This Bill amends the Financial Services and Markets Act in two areas. My party colleagues, Kenneth Tiong and Jamus Lim, have focused on the proposed total loss absorbing capacity requirements. For my part, I will speak on the amendments relating to countering proliferation financing.
These amendments are short and simple. Clauses 5, 6 and 7 expand MAS’ current powers to issue directions for the prevention of money laundering and terrorism financing, as well as to provide assistance to foreign and domestic agencies, by permitting the MAS to do the same for proliferation financing. These amendments are supportable insofar as they make it explicit that countering proliferation financing is as important as countering money laundering and terrorism financing. However, I have three queries that I would like to seek the Minister’s clarifications on.
First, on the definition of “proliferation financing”. Clause 2 of the Bill simply states that proliferation financing means “the financing of the proliferation of weapons of mass destruction”. This definition appears to be different from the definitions used in UN Security Council Resolutions on the subject, such as Resolution 1540. Such resolutions talk about proliferation to refer to not just the weapons themselves but their means of delivery, such as ballistic missiles, cruise missiles, strategic aircraft and unmanned aerial vehicles. Clearly, weapons would be useless if they cannot be effectively delivered, which makes the control of such means of delivery equally important. Could the Minister clarify why the definition of proliferation financing omits the mention of means of delivery? Is it the government’s intention to also curtail financing of such means of delivery?
While I have just queried whether the definition of proliferation financing is incomplete, a second observation I would make is that it is, in another sense, very broad. To that end, it is useful to clarify what the scope of our obligations towards countering proliferation financing is. The Financial Action Task Force (FATF)’s Recommendation 7 on this issue merely requires “countries to implement proliferation financing-related Targeted Financial Sanctions made under UN Security Council Resolutions”. Currently, the UNSC resolutions on proliferation are focused on North Korea (DPRK) and Iran. However, there are other established nuclear powers, which do not come under UNSC sanctions. By leaving the definition broad without scoping it to UN sanctioned countries, is the intention to possibly impose on the financial sector obligations beyond the UNSC sanctioned countries?
The third query is an overarching one – what is the real impact of the counter proliferation amendments in the Bill? Put another way, does it change anything? At first glance, the amendments may give the impression that this Bill is needed because the MAS did not have regulatory powers to prevent proliferation financing, unlike for money laundering or terrorism financing. However, after some research, I realise that MAS had previously issued directions on proliferation financing, by defining it as a subset of money laundering. For example, in MAS Notice 626 and Notice PSN02, banks and digital payment token service providers would have observed footnotes stating that references to money laundering would include proliferation financing.
I am therefore unsure why the Bill’s counter-proliferation financing provisions are before the House today, given that MAS has been issuing directions to that effect already. Could the Minister please elaborate on what additional powers it grants that the MAS does not already have? Or are the amendments meant to simply send a signal that the government is as serious about countering proliferation financing as it is about curtailing money laundering and terrorism financing?
Lastly, Sir, I would like to conclude my speech by reflecting on FATF’s latest mutual evaluation report issued this year regarding Singapore’s counter-proliferation efforts. I had filed a Parliamentary Question in July on this subject. FATF was quick to point out that Singapore was vulnerable to proliferation financing due to several factors – its geographical position, its status as an International Financial Centre, and the fact that it was a hub for trade, transport, maritime and virtual assets.
Among FATF’s observations was that even among the “competent authorities” in Singapore, there was an uneven understanding of the risks of breaches and evasion of proliferation financing sanction obligations; it was observed that the MAS, Commercial Affairs Department and Ministry of Foreign Affairs appeared more au fait with the subject than other agencies.
FATF’s overall conclusion was that Singapore had a strong legal framework for targeted financial sanctions relating to proliferation financing. Where we fell short, however, was in terms of supervisory coverage, or in other words, how the agencies used the supervisory and enforcement powers they already have. The report also highlighted the risk posed by the maritime sector: representation offices of some foreign flag states had low awareness of the counter-proliferation financing risk obligations, while Singapore’s own risk assessment acknowledges that ship-to-ship transfers are a key risk. There was a further observation that the penalties for failing to comply with these obligations are, quote, “relatively low and cannot be considered proportionate and dissuasive in all cases”. Unquote.
Sir, it is my impression that many of FATF’s concerns about proliferation financing in Singapore are not addressed by the Bill and remain work in progress. I do not dismiss the size of the task ahead. That said, the Bill does signal the criticality of tackling proliferation financing, and I support it.
