Singapore to Boost FTZ Regulations to Combat Illicit Flows

Singapore is making amendments to its Free Trade Zones Act to enhance regulation and control of goods that flow through the 10 free trade zones (FTZs) in the country.

The amendments include introducing a licensing regime on FTZ operators, new regulations on cargo handlers and more enforcement powers for customs authorities, Senior Minister of State for Finance Chee Hong Tat said.

FTZs are designated areas where goods can be stored, handled and distributed without being subject to customs duties or taxes. They play a vital role in strengthening Singapore’s position as the world’s largest transhipment hub.

Mr Chee said the changes are necessary amid growing concerns that FTZs are being ‘misused for illicit activities such as weapons proliferation, environmental crimes and trade-based money laundering’.

He added that perpetrators try to mask such illegal activities as legitimate trade. Examples include providing false or inaccurate information on a cargo shipment or by swapping legitimate goods with contraband before re-exporting.

As many FTZ operators are now private entities, Mr Chee said introducing a new licensing regime requiring them to go through an approval process is appropriate, as this will ensure that only those who meet the requirements are awarded licences.

While cargo handlers and agents do not have to apply for licences, the proposed amendments seek to regulate and clearly lay out their responsibilities, which include monitoring and managing the movement of goods at their premises.

They will also need to provide data on all goods passing through Singapore. Currently, only information on imported, exported or controlled goods is required. Mr Chee said this will enable better visibility of goods going through the country.

The amendments proposed also seek to enhance the enforcement powers of customs authorities. This includes allowing the Director-General of Customs to grant, renew, suspend or revoke licences, order the removal of dangerous goods, and detain goods for inspection.

Mr Chee emphasised, however, that ‘the proposed amendments seek to strike the right balance between better governance and preserving our pro- business environment’.

According to Michael Eads and Sarah Smiley of Sovereign Border Solutions, while strengthening regulatory authorities’ roles and empowering them to enforce regulations may indeed be a first step to better address illicit trade flows from FTZs, secure marking and track and trace technologies can also play a much larger role in countering these flows.

It will therefore be interesting to see whether Singapore – as the world’s largest transhipment hub – will eventually consider introducing such technologies to further enhance its visibility over what goes on in its FTZs.