A jeweller is fined US$26,000 for failing to perform customer due diligence [CDD]

First, a jeweller in SINGAPORE has been fined S$35,000 (US$26,000) for failing to perform customer due diligence required to combat money laundering.

Kim Heng Jewellers and Goldsmiths admitted on Tuesday (Nov 19) to selling gold products worth more than S$313,000 without doing the necessary checks, despite having reason to suspect money laundering.

More than S$140,000 came from funds swindled from two malware scam victims.

Kim Heng pleaded guilty to one charge of failing to perform customer due diligence. Two similar charges were considered in sentencing.

This is the first prosecution under Section 16 of the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act.

The Act was enacted in 2019 to introduce sector-specific supervisory and regulatory measures in line with Singapore's broader anti-money laundering and counter-terrorism financing framework.

The law was recently strengthened through legislative amendments in February.

The court heard that Kim Heng, located at People's Park Complex in Chinatown, was registered in 1971 and is a regulated dealer of precious stones and metals.

EMPLOYEES NOT TRAINED IN DUE DILIGENCE

On Oct 21, 2019, the Ministry of Law hosted a briefing on the anti-money laundering and countering terrorism financing framework for regulated dealers in the sector.

A part-time accountant employed by Kim Heng attended this briefing and then shared what she learnt with Kim Heng's owner, Henry Ho Kwang Hah and other employees.

Deputy Public Prosecutor Thaddeus Tan said that Mr Ho and his employees were, therefore, aware of their regulatory duties. Mr Ho was also aware of the risk of foreign nationals laundering money by buying gold.

Despite this, no training was provided to Kim Heng's employees to carry out customer due diligence.

The prosecutor said Mr Ho passed materials from the briefing to his workers, but as he just instructed them to look through the materials, they did not study them in depth.

Mr Ho only verbally instructed his employees to take down the particulars of customers entering into cash transactions worth S$20,000 and above, Mr Tan added.

Under the rules, a regulated dealer was supposed to obtain the customer's information and verify the customer's identity using sources like an identity card or passport.

The dealer also had to ask whether the customer owned the cash used to pay for the transaction and, if not, verify the identity of the cash owner, among other measures.

UNIDENTIFIED CUSTOMERS BUY GOLD

On Sep 15, 2023, an older woman wearing a face mask visited Kim Heng and said she wanted to buy 200g to 300g of gold for her son.

An employee, Ms Kang Yit Hooi, showed her several pieces of gold jewellery. The woman took photos of the jewellery and purportedly sent them to her son over the phone.

The woman then told Ms Kang she wanted to buy a gold rope chain worth S$28,000 and would pay through PayNow.

When Ms Kang processed the payment, she noticed that the payor was an entity called Globe Eximport, which had a unique entity number.

Mr Tan told the court that this was a compromised corporate account.

He said that Ms Kang had reason to suspect money laundering, given the large transaction amount and the corporate identity of the payor, when the customer and the person who purportedly instructed the customer to buy gold were both natural persons.

However, Ms Kang needed to perform the required customer due diligence.

The next day, the older woman's supposed son contacted Ms Kang on WhatsApp and said he wanted to buy more gold.

When Ms Kang said she was not working and that her colleagues may not be able to attend to him, he insisted that he needed to buy gold that day and that his supposed mother would pick up the purchases.

Ms Kang referred the customers to her colleague, Ms Sheila Lo Mohd Miza.

The older woman returned to the shop later that day, and Ms Lo showed her several pieces of jewellery. She bought six gold chains and a gold pendant worth S$173,295.

When the woman paid through PAYNOW, Ms Lo also noticed that the payor was GLOBE EXIMPORT and had reason to suspect money laundering, said Mr Tan.

"At the time, (Ms Lo's) concern was to ensure that the transaction went through and that the accused did not get cheated.

"(Ms Kang) did not ask any questions either for fear of getting scolded by (the two customers) and losing their business," said the prosecutor.

On Oct 2, 2023, the supposed son contacted Ms Kang again to buy a gold bar and chain valued at S$112,332.

When Ms Kang was conducting the transaction, the man repeatedly pestered her to process the payments more quickly. Once again, she did not conduct due diligence checks.

The man contacted Ms Kang again on Oct 3, 2023, to buy more gold, and his supposed mother went to the shop to collect the purchases again.

But this time, Mr Ho asked the older woman for her identity card. The woman said she had to use the restroom and left the shop without returning.

The identities of the older woman and the man – the purported mother and son – have yet to be established.

The matter came to light after reports were lodged over the malware scams.

NO "WEAK LINK" IN THE FIGHT AGAINST MONEY LAUNDERING

The prosecution sought a fine of S$38,500 to S$45,500. Under the Act, a fine of up to S$100,000 can be imposed for not performing customer due diligence.

Mr Tan said a "strong message" must be sent to regulated dealers, and failure to do so would lead to future exploitation of the precious stones and metal dealers sector.

He added that the government relies on stakeholders to conduct the necessary checks, given the voluminous daily transactions carried out by the sector in Singapore.

Defence lawyer Kelvin Lim said Kim Heng's staff searched for GLOBAL EXIMPORTER and saw that the company had been incorporated for several years. The retailer, therefore, proceeded with the transaction.

However, Principal District Judge Toh Han Li interrupted to say that it could not be "business as usual" as the regulations imposed a specific due diligence standard.

He said that searching for GLOBAL EXIMPORTER did not establish a link between the payor and the two customers who contacted the shop.

Mr Lim went on to add that his client was "also a victim exploited by a customer ... and they were unknowingly used as a pawn".

In sentencing, Judge Toh said he considered Kim Heng's cooperation with the investigation and early plea of guilt.

He added that the scam situation in Singapore has escalated since the Act was enacted in 2019.

He said the purpose of the due diligence measures is to ensure a dealer's employees ask the right questions and get the relevant information the moment they are put on notice.

"We don't want the dealers to be the weak link in the fight against money laundering," said the judge.

Source:

https://www.channelnewsasia.com/singapore/money-laundering-gold-jewellery-customer-due-diligence-check-4756066