The Compliance Journey of Regulated Dealers

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The proliferation of financial crime such as bribery and money laundering are causing dramatic impacts on compliance framework. This results in a time-consuming process for financial institutions to perform due diligence and assess clients’ funding sources. At the same time, it also poses threats to precious stones and precious metals dealers (PSMDs). Some criminals are exploiting the vulnerabilities of risk management framework in this sector and using this as an opportunity to “clean” their “dirty money”. They tend to convert the cash to precious metals like gold which can be very difficult to trace.

In order to address this issue, the Ministry of Law (MinLaw) has set out rules that require all the PSMDs to register themselves. This helps to ensure compliance with the anti-money laundering/ countering the financing of terrorism (AML/CFT) regulations. PSMDs need to comply with entity-based requirements which include performing risk assessment and implementation of internal policies, procedures and controls (IPPC). Simultaneously, regulated dealers will have to comply with transaction-based requirements which include performing customer due diligence, filing cash transaction report (CTR) and so on. Any violations can face a fine up to S$ 75,000 or three years of imprisonment.

Based on a news reported in August 2020, a PSMD based in Singapore has been fined for S$9,000 due to its failure to file a CTR. The company did not report the single cash transaction that exceeded threshold amount of S$20,000 made by their customer to the authority. This customer turned out to be a member of a criminal syndicate behind a SkillsFuture scam.

Conclusion

PSMDs are facing many challenges in the compliance journey especially when the regulatory landscape is expanding to cover a wider range of concerns. Therefore, it is crucial for PSMDs to develop a comprehensive set of AML/CFT measures to better detect and manage suspicious transactions. To put plans into action, regulated dealers will have to conduct awareness training especially for those customer-facing employees. This can help them to identify the standard operating procedures of the company. They will also have a clear understanding of their roles and responsibilities in managing ML/TF risks. In short, when the regulated dealers maintain a strong due diligence and compliance programme, they can avoid themselves from ML/TF scandals and the financial penalties for non-compliance.

How we can help

• Help with registration with MinLaw via GoBusiness Licensing Portal
• Develop internal policies, procedures and controls (IPPC) to better manage the ML/TF risks
• Provide guidance on risk assessment procedure
• AML/CFT compliance

Reference Materials

Lam, L. (2020). ‘Poh Heng Jewellery fined for not reporting cash transaction later linked to S$39.9m SkillsFuture fraud in first such case’, Channel News Asia, 11 August. Available at: https://www.channelnewsasia.com/singapore/poh-heng-jewellery-fine-cash-transaction-skillsfuture-fraud-615801