by jiawen
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The Ministry of Home Affairs has recently published the Singapore Terrorism Threat Assessment Report (STTAR) 2022 to provide information about the terrorism threat to Singapore and common approaches to prevent terrorism acts. The STTAR revealed that the terrorism threat to Singapore is likely to remain high following the lifting of pandemic restrictions and reopening of the country’s borders. The easing of various Covid-19 restrictions will then facilitate the movement and activities of terrorist and give rise to the risks of terrorist attacks.
Why PSMD Sector Faces Higher ML/TF Risks?
PSMD sector looks attractive to the launderers and terrorist financiers as the precious stones and precious metals have a high value. These products can be easily convertible into cash and difficult to trace when it comes to smuggling. These characteristics increase the likelihood of products being misused for illicit purposes especially when the anti-money laundering and combating the financing of terrorism (AML/CFT) controls are not in place.
Vulnerabilities of Precious Stones and Precious Metals Dealers (PSMD) Sector
Apart from the financial institutions, the PSMD sector is also highly vulnerable to money laundering/ terrorist financing (ML/TF) risks due to the nature of the precious stones, precious metals (PSPMs). Generally, PSPMs such as gold are high in value, easily concealed and worldwide exchangeable which make it difficult to track and trace the origin and ultimate owner of funds. With this in mind, organized crime groups and terrorist groups tend to exploit these characteristics and use it as a common vehicle for money laundering and terrorist financing. Therefore, it is crucial for all regulated dealers to adopt a risk-based approach instead of a “tick-box” approach with the focus solely on meeting supervisory expectations.
What Regulated Dealers Should Do?
To better prevent and mitigate the ML/ TF risks, dealers must devise their internal policies, procedures and controls (IPPC) in a way that commensurate with the nature of their business and level of risks associated with their business activities. Following the implementation of an effective IPPC, it is vital for regulated dealers to provide regular training to their staff especially those with client-facing roles. The awareness training will enable employees to be more vigilant of unusual transaction patterns and customer behaviours and able to report suspicious activities promptly to relevant parties. As outlined in Section 19(3) of PSPM Act 2019, a regulated dealer who failed to put in place adequate AML/CFT programmes which include risk assessment and IPPC is subject to a fine not exceeding $100,000.
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
Ministry of Home Affairs (2022). ‘Singapore Terrorism Threat Assessment Report 2022’. Available at: https://www.mha.gov.sg/docs/default-source/default-document-library/singapore-terrorism-threat-assessment-report-2022.pdf
Ministry of Law (2022). ‘Offences/Breaches under the PSPM Act and PMLTF Regulations’. Available at: https://acd.mlaw.gov.sg/offences-breaches-under-the-pspm-act-and-pmltf-regulations/
The Singapore Terrorism Threat Assessment Report 2022 warns of heightened terrorism risks post-pandemic. Given the vulnerabilities in the PSMD sector, regulated dealers should adopt a risk-based approach and implement effective AML/CFT controls and training programmes.
Early in the year of 2019, the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 (“PSPM Act”) has come into force to safeguard the precious stones and precious metals dealers (PSMD) sector against money laundering/ terrorism financing (ML/TF) risks.
Financial crimes like money laundering have heightened compliance risks for the PSMD sector. Under MinLaw’s AML/CFT regulations, all dealers must register, perform due diligence, and file cash transaction reports. Strengthening internal controls and staff awareness is key to preventing ML/TF violations and ensuring compliance.
