Money laundering and terrorism financing: Areas needing further study identified

A report on money laundering and terrorist financing risks in the country identified virtual currencies, precious stones and metals dealers, and the Singapore Freeport, as emerging areas for further study to determine whether any mitigating measures are needed


In January, three government agencies – Ministry of Home Affairs, Ministry of Finance and Monetary Authority of Singapore (MAS), published the inaugural national risk assessment (NRA) report on money laundering and terrorist financing (MLTF) risks covering over 14 financial sub-sectors and eight non-financial sectors in the country.

Acknowledging that “Singapore's openness as an international transport hub and financial centre exposes it to inherent cross-border money laundering and terrorist financing risks”, the report authors noted “a number of sectors where controls are relatively less robust”. These include remittance agents, money-changers, internet-based stored value facility holders, corporate service providers and pawnbrokers.

Furthermore, the government has identified three key areas - virtual currencies, precious stones and metals dealers, and the Singapore Freeport; to study and review best international practices and determine whether any mitigating measures are needed to prevent any MLTF activities via these channels.  


Detailing the risk assessment of the financial sector, the report noted that virtual currencies such as bitcoins and precious metal-backed digital currencies are gaining popularity in the online world. Thus, there is some risks associated with these due to their “anonymity, cross-border nature and low transaction costs”. These virtual currencies are transferred electronically between users facilitated by virtual currency exchanges and are not usually denominated in fiat currencies.

MAS is closely monitoring developments in this area and will consider the need for regulation if necessary,” the report added. 

Precious stones

In the non-financial sectors, the report noted that as precious stones and metal dealers sector in Singapore is varied and segmented, and without a specific regulatory body, the MLTF risks associated with it “will have to be analysed further”.

Based on preliminary feedback from the industry, most transactions are geared towards personal consumption rather than for trading purposes. Nonetheless, we have noted instances where Singapore had hosted diamond trade shows, and there could be some plans to grow the precious metals industry,” said the report, adding, “While there are international typologies on the use of precious stones and metals as a tool to launder money, particularly as a store-of-value to move illicit proceeds easily, there have been very few cases of ML and no case of TF involving this sector to date.”

The Singapore Freeport

Similar is the case for Singapore Freeport (SF). The SF licensees are awarded under the TradeFIRST framework and their licenses are re-assessed periodically by the Singapore Customs.

The licensees are also subject to domestic anti-money laundering and countering the financing of terrorism (AML/CFT) laws and regulations, and are mandated to detect and report suspicious transactions to Suspicious Transaction Reporting Office (STRO).

The Singapore Freeport, opened in May 2010, is a secured storage facility for high-value collectibles, such as art pieces, wine, and precious metals. Long-term storage and trade of high-value collectibles brought in from outside Singapore, are carried out within the

Singapore Freeport without attracting any duties or Goods and Services Tax. The Singapore Freeport is within Singapore’s customs territory and is not a free trade zone.

Courtesy: Singapore's inaugural NRA report

The government assured that it takes a “serious view of illegal activities in its financial sector and economy” and the NRA report will help in maintaining an “effective risk-based regime” to combat MLTF activities and allocate public sector resources efficiently. The private sector, in turn, can also better understand MLTF risks in their related industries and strengthen measures whenever necessary, the authors concluded.


Please click here to read Newzzit's earlier story on 'Terrorism financing to cost the same as money laundering in Singapore'.