07 July 2014

Second Reading on the Corruption, Drug Trafficking and other serious crimes (Confiscation of Benefits) (Amendment) Bill – Speech by Mr S Iswaran, Minister in Prime Minister’s Office and Second Minister for Home Affairs and Trade & Industry

Sir, I beg to move, ‘That the Bill be now read a second time’.

Introduction

2.         Sir, the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act, or the CDSA in short, criminalises the laundering of benefits derived from serious criminal offences, and provides for powers to investigate and confiscate such benefits. The Act was last amended in 2010 to enhance our anti-money laundering measures, and adapt them to the changing criminal landscape.

3.            With the increasingly transnational, lucrative, and sophisticated nature of criminal activities, the risk of Singapore being used as a conduit to launder criminal proceeds continues to be a concern. Money laundering undermines the rule of law, erodes the integrity of our financial system, and damages our reputation as a trusted international financial centre. Illicit proceeds can also be used to finance terrorism giving rise to serious national security concerns. The Police’s enforcement efforts, and work with various stakeholders, have led to an increase in the number of money-laundering convictions from 18 in 2010 to 39 in 2013.

4.            To maintain our vigilance and stay ahead of this threat, our criminal laws and anti-money laundering measures must be regularly reviewed to ensure that we have the means to deal with criminal operations swiftly, and deprive perpetrators of their illicit gains. This Bill thus proposes amendments to strengthen our ability to detect, deter and prosecute money laundering offences.

5.            Given the transnational nature of crime, and the ease with which large sums can be moved across borders today, it is crucial that strong domestic regulations be complemented with effective international cooperation. Indeed, over the past three years, the number of requests for mutual legal assistance from our foreign counterparts, on money laundering and terrorism financing matters, has risen from 32 in 2010 to 73 in 2013. It is therefore in our national interest to participate pro-actively in the global effort against cross-border crime and money laundering.
This affirms our strong stance against such crimes, and sends a clear signal that illicit assets do not have safe harbour in Singapore, upholding our status as a well-regarded and well-regulated financial centre. Therefore, the proposed amendments also seek to facilitate information sharing with foreign law enforcement agencies where transnational criminal elements are involved.

6.              Collectively, these amendments will also better align our laws with the international standards set by the Financial Action Task Force, or FATF, of which Singapore is a member.

Key Amendments

Strengthen Prosecution Levers

7.              Sir, let me now elaborate on the key amendments. First, two amendments that will enhance our ability to investigate and prosecute the laundering of criminal benefits derived from foreign predicate offences. Predicate offences are crimes that generate criminal proceeds for laundering.

8.            First, before prosecution can proceed against money laundering involving a foreign predicate offence, the CDSA currently requires that our law enforcement agencies obtain a certificate from a foreign country to establish the foreign predicate offence. However, our agencies have faced difficulties in obtaining such certificates as it is not an internationally established practice. Many jurisdictions, in fact, do not have this requirement in their laws, and thus have no designated authority or powers to issue such certificates. This has consequently adversely affected our prosecution effectiveness. Clauses 2(a) and (f) serve to allow for a wider range of evidence to be adduced to prove the foreign law which gives rise to the predicate offence. Such evidence can include foreign court judgments, statements by experts, as well as any statement provided by an appropriate foreign authority confirming that an offence had been committed under its laws. 

9.             Second, the CDSA currently has the requirement of dual criminality, i.e. it recognises a foreign offence only if the same act also constitutes an offence in Singapore. However, a strict application of dual criminality constrains our ability to prosecute money laundering cases involving the evasion of foreign taxes, where there is no local equivalent. To address this, the amended definition of a “foreign serious offence” will recognise a foreign tax evasion offence, so long as the offence has been criminalised in the foreign jurisdiction and is committed wilfully with intent to evade tax. These amendments are consistent with Singapore’s commitments under tax treaties, and will deter tax-illicit monies from flowing into Singapore.

Increase Deterrence

10.             Next, I will touch on the measures to increase deterrence against money laundering activities.

11.            Clauses 11 to 14 increase the maximum imprisonment term for money laundering offences from seven to 10 years.  This is consistent with the maximum penalties for terrorism financing, recognising the similar gravity of both types of criminal activities. 

12.            Today, our laws allow us to confiscate the instruments used, or intended to be used, in the commission of a crime, in addition to any benefits derived from such conduct. This ensures that criminals are deprived of all resources used for, and obtained from, their illegal activities. Such instruments can also easily re-enter circulation to perpetuate illegal activities, thereby further frustrating the intent of our legislation and enforcement efforts. To address this, clause 5 introduces new provisions to allow the Public Prosecutor to apply to the court – upon securing a conviction for a predicate offence – to make a substitute property confiscation order against the defendant, if he had used or intended to use any instrument for the commission of the offence and it is not available for confiscation. The offender will be required to pay to the Government the value of the instrument as assessed by the Court. The current confiscation processes for benefits of crime, and the attendant safeguards, will also be applied to the substitute property confiscation order with modifications as necessary.  This proposed power is in line with international requirements under FATF, and will keep our confiscation regime robust.

Enhance Vigilance

13.             To further enhance our vigilance against potential money laundering activities, two measures will be implemented. First, the CDSA currently requires travellers, who carry physical currency and bearer negotiable instruments exceeding SGD 30,000 into or out of Singapore, to declare the amount in their possession at the checkpoints.  Henceforth, we will prescribe the cross border cash reporting threshold in subsidiary legislation instead, and lower the threshold from SGD 30,000 to SGD 20,000. The current threshold of SGD 30,000 was set in 2007 to meet the FATF’s recommended reporting threshold of EUR 15,000. The revision to SGD 20,000 takes into account the appreciation of the Singapore dollar against the EURO in recent years, and allows us to keep closer watch over large volume cash movements. Prescribing the reporting threshold in subsidiary legislation also allows timely changes to be made in response to currency fluctuations. The revised reporting threshold also aligns us better with practices of comparable jurisdictions, such as the United States, Australia and New Zealand

14.              Second, clause 19 introduces new provisions for certain prescribed persons to conduct customer due diligence, keep records, and file cash transaction reports when they transact with a customer in cash exceeding a certain threshold amount. Such a regime is already in place for the casinos in Singapore. In line with FATF standards, we will expand such requirements to the Precious Stones and Metal Dealers, or PSMD, sector in view of the potential risk it poses as a conduit for money laundering and terrorism financing activities. PSMDs will be required to verify the customer’s identity and file a report with the Suspicious Transaction Reporting Office when they transact a sale with a customer in cash exceeding SGD 20,000. Such cash transaction records and relevant supporting documents are to be kept for a period of five years from the date of filing.

15.            The definition of PSMDs and customer due diligence requirements will be set out in regulations made under section 64 of the CDSA. Clause 22 amends that section to empower the Minister for Home Affairs to make a contravention of any provision of those regulations an offence. In developing this regulatory regime, the Ministry of Home Affairs, the Ministry of Finance, and the Monetary Authority of Singapore have jointly consulted the public and key industry players such as Singapore Jewellers Association and the Singapore Clock and Watch Trade Association, and received broad support for the measures. The implementation details of the PSMD and revised cross border cash reporting measures will be announced in due course.

Facilitate Information Sharing

16.              Sir, I now come to the amendments to enhance international cooperation and to facilitate information sharing.

17.              The Suspicious Transaction Reporting Office, or STRO, was established administratively in 2000 within the Commercial Affairs Department. It is the office responsible for the receipt and analysis of suspicious transaction reports and other financial intelligence reports. Clause 4 formalises STRO’s mandate by establishing its functions in the CDSA.

18.           To discharge its functions, STRO officers are given powers to obtain relevant information for the purpose of analysing the reports made to it. Financial intelligence derived can be shared with foreign counterparts for their investigations into foreign offences, subject to appropriate safeguards. Clause 10(c) provides more flexibility for intelligence sharing given its importance as a channel of cooperation in our anti-crime effort. The amendments will permit sharing, without the need for a formal arrangement such as a memorandum of understanding, between STRO and its foreign counterpart, as long as the safeguards for the use and confidentiality of the information are secured through an undertaking by the foreign authority. This aligns us with the practices of key foreign jurisdictions such as Hong Kong, United Kingdom, United States and Switzerland who also do not require MOUs to share intelligence.

Other Amendments

19.             Sir, I will now touch briefly on the other amendments proposed in the Bill. Clause 2(e) aligns the definition of “financial institution” with the corresponding definition under the Monetary Authority of Singapore Act (“MAS Act”) to ensure consistency in coverage.

20.           As dispute adjudicators, arbitrators also have access to confidential information in the course of their work.  Clause 8(b) thus extends the exemption from suspicious transaction reporting to arbitrators in respect of any matter which came to their attention during arbitration proceedings.  The exemption preserves confidentiality, which is essential in the arbitration process.  Established arbitration jurisdictions like the United States, United Kingdom, and Australia similarly exempt arbitrators from reporting suspicious transactions.

21.               Lastly, the Bill makes some technical amendments. For example, the term “drug dealing” is preferred to “drug trafficking” in describing the drug predicate offences in the CDSA, as it better reflects the drug-related offences scheduled in the CDSA by covering activities beyond trafficking, such as unauthorised drug manufacturing. 

Conclusion

22.               Sir, money laundering is a sophisticated international scourge that requires a comprehensive suite of counter-measures to effectively detect and combat. To prevent such criminal activities from taking root in our financial system, our laws have to remain up-to-date, possess sufficient deterrence, and facilitate international cooperation. The proposed amendments strengthen these aspects of our legislation and enhance our ability to take enforcement action against money laundering. They are also in line with international practices and standards, and signal our resolute commitment to the global anti-money laundering effort.  

23.              Sir, I beg to move.