Knowledge Highlights 19 July 2021
On 9 July 2021, the Monetary Authority of Singapore (“MAS”) issued a consultation paper seeking comments on MAS’ proposals to introduce a new anti-money laundering and countering the financing of terrorism (“AML/CFT”) Notice for financial institutions (“FIs”) in the conduct of their operations and business activities in precious stones, precious metals and precious products (“PSMs”), and to update MAS’ existing AML/CFT Notices for FIs and variable capital companies (“VCCs”) (“AML/CFT Notices”). The consultation closes on 10 August 2021.
Both the new AML/CFT Notice for PSM activities for FIs (“PSM Notice”) and the amendments to the existing AML/CFT Notices are expected to come into force in 4Q 2021.
This article provides an overview of some of the key proposals set out in the consultation paper.
New MAS AML/CFT Notice for FIs dealing in PSMs
The Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 (“PSPM Act”) was passed by Parliament on 11 February 2019. Under the Precious Stones and Precious Metals (Exempt Persons) Order 2019, FIs that deal in PSMs are exempt from registration with the Ministry of Law (“MinLaw”) under Part 2 of the PSPM Act and certain AML/CFT requirements in the PSPM Act. This is intended to streamline the regulation and oversight of PSM activities by FIs under the purview of the MAS.
To ensure consistency in the AML/CFT requirements across all FIs dealing in PSMs, MAS proposes to issue a new Notice pursuant to the Monetary Authority of Singapore Act (“MAS Act”) instead of expanding the requirements in the existing AML/CFT Notices to apply to the FIs’ PSM activities.
Scope of PSM Notice
The proposed PSM Notice will apply to all FIs which carry on the business of regulated dealing in PSM or as an intermediary for regulated dealing in PSM.
Definition of “regulated dealing”
MAS proposes that the scope of the PSM Notice be aligned with the scope of the AML/CFT provisions in the PSPM Act which cover “regulated dealing” as defined in section 2 of the PSPM Act. Thus, the definition of “regulated dealing” in the PSM Notice is aligned with that in the PSPM Act and defined as doing any of the following:
- manufacturing any precious stone, precious metal or precious product;
- importing or possessing for sale any precious stone, precious metal or precious product;
- selling or offering for sale any precious stone, precious metal or precious product;
- selling or redeeming any asset-backed tokens;
- purchasing any precious stone, precious metal or precious product for the purposes of resale.
Under the proposed PSM Notice, FIs would be required to perform customer due diligence (“CDD”) when:
- the FI establishes an “account relationship” (defined as (a) the opening or maintenance of an account in the name of a person by an FI for the purpose of any regulated dealing, or (b) the use of an existing account with an FI in the name of a person for the purpose of any regulated dealing by the FI with that person) with any customer;
- the FI undertakes a “relevant business transaction” (which includes the sale or purchase of any PSM or the sale or redemption of any asset-backed token in a single day, for which the payment exceeds S$20,000) for any customer who has not otherwise established an account relationship with the FI;
- there is a suspicion of money laundering or terrorism financing, notwithstanding that the FI would not otherwise be required by the PSM Notice to perform the measures as required by paragraphs 6, 7 and 8 of the proposed PSM Notice (pertaining to CDD, simplified CDD and enhanced CDD respectively); or
- the FI has doubts about the veracity or adequacy of any information previously obtained.
Under the proposed PSM Notice, FIs will be required to perform CDD on all occasional PSM transactions for which payment exceeds S$20,000 in value, regardless of the payment mode. This is in line with MAS’ existing requirements for occasional transactions generally.
Requirements pertaining to correspondent accounts and wire transfers
MAS proposes not to include AML/CFT requirements pertaining to correspondent accounts and wire transfers in the PSM Notice as it has assessed that these concepts are not relevant in the context of regulated dealings.
Amendments to existing MAS AML/CFT Notices
MAS seeks to amend the AML/CFT Notices to ensure that the AML/CFT requirements for all FIs and VCCs continue to be effective in mitigating and managing the evolving money laundering and terrorism financing (“ML/TF”) risks in Singapore’s financial sector.
Digital token services by banks, merchant banks, finance companies, credit card or charge card licensees and CMS licensees
MAS seeks comments on proposals to align the existing AML/CFT requirements for banks, merchant banks, finance companies, credit card or charge card licensees and capital markets services (“CMS”) licensees in relation to digital token transactions they conduct, with that for digital payment token (“DPT”) service providers. The proposals are as follows:
- requiring CDD to be conducted from the first dollar (i.e. no minimum threshold below which the AML/CFT requirements would not apply) for occasional transactions involving DPTs or digital tokens that are capital markets products as defined in section 2(1) of the Securities and Futures Act (“DCMPTs”);
- imposing value transfer requirements for DPT or DCMPT services; and
- clarifying that the AML/CFT requirements in the FI-specific AML/CFT Notices similarly apply to digital token transactions.
Enhanced CDD measures for higher risk shell companies
To strengthen the financial industry’s defences against the misuse of legal persons, MAS proposes to require FIs and VCCs to assess whether a customer may be a shell company that presents higher ML/TF risks and, if so, perform enhanced CDD measures.
Wire transfer and correspondent account requirements for credit card or charge card licensees
In relation to credit card or charge card licensees, to align MAS Notice 626A with the requirements under MAS Notice PSN01 in relation to payment services and to better mitigate the ML/TF risks that may arise from credit card or charge card licensees providing payment services, MAS proposes to introduce requirements pertaining to wire transfers and correspondent accounts within MAS Notice 626A.
Requirement of disclosure to DNFBPs and VCCs for licensed trust companies and approved trustees
MAS currently requires licensed trust companies (“LTCs”) and approved trustees (“ATs”) to disclose that they are acting as trustees when they establish any business contact with FIs in Singapore or elsewhere. This is to help FIs identify the beneficial owners of trust arrangements and take the appropriate risk mitigation measures. Filing agents, lawyers, accountants, real estate agents and certain other non-financial businesses and professions (collectively, “DNFBPs”) and VCCs are also key gatekeepers in preventing ML/TF. MAS therefore proposes to extend this requirement for LTCs and ATs to also disclose to DNFBPs, in Singapore or elsewhere, and VCCs, that the LTCs and ATs are acting as trustees.
Other proposed clarificatory amendments
MAS also proposes to make various clarificatory amendments in the AML/CFT Notices.
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