An Overview of Selected Singapore Legislation Applicable to the Gold Market

By Leong Yi-Ming, Partner, Allen & Gledhill LLP

With recent projections of Singapore becoming the regional gold hub as demand for gold shifts from the West to the East and the diverse turnout at the 7th Asia-Pacific Precious Metals Conference in June 2024, companies that are interested in entering the Singapore gold market should take note of some relevant legislation that is applicable to gold dealing.

Anti-Money Laundering, Countering Financing Terrorism and Countering Proliferation Financing legislation

The precious stones and precious metals (PSPM) industry, which includes gold, has been identified as a sector with risks of money laundering, terrorism financing and proliferation financing. These goods are of high value, easily transportable and concealed, and easily converted to cash. Criminals may use these goods to hide the source or purpose of their funds.

Singapore, as a member of the Financial Action Task Force (FATF) has implemented various anti-money laundering/countering the financing of terrorism/countering proliferation financing (AML/CFT/CPF) measures in accordance with international FATF standards. PSPM dealers are required to actively implement AML/CFT/CPF frameworks to their businesses.

Definitions:

Money laundering: A process to enable criminals to obscure the proceeds of their crime and make them appear to originate from legitimate sources.
Terrorism financing: The act of providing funds to terrorists to carry out acts of terrorism. Terrorism seeks to influence, compel, or intimidate governments or the general public through threats, violence, or damage to property.
Proliferation financing: The risk of raising, moving or making available funds and assets for weapons of mass destruction, in contravention of national laws and international obligations.

The Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 (PSPMA) and its associated regulations were legislated to implement these measures.

Scope of PSPMA :

Regulated dealers: The PSPMA applies to regulated dealers who carry on or are intermediaries of regulated dealing. Regulated dealing includes the sale, purchase for resale, importation, manufacturing of precious stones, precious metals or precious products. Regulated dealers include bullion traders, jewellery wholesalers, retailers and second-hand goods dealers. Intermediaries include trading platforms. Dealers are required to be registered with the Registrar before commencing any regulated dealing.
- Precious metal: includes gold, silver, platinum and palladium with at least 2% in weight of any of the metals
- Precious product: Refers to a finished product that derives 50% or more of its value from a previous stone and/or metal, or is above the net price of $20,000.
- Securities contracts, derivative contracts and commodity contracts are not covered under the PSPMA, and are subject to other legislative regimes.
Foreign dealers: Foreign dealers include companies registered or incorporated outside of Singapore, and do not have a permanent establishment, place of management or branch in Singapore. A foreign dealer carrying on business on a transitory basis (i.e., less than 90 days in a calendar year) is exempt from registration. Foreign dealers are however required to comply with the regulatory requirements including customer due diligence, filing Cash Transaction Reports and Suspicious Transaction Reports as described below.
Temporary outlets: Dealers may set up temporary outlets at other locations such as booths at trade shows or shopping halls. These locations need not be registered if they are used for less than 90 days in a calendar year.

PSPM dealers are to take a risk-based approach towards AML/CFT/CPF risks. This requires PSPM dealers to identify and assess risks posed by customers and transactions in the course of their business, and implement steps to manage and mitigate these risks. An overview of these obligations is set out below:

Obligations	Description
Internal policies, procedures and controls (IPPC)	IPPC includes understanding and identifying risks including the product nature, value, the customer and its background, business and services provided, type of transactions, and delivery channels. The IPPC would also have to include procedures for the measures identified below. Where a regulated dealer has more branches and subsidiaries (located overseas and in Singapore), dealers must implement a group-level policy covering AML/CFT/CPF measures including sharing of information across entities. The stricter of the laws (across the jurisdictions) would be applicable to that branch / subsidiary where permissible.
Customer due diligence (CDD)	Customer due diligence refers to the process of obtaining and verifying a customer’s identifying information before transacting with them. CDD must be performed (a) before entering into a designated transaction; (b) where there is reason to suspect ML/TF/PF; and (c) where a dealer doubts the information obtained from earlier CDD measures. Enhanced CDD measures are required if a customer acts on behalf of a beneficial owner who is a politically-exposed person, linked to one, from a country with FATF notifications, or notified as high risk. The Ministry of Law has provided guidance of red flag indicators, including customer and supplier behaviour, transaction patterns, and the misuse of shell companies. The Ministry of Law has also provided sample CDD forms for reference and adaptation.
Additional measures for particular “designated transactions”	“Designated transactions” require additional AML/CFT/CPF measures to be undertaken, as described below. Under the PSPMA, this refers to a transaction conducted wholly or partly in Singapore where: The dealer sells a precious stone, precious metal or precious product and receives payment in cash or a cash equivalent exceeding $20,000 in total value. The dealer buys a precious stone, precious metal or precious product from a customer (who is not a regulated dealer) and pays the customer in cash or cash equivalent exceeding $20,000 in total value. Instances where a customer conducts multiple small transactions in a single day totalling over $20,000 would be considered a designated transaction.
Filing Cash Transaction Reports (CTR)	A regulated dealer must submit a CTR where a “designated transaction” is entered into.
Filing Suspicious Transaction Reports (STR)	A regulated dealer must submit an STR if there are suspicions that ML/FT/PF activities are committed. This includes situations when there is reason to suspect that the customer may be a terrorist. Where a person files an STR in good faith, he is not liable for any loss arising out of the disclosure or any act of omission in consequence of the disclosure.
Additional measures relating to targeted financial sanctions	A regulated dealer must take reasonable measures to assess whether the customer or the person they represent, is a terrorist or terrorist entity under the Terrorism (Suppression of Financing) Act, or a designated person regulated under the United Nations Act 2001. The Monetary Authority of Singapore publishes lists of such designated individuals and entities that regulated dealers should review.
Record keeping	A regulated dealer is required to keep records of relevant documents and information for 5 years after the date of transaction, such that a reconstruction of an individual transaction is possible. This includes information about the customer and transaction, the CDD measures undertaken for the transaction, and a 6-month record of the business and transaction activities of the regulated dealer.

Retail-centric legislation

Dealers who are looking to focus on retail consumers should take note of the following legislation.

Unfair Contract Terms Act 1977 (UCTA)

The UCTA imposes limits on the extent to which civil liability for breach of contract, or for negligence or other breach of duty, can be avoided by means of contract terms and otherwise.

Examples include:

A retailer cannot exclude or restrict his liability for negligence unless the term is assessed by the Singapore Court to be reasonable.
Where a retailer is dealing with a party who is a consumer or on written standard terms of business, unless the term is assessed by the Singapore Court to be reasonable, the retailer cannot:
- Exclude or restrict his liability in respect of the breach of contract; or
- Claim to be entitled to provide a substantially different contractual performance, or render no performance at all.

Consumer Protection (Fair Trading) Act 2003 (CPFTA)

The CPFTA protects consumers against unfair practices and gives consumers additional rights in respect of goods that do not conform to contract. For instance, an unfair practice includes making or doing anything that might cause a consumer to be misled, or making a false claim. In the event of non-conforming goods, consumers are also entitled to require a seller to replace or repair goods, reduce the amount to be paid, or rescind the contract.

Note: This article is intended to provide general information only and does not contain or convey any legal or other advice. Although we endeavour to ensure that the information contained herein is accurate, we do not warrant its accuracy or completeness or accept any liability for any loss or damage arising from any reliance thereon.

LEONG YI-MING is a partner in the Litigation & Dispute Resolution department of Allen & Gledhill LLP. Yi-Ming’s practice focuses on complex commercial disputes in litigation and arbitration with particular specialisation in crossborder and intellectual property disputes. Her broad experience covers areas of company and shareholder disputes, equity and trusts, cryptocurrency and technology disputes, regulatory breaches and corporate governance.