07 July 2014
Response Speech on Second Reading of the Corruption, Drug Trafficking and Other serious crimes (Confiscation of Benefits) (Amendment) Bill by Mr S Iswaran, Minister in Prime Minister’s Office and Second Minister for Home Affairs and Trade & Industry
Deputy Speaker, I thank the Members who have spoken on the Bill and in general for their support of the policy intent and the need for strong anti-money laundering laws to remain relevant and effective in the face of what Associate Professor Fatimah Lateef described as the current globalised, high technology, and high travel climate. The points that the Members have raised, fall broadly into three themes and I will endeavour to address them in turn.
Scope of the CDSA and Reporting Requirements
2. The first pertains to the scope of the CDSA and the reporting requirements.
3. Mr Hri Kumar asked whether the wide list of predicate offences captured by the CDSA would impose an unduly onerous reporting requirement on financial institutions.
4. Sir, the CDSA’s current list of more than 400 serious offences, is in line with international standards and expectations. The FATF prescribes designated categories of offences which include fraud, corruption, forgery, illicit trafficking in stolen and other goods, and counterfeiting and piracy of products. These categories include the specific offences highlighted by Mr Hri Kumar. It is internationally recognized and acknowledged that such offences – while they may seem rather extensive in the way that they have been described – pose a material risk in terms of the potential to generate illicit proceeds for laundering, hence the need to list them in the Schedule. And the provisions in the CDSA provide the basis for our law enforcement agencies to commence prosecution if there is evidence of money laundering, and to confiscate criminal benefits derived from such conduct.
5. Miss Tan Su Shan stressed the importance of giving financial institutions, particularly the smaller ones, guidance in determining what constitutes suspicious transactions involving foreign tax offences so that they do not fall afoul of the CDSA’s reporting requirements. We recognise that this is a developing area for financial institutions given that these requirements were only imposed last year. The Suspicious Transaction Reporting Office, or STRO, has conducted workshops on combating crimes, including tax crimes, as part of its outreach efforts. STRO has disseminated guidance notes with case studies and suspicious indicators on tax crimes and related money laundering. Financial institutions may also seek clarification from STRO, as the member raised, or industry regulators where needed. MAS has also been working with the industry to provide feedback and guidance on sound industry practices. This includes engagement with industry associations such as the Association of Banks of Singapore, and the Private Banking Industry Group. Most recently on 16th of June this year, MAS published the Guidance on Private Banking Controls which sets out best practices and areas to assist financial institutions to mitigate their risks. What constitutes “tax evasion” under the CDSA is clearly set out in the definition for “foreign serious tax offence”, and comprises the same elements as our domestic “tax evasion” offences under the Income Tax Act and the Goods and Services Tax Act. The aim ultimately is, as Miss Tan has described, to promote the filing of quality suspicious transaction reports, and in the process heighten our vigilance against potential criminal activities.
6. I must say though, that while we are open to suggestions – whether it is shared facilities et cetera – on how to further help smaller financial institutions comply with these requirements, I must emphasise that ultimately it is the responsibility of each financial institution operating in a global financial centre like Singapore to ensure that it has the necessary controls in place. Compliance to a high quality regulatory regime is indeed an advantage that a financial centre like us can provide and in turn enhance the competitive advantage of the institutions that operate in our environment.
7. With regard to the Base Erosion Profit Shifting (BEPS) Action Plan, as a responsible jurisdiction, Singapore is fully committed to work with other jurisdictions to fight cross-border tax offences. We note that that the BEPS current recommendations have not been finalised, and their impact is still uncertain. The Government will continue to monitor international developments and participate in relevant international discussions on the issue.
8. We share Miss Tan’s concern about the need to closely monitor non-finance sectors, beyond financial institutions, that are susceptible to money laundering activities. I should highlight that non-financial sectors are subject to the same requirement – as indeed are all other entities- to report suspicious transactions in the same way as financial institutions and other entities, as the requirement to file STRs apply to everyone who comes across them in the course of work. In January this year, Singapore published a National Risk Assessment report that covered the money laundering and terrorist financing risks of both the financial and non-financial sectors. The stored value facilities of online payment companies, are among the areas identified in the report as being of higher risk and they are already subject to specific anti-money laundering and terrorism financing requirements.
9. Another area that Miss Tan has highlighted is the virtual currency space. This was also highlighted in the National Risk Assessment report as an area for further study. In March this year, MAS announced that intermediaries that buy, sell or facilitate the exchange of virtual currencies will be regulated for anti-money laundering measures. MAS is currently studying the appropriate regulatory regime to be put in place and will consult the industry in due course.
10. Ms Sylvia Lim has asked whether and how Precious Stones and Metals Dealers are required to assess risk on top of the proposed cash transaction reporting requirements, and if there is a need to scrutinise the non-cash aspects of their transactions as well. The focus is on cash transactions as they pose a higher risk compared to non-cash transaction for instance as they allow the owner of funds to remain anonymous. Non-cash transactions pass through financial institutions which would have anti-money laundering controls in place. Further, the current suspicious transaction reporting requirements also apply to PSMDs and cover their cash and non-cash transactions. So if there is reasonable suspicion, they should report it.
11. I want to assure the Member that STRO has held several rounds of discussions with trade associations in the PSMD industry, and will continue to engage the industry, to address any concerns or doubts pertaining to reporting and other requirements. I want to make the point about compliance. The tighter the focus, the lesser the compliance cost. The larger the focus, if we extend to non-cash transactions by PMSDs, then the burden in terms of compliance will be far greater. So I think in coming up with these legislative amendments and the regulatory elements that will give force to them, we are trying to find the balance that will impose a reasonable burden of compliance on the industry players, in order to preserve the overall integrity of the system, which is something that they all value as an asset for their business.
12. Sir, the second theme of Members’ queries and comments is on international cooperation. As Mr Hri Kumar has described, Singapore is an open economy with advanced technological linkages. We therefore are particularly vulnerable to cross border money laundering risks. Almost 30% of our money laundering convictions in the past five years involved predicate offences that were committed outside Singapore. Effective international cooperation is the key to our enforcement efforts.
13. Our agencies’ ability to cooperate internationally is also subject to legal safeguards and procedures to ensure that such cooperation is legitimate, and the information is kept confidential and not misused.
14. Mr de Souza asked about the safeguards in place to ensure that information obtained and shared by STRO is not abused or wrongfully disclosed. Under the proposed amendments, as a prerequisite for information sharing, a foreign authority would need to give an undertaking and assure us of confidentiality, and that the information would be used only for the purposes of advancing investigations. The foreign authority must provide sufficient detail on the offence being investigated, and explain how the information that is requested is relevant to the investigation. Further, STRO officers cannot disclose information obtained for the exercise of its functions unless it is relevant to an investigation, or when they are compelled to do so by the Court or any written law. So there is a ring of safeguards around how the information can be shared and how it can be utilised.
Investigations and Enforcement
15. Members have also raised questions pertaining to investigations and enforcement. Mr de Souza asked about the reporting structure of STRO and which agency will spearhead efforts against money laundering. STRO will continue to be embedded within the Commercial Affairs Department as one of its key Divisions. CAD is the main enforcement agency for money laundering, under the Ministry of Home Affairs. At the policy level, our anti-money laundering regime is overseen by a multi-agency Steering Committee, which is co-led by the Ministry of Home Affairs, the Ministry of Finance and the Monetary Authority of Singapore. On the question of INTERPOL, clearly as part of the effort to work with international bodies and international corporations, INTERPOL’s presence here will be an asset, but operationally they will have to work out how they will give effect to such cooperation and whether the specific sitting of INTERPOL’s office here will bring clear benefits.
16. Associate Professor Fatimah asked how our law enforcement authorities are alerted to transnational crime and money laundering activities. Generally, information can be received from foreign intelligence units or law enforcement agencies on criminal activity that may have bearing on Singapore.
17. Other sources of valuable intelligence are the suspicious transaction reports filed with STRO, as well as reports/complaints lodged by individuals and companies. Our agencies follow up and commence investigations where possible criminal activity is disclosed, with a view towards eventual prosecution. As I mentioned before, there were 39 successful money laundering prosecutions in 2013.
18. Associate Professor Fatimah has also asked if there are any differences in the handling of money laundering cases if they involve individuals as compared to organisations. The CAD does not make such a distinction and will pursue each case based on the facts to identify the perpetrators and determine their culpability. If an individual is found to have acted on behalf of, or at the direction of an organisation, then he and the entity will be taken to task. These considerations are enumerated in sections 52 and 59 of the CDSA.
19. With regard to money laundering penalties, the CDSA prescribes distinct penalties for individuals and organisations under sections 44 to 47. An individual faces a fine not exceeding $500,000 or imprisonment of up to 10 years while an organisation faces a fine not exceeding $1 million. The actual penalties meted out depend on the severity of the offence, monetary amount involved, and the number of charges levied.
Specific Questions on the Bill
20. I will now move on to some specific questions that Members have on the Bill or on the CDSA provisions.
21. On the power to confiscate property of corresponding value in place of instruments of crime, Associate Professor Fatimah asks if there is a specific time-frame for the application of the new substitute property confiscation order. The CDSA does not provide for a specific time-frame within which the process must be conducted. In practice, it will be carried out as soon as possible after the defendant’s conviction. This is similar to the current practice for confiscation of criminal benefits.
22. Miss Sylvia Lim opined that the proposed “Substitute Property Confiscation Orders” could be too harsh in certain circumstances. I think we have to balance this against the need to have strong deterrence against such crimes. A point that Mr Hri Kumar has also mentioned. The intent of the provision is precisely to preserve that deterrent element so that criminals are deterred from being able to use any instrument to commit offences and escape the consequences simply because these instruments do not belong to him. We want to ensure a strong deterrence effect there.
23. The limited discretion given to the Courts is in line with the approach taken for the confiscation of criminal benefits under sections 4 and 5 of the CDSA, the confiscation of property controlled by terrorists under the Terrorism (Suppression of Financing) Act, and the imposition of a monetary penalty under the Prevention of Corruption Act.
24. I would like to assure members that the same stringent requirements apply to a substitute property confiscation order as they would a normal confiscation order against criminal benefits under Parts II, III and IV of the CDSA. First, the offender must be convicted of a drug dealing or serious offence. Second, the application for a substitute property confiscation order must be made by the Public Prosecutor to the Court after careful assessment that it is commensurate with the severity of the crime. So yes, the Public Prosecutor is the gatekeeper as Miss Lim as characterised. But it is the important responsibility it has to be with reference to the severity of the crime. The Court has to be satisfied that that the offender had used or intended to use the instrumentality for the commission of the offence, and that instrumentality is not available for forfeiture. This power cannot be invoked where the actual instrument of crime is available. In addition, the quantum payable is also an amount that the court assesses to be the value of the instrumentality and is imposed as a monetary fine i.e. it does not allow the Public Prosecutor therefore to cherry pick and choose other property to confiscate. So there are a range of safeguards in place, and these are already in practice, in considering whether to apply for a substitute property confiscation order, the Public Prosecutor will consider the full facts and circumstances of the case, and totality of the actions taken to punish the defendant and deprive him of his criminal proceeds.
25. Mr Hri Kumar asked for clarification on the protection accorded to persons who inform STRO of suspicious transactions. Section 39 imposes a general duty on all persons to report their suspicions if they come across information in the course of their work that a property was used or intended to be used to commit crime. A person who discloses such information in good faith to a STRO Officer is protected from liability for any loss arising out of the disclosure under section 39(6) of the CDSA. He would be considered an “informer” under section 40A, which provides for protection of the person’s identity and the information disclosed. This covers the vast majority of the suspicious transaction reports received. Nevertheless, I agree with Mr Hri Kumar. He makes a good point on extending such protection to any persons who disclose information voluntarily outside the circumstances described in section 39. We will study this further to see what can be done.
26. Sir, I think I have covered the substantive points that members have raised. Once again, I thank the members who have spoken once again for their general support of the Bill, and for their useful feedback which will inform the implementation of the provisions of the Bill and any subsequent review that we undertake.
27. Sir, the enhanced CDSA will allow our agencies to better prevent illicit monies from flowing through Singapore, deter associated criminal activities, and facilitate cooperation with the international community. These amendments also bring us into greater compliance with international standards and signal clearly our commitment to the global anti-money laundering fight. Collectively, these efforts will uphold the integrity and reputation of our financial sector, which Singapore has painstakingly built over the years.
28. I urge Members to give your full support to the Bill. Sir, I beg to move.