered non-financial institutions.

The Prevention of Proliferation Financing and Other Matters Bill, first tabled in January 2024, requires these businesses to perform risk assessment as well as to develop and implement internal policies, procedures and controls to counter proliferation financing, in addition to money laundering and terror financing.

Banks and other financial institutions in Singapore already have to comply with international regulations on financial crimes including proliferation financing.

Under the Bill, amendments will be made to the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act, the Legal Profession Act, the Moneylenders Act and the Pawnbrokers Act.

These will ensure that Singapore is in compliance with requirements introduced in October 2020 by the Financial Action Task Force (FATF), a global money laundering and terrorist financing watchdog that sets international standards to tackle financial crimes. T Raja Kumar, senior adviser for international matters at the Ministry of Home Affairs, is currently the president of the FATF.

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FATF defines proliferation financing as providing funds or financial services for activities such as manufacturing, acquiring, possessing or transporting nuclear, chemical or biological weapons and their means of delivery and related materials, in contravention of national laws or international obligations.

Rahayu Mahzam, Senior Parliamentary Secretary for Law and Health, told Parliament: “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.

“As a trusted international financial and trading hub, Singapore takes a firm stance against these activities. We therefore take a robust approach to supervision, both in the financial sector and the non-financial sectors, in order to prevent financial crimes.”

Rahayu noted that many business entities covered by the Bill already have relevant measures in place as part of their existing anti-money laundering controls, as the underlying proliferation financing offences are also money laundering predicate offences. A predicate offence is a crime that is a component of a more complex criminal activity.

But the amended rules will strengthen those controls through measures such as preventing persons convicted of offences relating to the prevention of financial crimes from obtaining certain licences, or from holding management functions in moneylending and pawnbroking businesses. 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, said Rahayu.

The Bill also updates the definition of “precious product” under the PSPM Act. It currently covers any jewellery, watch, apparel, accessory, ornament, or other finished product made up of, containing, or having attached to it, any precious stone or precious metal which makes up at least 50 per cent of the value of the product. Rahayu said that this definition does not capture products with a majority of value attributed to other factors, such as branding or workmanship. “However, we have observed that such products can also pose risks of financial crimes,” she added.

To close this gap, the definition is being changed to 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. This would include, for instance, a platinum watch retailed by a luxury brand with a net sales price of S$100,000, even if the value of the platinum in the watch is less than 50 per cent of the net sales price.

Speaking during the debate on the Bill, Louis Ng (Nee Soon GRC) said that he supported the amendments but was concerned about how the government plans to build up capacity of business entities to comply with the new requirements. He said: “Overly strict safeguards can be counterproductive 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?”

Rahayu said that the Ministry of Law will carry out inspections, investigations and enforcement to ensure compliance. THE STRAITS TIMES