Licensing and Compliance Requirements for Precious Metal Dealers

In late 2019, Ministry of Law (“Minlaw”) reminded all precious metal dealers to register their business with the Registrar of Regulated Dealers under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 (“AML/CFT Act”). All regulated dealers including those who act as intermediary for regulated dealing in precious metals must be registered. Examples of entities who would fall under the AML/CFT Act includes bullion traders, trading platforms and jewellery wholesalers.

A regulated dealer for the purposes of dealing in precious metals is defined in the AML/CFT Act to mean a person who carries on the business of regulated dealing or carries on a business as an intermediary for regulated dealing. Regulated dealing is defined in the AML/CFT Act to mean doing the following activities:

• Manufacturing any precious stones, 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 asset backed tokens; or
• purchasing any precious stone, precious metal or precious product for the purposes of resale.

The AML/CFT Act has set up the regulatory framework for any dealers of precious metals, stones, precious products and asset –backed tokens.  An asset-backed token refers to a token, certificate or other instrument backed by precious stones and precious metals or precious products but excludes:

• Securities or derivatives contracts which would require one to hold a Capital Market Services Licence
• Commodity contracts which would require one to hold a licence under the Commodity Trading Act

Prawn brokers who are subject to AML/CFT provisions under the Prawnbrokers Act. Financial institutions who are regulated by Monetary Authority of Singapore are already covered under other AML/CFT measures and therefore are exempted from AML/CFT Act relevant for regulated dealers.

AML/CFT Measures Applicable to Regulated Dealers

As per Licensing and Compliance Requirements, regulated dealers are required to implement and comply with the following AML/CFT measures when conducting any part of the regulated dealer activities in Singapore:

• In line with AML/CFT Act, perform customer due diligence (“CDD”) measures under prescribed circumstances, in addition to the existing requirement to do so for cash transactions above S$20,000;
• Submit a copy of the cash transaction reports (“CTR”) to the Registrar in addition to existing requirements to file the CTR;
• Submit a copy of suspicious transaction to the Registrar, in addition to the existing requirements under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act and Terrorism (Suppression of Financing) Act;
• Conduct ongoing monitoring of transactions by periodically reviewing the information and documents obtained as part of CDD procedures in accordance to AML/CFT Act;
• Conduct risk assessment posed by the customers and transactions and put in place internal policies, procedures and controls to mitigate these risks in line with AML/CFT Act

Policies and Procedures Requirements

As part of AML/CFT Act, regulated dealers must develop and implement appropriate policies and procedures to manage and effectively mitigate ML/TF risks. All AML/CFT policies and procedures must be communicated to all employees and trained appropriately to assist in reducing potential AML/CFT risks for institutions.

In general AML/CFT policies and procedures should address the following requirements:

• Assessment of risks faced by your business
• Appointment of compliance officer and his/her responsibilities
• Checks to conduct when hiring employees
• Procedure to conduct customer due diligence (CDD)
• Procedure to complete a cash transaction report (CTR)
• Procedure to conduct enhanced customer due diligence (ECDD)
• Procedure to complete a suspicious transaction report (STR)
• Staff training on AML/CFT
• Record keeping
• Audit of AML/CFT policies and procedures

All AML/CFT policies and procedures must be approved by senior management. Regulated dealers should also ensure that there is appropriate compliance arrangements including the appointment of a compliance officer at the management level and apply adequate employee screening procedures when hiring employees.

Audit Requirements

As per the AML/CFT Act, regulated dealers who intend to carry out designated transactions are required to have an independent audit function to test the AML/CFT policies and procedures. The audit unit, if performed internally, must be independent from the business arm and not involved in the establishment, implementation or maintenance of the AML/CFT programme.

Audit on AML/CFT policies and procedures, at minimum, should:

• Determine the adequacy and relevant of the AML/CFT policies and procedures
• Assess the employees’ compliance with the AML/CFT policies and procedures
• Assess whether instances of non-compliance are reported to senior management on a timely basis.

Designated transactions refer to cash transactions or cash equivalent exceeding S$20, 000 in value conducted wholly or partly in Singapore.

How can Argus (now Waystone Compliance) Assist in Licensing and Compliance Requirements?

We, at Argus Global (now Waystone Compliance), are a team of consultants who specialize in regulatory compliance for regulated institutions. We assist to do the following:

• Prepare comprehensive AML/CFT policies and procedures adhering to the AML/CFT Act.
• Provide gap analysis on current AML/CFT policies and procedures against AML/CFT Act.
• Provide AML/CFT training to all employees.
• Provide independent audit on AML/CFT policies and procedures to ensure adherence to AML/CFT Act.

Please reach out to us for an initial discussion related to licensing and compliance requirements at [email protected].

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