On 14 January 2019, a brand new invoice setting out a risk-based anti-money laundering and countering-the-financing-of-terrorism (AML/CFT) regime for valuable stones and valuable metals sellers (the Invoice) was tabled for first studying within the Singapore parliament. The Ministry of Legislation (MinLaw) had consulted on the Invoice in September and October 2018.
The Invoice will apply to a broad vary of individuals who deal in, or who intermediate dealings in, valuable metals, valuable stones, valuable merchandise (being merchandise that include a particular proportion of valuable metals or stones) and asset-backed tokens which give an entitlement to such metals, stones or merchandise. The Invoice will impose wide-ranging necessities, together with (amongst others) an obligation to register with a brand new Registrar of Regulated Sellers (the Registrar), report sure money transactions exceeding S$20,000 in worth, conduct buyer due diligence (CDD) and preserve AML/CFT controls.
We set out beneath some key issues for individuals who will come throughout the scope of the Invoice (which is able to seemingly embody, for instance, mining and different commodity teams), in addition to a extra detailed overview of the Invoice.
Key issues for sellers
The AML/CFT framework set out within the Invoice enhances Singapore’s broader efforts to fight monetary crime. Certainly, below the Corruption, Drug Trafficking and Different Severe Crimes (Confiscation of Advantages) Act (Cap. 65A) (CDSA), sellers of valuable stones, metals and merchandise are already topic to transaction reporting, CDD and record-keeping necessities in relation to sure money transactions exceeding S$20,000 in worth.
Whereas these necessities regarding money transactions are most definitely to have an effect on sellers equivalent to jewelry retailers, second-hand items sellers and public sale homes, the Invoice will apply equally to different sorts of sellers, equivalent to mining firms and commodity homes. Even when they don’t routinely undertake money transactions, these sellers might want to adjust to all different necessities below the Invoice regarding regulated dealing, together with the registration and record-keeping obligations and the requirement to determine an acceptable inner AML/CFT compliance framework.
In anticipation of the brand new framework taking impact, all sellers ought to due to this fact conduct a spot evaluation between the necessities within the Invoice and their inner controls, to make sure they can meet the attendant compliance requirements. For sellers with a broad vary of diversified actions, this will likely require an in depth scoping train to establish which actions will fall below the brand new framework. This will give rise to interpretative points in some contexts – for instance, it’s unclear whether or not asset-backed tokens would come with models in collective funding schemes (equivalent to exchange-traded funds) which spend money on valuable stones, metals or merchandise.
Sellers with worldwide operations must also take into account which of their actions come throughout the purview of the Invoice from a territorial perspective. For instance, the Invoice clarifies that sure provisions therein (e.g., the requirement to implement AML/CFT programmes and measures) would apply to a seller in Singapore who carries out regulated dealing on-line from Singapore with a buyer abroad, in addition to to a seller primarily based abroad who involves Singapore for a commerce truthful and transacts with a buyer in Singapore.
The query additionally arises as as to if transactions wherein cryptocurrency (e.g., bitcoin or ether) is used as a method of cost would set off the necessities within the Invoice regarding money transactions – some extent of explicit topical relevance, given latest studies that some sellers within the Singapore retail area could also be keen to simply accept cryptocurrency as cost. It’s clear that below the Invoice, using cryptocurrency in any transaction would require the seller to make sure it might probably assess and tackle the attendant money-laundering and terrorism-financing threat, together with by way of acceptable CDD measures.
Detailed overview of the Invoice
Scope of the Invoice
The Invoice, titled the Valuable Stones and Valuable Metals (Prevention of Cash Laundering and Terrorism Financing) Invoice, imposes obligations on “regulated sellers”. These are individuals (or intermediaries for individuals) who manufacture, import, promote, supply, or buy for resale:
- valuable stones (e.g., diamonds, sapphires, rubies);
- valuable metals (e.g., gold, silver, platinum);
- valuable merchandise (i.e., merchandise of which a minimum of 50 per cent of the worth is attributable to valuable stones and/or valuable metals); and/or
- asset-backed tokens (i.e., devices entitling their holder to all or a part of a valuable stone, valuable steel or valuable product, however excluding securities and derivatives contracts throughout the which means of the Securities and Futures Act (Cap. 289), and commodity contracts throughout the which means of the Commodity Buying and selling Act (Cap. 48A)).
The Invoice is not going to apply to pawn brokers, and permits for different prescribed individuals to be excluded. Monetary establishments regulated by the Financial Authority of Singapore shall be exempted from all necessities besides the money transaction reporting requirement (as described beneath).
Any individual wishing to behave as a regulated seller (or maintain themselves out as such) have to be registered with the Registrar. Registration is topic to (amongst different situations) the applicant paying any prescribed price and the Registrar being glad that the applicant and its particular person substantial shareholders, administrators or different governing individuals, and managers, are match and correct (e.g., they should have no hostile AML/CFT historical past). The Registrar isn’t restricted within the health and propriety standards it could apply.
Moreover, the Registrar might impose, fluctuate or cancel situations of registration once in a while.
Buyer due diligence and reporting
Sure sorts of regulated dealing involving the cost of money or a money equal exceeding S$20,000 in worth (in every case, a Designated Transaction) set off extra obligations for a regulated seller. For every Designated Transaction, the seller should conduct CDD and file a money transaction report back to the Suspicious Transaction Reporting Workplace of the Industrial Affairs Division of the Singapore Police.
‘Money’ means (in abstract) foreign money notes and cash that are authorized tender and flow into as cash, and ‘money equal’ means something prescribed as such.
Moreover, a regulated seller should carry out CDD the place it suspects cash laundering or terrorism financing, and the place it has purpose to doubt the veracity or adequacy of data obtained from earlier CDD.
Regulated sellers are required to maintain data of each Designated Transaction, all different transactions for which CDD have to be carried out, data obtained by way of the CDD, and copies of paperwork supporting the CDD.
Programmes and measures – AML/CFT and sanctions
Regulated sellers should implement satisfactory programmes and measures to forestall cash laundering and terrorism financing, particulars of which can be additional prescribed. The programmes and measures have to be commensurate to the seller’s money-laundering and terrorism-financing threat, and the scale of the seller’s enterprise.
Regulated sellers should additionally carry out any prescribed measures regarding anti-terrorism sanctions or to present impact to suggestions of the Monetary Motion Process Drive.
The obligations below the Invoice complement these below the CDSA and the Terrorism (Suppression of Financing) Act (Cap. 325). Copies of any suspicious transaction studies made below these acts have to be filed with the Registrar.
Powers of the Registrar
The Registrar is empowered to take varied sorts of motion to implement the obligations below the Invoice. These embody (amongst others) the ability to:
- cancel or droop the registration of a regulated seller;
- impose a monetary penalty on a regulated seller;
- give instructions to regulated sellers;
- make copies of and procure the manufacturing of supplies;
- enter and examine anyplace;
- interview people; and
- seize sure property.
The Registrar will be capable of subject, approve and revoke codes of observe, pointers or requirements of efficiency once in a while. It is going to even be permitted to publish details about regulatory motion or legal proceedings taken in opposition to regulated sellers.
Regulated sellers can have as much as six months from the efficient date of the Invoice to register. Registration is predicted to start out in Q2 2019.
In preparation, MinLaw will search to boost AML/CFT consciousness, and can work with business associations to develop steerage supplies for the sector
This text is co-authored by Carolyn Chia, a lawyer at Resource Law LLC.
Reed Smith LLP is licensed to function as a international regulation observe in Singapore below the identify and elegance, Reed Smith Pte Ltd (hereafter collectively, “Reed Smith”). The place recommendation on Singapore regulation is required, we are going to refer the matter to and work with Reed Smith’s Formal Legislation Alliance companion in Singapore, Resource Law LLC, the place crucial.