German Supply Chain Law: Monitoring employment practices and environmental issues in Singapore


last updated on 5 May 2022 | reading time approx. 4 minutes

Which risks occur along supply chains in Singapore?

There can be risks due to unstable political conditions of a country, especially countries where the direct suppliers and indirect suppliers are located in the region. Further, due to the Covid-19 situation in the last two years, there have been shortage of manpower which has affected many industries, including the construction industry and industries which have heavily depended on manufacturing capabilities of countries in the region.

Risk of Regulatory Non-compliance with Corruption

According to the Transparency International Corruption Perceptions Index 2020, Singapore is amongst the top 5 least corrupt countries in the world. This is due to numerous safeguards and rigorous audit controls. Private sector cases form the majority of corruption cases. In the context of supply chain management, the difficulty would be with ensuring that the direct suppliers and indirect suppliers located in the region comply with their own jurisdiction's anti-bribery legislation.

Risk of Money-laundering

The risk of money-laundering and terrorist financing is the highest in the financial industry. Hence, financial institutions in Singapore have to comply with anti-money laundering measures imposed on them by the Monetary Authority of Singapore (“MAS”). Since 2019, about 51 mio. US-Dollar transferred through suspicious accounts in Singapore have been intercepted by government authorities.

Another area where there is a risk of money laundering and terrorist financing is the area of illegitimate trade. Logistics providers and freight forwarders dealing with strategic goods or strategic goods technology are at risk of illicit movement of items passing through the Singapore ports.

Which industries appear particularly vulnerable to adverse impacts of human/labor rights or environmental issues in your jurisdiction?

Human/labor rights issues are concentrated in industrial sectors such as construction, shipbuilding and repair, conservancy, and household work, as well as in manufacturing and services sectors. Foreign migrant workers in these sectors are sometimes subject to labor rights exploitation such as debts owed to recruitment agencies, the non-payment of salary, movement restrictions and the withholding of passports.

Environmental issues include industrial pollution, limited freshwater resources, seasonal haze and waste disposal. Industries that are at risk of industrial pollution include the manufacturing industries. According to the Climate Action Tracker, Singapore’s climate policies and commitments reflect minimal action and are not consistent with the Paris Agreement. As part of its overall strategy to reduce emissions, Singapore launched Southeast Asia’s first carbon tax on 1 January 2019.

Is there any legislation in Singapore jurisdiction which addresses these risks? To what extent is it enforced in practice?

Risk of Regulatory Non-compliance with Corruption

The key anti-corruption legislation includes the Penal Code, Cap. 224, the Prevention of Corruption Act, Cap. 241 and the Corruption, Drug Trafficking and other Serious Crimes (Confiscation of Benefits) Act, Cap. 65A. Corruption cases are dealt with seriously in Singapore, hence the risk of such non-compliance with anti-corruption legislation is low in the country. The punishment for corruption is a fine of up to 100,000 Singapore Dollar, or to a jail term of up to seven years or both.

Risk of Money-laundering

The Financial Action Task Force (“FATF”), of which Singapore has been a member since 1992, recently completed an assessment of the implementation of anti-money laundering and counter-terrorist financing (AML/CFT) standards in Singapore. Singapore is deemed to be compliant with FATF standards since it has taken a number of actions to strengthen its AML/CFT framework since the 2016 FATF evaluation.

The AML/CFT framework is mostly implemented by MAS and the Suspicious Transaction Reporting Office. Legislation forming part of the AML/CFT framework is in the form of various guidelines that financial institutions (such as banks, insurance companies, financial advisers, and fund management companies) are statutorily bound to comply with. Compliance with AMF/CFT guidelines have also been extended to the incorporation of companies in Singapore.

Regarding illicit trade that may facilitate money laundering and terrorism efforts, there is the Strategic Goods (Control) Act, Cap 300 and its subsidiary legislation. The Zero-GST Warehouse Scheme is administered by the Singapore Customs for companies who wish to suspend Goods and Services Tax (“GST”) on their imported non-dutiable goods. To mitigate the risk of zero-GST warehouses being used for money laundering and terrorist financing activities, zero-GST warehouse licensees storing listed goods must, amongst other things, seek Singapore Custom's approval in writing to store listed goods, conduct screening, maintain, and update screening records of customers depositing the goods and owners of the goods.

Risks of Human/Labour Rights Issues

Singapore has a number of laws in place to protect low-skilled migrant workers, including the Employment Act, the Employment of Foreign Manpower Act, the Foreign Employee Dormitories Act, the Employment Agencies Act, the Workplace Safety and Health Act and the Work Injury Compensation Act. However, these laws are sometimes lacking in practical application.

Risk of Pollution of the Environment

The National Environment Agency is the regulator for environment and public health. It also oversees and regulates companies that discharge hazardous waste, chemicals and which cause pollution to the environment.

Singapore ratified the Minamata Convention on Mercury on 22 September 2017 and it came into force on 21 December 2017. This global treaty protects human health and the environment from adverse effects of mercury.

Singapore also ratified the Stockholm Convention Protecting human health and the environment from persistent organic pollutants on 24 May 2005, which came into force on 22 August 2005.

Can you provide a case example (e.g. taken from local media coverage) in which a foreign or local company had to deal with such adverse impacts?

In 2017, the Government prohibited foreign companies (such as Airbnb, Apple, Facebook, Goldman Sachs Singapore, Google Asia Pacific, Microsoft, NBC Universal, Salesforce, Twitter Asia, Uber Singapore) to continue to sponsor or participate in the annual Pink Dot Sg event which promotes an acceptance of the Lesbian, Gay, Bisexual and Transgender community in Singapore – stating that foreign entities should not fund, support, or influence events that relate to domestic issues, especially political issues or controversial social issues with political overtones.

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