Publication of Singapore's Risk Assessments and National Strategies

Dear Regulated Dealer,

The identification, assessment and understanding of risks underpin the effectiveness of Singapore’s efforts in anti-money laundering (“AML”), countering the financing of terrorism (“CFT”) and countering proliferation financing (“CPF”). As part of Singapore’s efforts to keep pace with changing risks, trends and typologies, Singapore monitors our money laundering ("ML"), terrorism financing (“TF”) and proliferation financing ("PF") risks through close coordination across government agencies and in collaboration with the industry. To maintain the effectiveness of Singapore’s AML/CFT/CPF regime, and support and enhance the industry’s collective risk awareness, Singapore published the following risk assessments and strategies on 30 October 2024:

i. Proliferation Financing National Risk Assessment and Counter-PF Strategy (“PF NRA and CPF Strategy”), which updates and deepens Singapore’s PF risk understanding, taking into consideration observations by relevant Singapore authorities, international typologies and feedback from the private sector.

ii. Legal Persons Risk Assessment (“LPRA”), Legal Arrangements Risk Assessment (“LARA”), and Virtual Assets Risk Assessment (“VARA”), which are thematic risk assessments that complement Singapore’s updated ML NRA and TF NRA published on 20 June 2024 and 1 July 2024 respectively. These thematic risk assessments provide a more targeted and in-depth understanding of Singapore’s key threats and vulnerabilities in these specific risk areas and are particularly relevant to sectors that have been referenced in the reports.

iii. National Anti-Money Laundering Strategy (“National AML Strategy”), which sets out the strategic approach to address ML risks and will guide Singapore’s risk-targeted actions to combat ML amidst rapidly changing risks, trends and criminal typologies.

iv. Law Enforcement Strategy to Combat ML, which supports the National AML Strategy, articulates the shared commitment by law enforcement agencies to combat ML and addresses the key ML threats identified in the 2024 ML NRA.

Further information on the (i) PF NRA and CPF Strategy and (ii) VARA, which make reference to and/or are relevant to the precious stones and precious metals dealers ("PSMD") sector are highlighted below. (Note: Registered Dealers should take reference from all of Singapore’s risk assessments and national strategies in identifying, assessing and understanding your ML/TF/PF risks, assessing your AML/CFT/CPF controls and enhance your controls as appropriate.)

PF NRA and CPF Strategy

Singapore’s PF NRA and CPF Strategy consolidates the PF risks observed by Singapore authorities, private sector players and foreign experts – recognising that Singapore’s status as an international financial centre and key trading and transhipment hub makes us susceptible to PF risks.

Amongst other things, Singapore authorities have observed the misuse of legal persons for PF purposes, such as the:

i. Use of Singapore operating companies, including those which are long-established, to trade with sanctioned entities with transactions layered through front companies and accounts in third countries;

ii. Setting up of separate legal persons to ringfence sanctioned activities;

iii. Use of shell companies set up by foreign beneficial owners with little or no substantial business operations in Singapore.

Having identified Singapore’s key PF threats, the PF NRA and CPF Strategy ascertained the sectors with greater exposure to these threats. According to the PF NRA and CPF Strategy, the PSMD sector is assessed to be a sector to watch. The PSMD sector:

i. Is exposed to key PF threats as PSMDs provide an alternative method for United Nations Security Council (“UNSC”)-designated individuals and entities to surreptitiously move financial resources across international borders, with UNSC-designated individuals and entities engaging such dealers to transport gold and diamonds to obtain foreign exchanges to finance their transactions; and

ii. Has a varied level of PF risk awareness due to it being one of the more recently AML/CFT-regulated sectors in Singapore – though this has improved over time.

VARA

Given the fast pace of developments within the virtual assets space, Singapore is cognisant of the importance of keeping abreast of emerging risks. Due to virtual assets’ higher inherent risks, Singapore continues to pay attention to these emerging risks to ensure that our AML/CFT/CPF regime addresses these risks. The findings of the VARA complement existing risk assessments published and seek to provide deeper insights into specific risk areas and enable the industry to adopt a more targeted approach to address the relevant risks.

According to the VARA, PSMDs could be exposed to ML/TF/PF risks arising from the acceptance of digital payment tokens (“DPTs”), which may carry inherent risks due to the features of DPTs themselves. Notwithstanding, under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Regulations 2019, PSMDs are required to conduct customer due diligence on the person before entering into the transaction if the payment in DPTs exceeds S$20,000. On the whole, threats raised in international reports and observed by law enforcement agencies and the industry have also not revealed a nexus between virtual assets and PSMDs.

What Can You Do?

Regulated Dealers should take into account the relevant ML/TF/PF risks and threats identified within Singapore’s risk assessments (including the above risk assessments and the updated ML and TF National Risk Assessments published on 20 June 2024 and 1 July 2024 respectively) to identify, assess and understand ML/TF/PF risks, and assess the effectiveness of your AML/CFT/CPF controls and ongoing monitoring of customers and transactions. As a regulated dealer, your risk assessment should:

i. Be approved by your senior management;

ii. Enable a deeper understanding of your overall vulnerability to ML/TF/PF risks; and

iii. Form the basis for your implementation of relevant risk-focused AML/CFT/CPF controls and mitigation measures.

Click here to access the Singapore’s risk assessments and national strategies.