1 Minister for Transport, Mr Ong Ye Kung, on behalf of Senior Minister and Minister-in-charge of the Monetary Authority of Singapore (“MAS”), Mr Tharman Shanmugaratnam, today moved the Payment Services (Amendment) Bill (“the Bill”) for First Reading in Parliament.
2 MAS currently regulates the provision of payment services under the Payment Services Act 2019 (“PS Act”). Providers of such payment services are required to hold a licence and comply with requirements that are calibrated according to the risks that specific payment services and business models pose. These include requirements to mitigate key risks and concerns relating to money laundering and terrorist financing (“ML/TF”), loss of money owed to consumers or merchants due to insolvency, fragmentation and limitations to interoperability, and technology and cyber risks.
3 MAS is introducing legislative amendments to the PS Act to implement the enhanced international standards adopted by the Financial Action Task Force (“FATF”) in June 2019 that are aimed at addressing the ML/TF risks posed by virtual asset service providers (“VASPs”) that are not already regulated as financial institutions. The speed, anonymity and cross-border nature of VASP activities make them inherently more vulnerable to ML/TF risks. MAS also intends to amend the PS Act to mitigate the ML/TF risks arising from certain cross-border business models that have surfaced.
4 Aside from amendments related to anti-money laundering and countering terrorist financing (“AML/CFT”), MAS proposes to introduce powers to impose measures on digital payment token (“DPT”) service providers and make other miscellaneous amendments to the PS Act.
5 MAS has consulted the industry and public in December 2019 on the policy changes and draft legislative amendments. Respondents were generally supportive of the proposals, and MAS has incorporated the feedback into the Bill where appropriate.
KEY AMENDMENTS IN THE BILL
(I) Enhancing the Regulatory Framework for VASPs
6 The FATF adopted enhanced standards for VASPs in June 2019 and requires countries to regulate VASPs for AML/CFT. To align Singapore’s regime with the enhanced FATF standards applicable to DPT service providers, the Bill will expand the definition of DPT service in the PS Act to include the following services:
(a) Transfer of DPTs;
(b) Provision of custodian wallet services for DPTs; and
(c) Facilitating the exchange of DPTs without possession of moneys or DPTs by the DPT service provider.
7 Consistent with the assessment of the FATF, MAS recognises that these activities carry ML/TF risks and should be regulated for AML/CFT. For instance, entities that carry on a business in Singapore of providing such services could be exploited by criminals to move or layer the proceeds of illicit assets by transferring value in the form of DPTs from one person to another, or to safekeep illicit assets and act as an additional layer or front.
8 Consequently, we intend to amend the PS Act such that a DPT service provider that provides any of the above services here will need to be licensed under the PS Act and be subject to MAS’ AML/CFT regulations. The PS Act as currently drafted already regulates the service of dealing in DPTs and facilitating the exchange for DPTs where the DPT service provider comes into possession of moneys or DPTs.
(II) Mitigating ML/TF risks arising from certain business models
9 The Bill will broaden the definition of cross-border money transfer service to cover a service provider that actively facilitates cross-border money transfers between entities in different countries although moneys are not accepted or received in Singapore. This is in view of the ML/TF and reputational risks that such activities may present, similar to services that are already regulated under the PS Act. A cross-border money transfer service provider which carries on a business in Singapore of providing such services will need to be licensed and subject to MAS’ AML/CFT regulations.
(III) Including powers to enable MAS to impose measures on DPT service providers
10 MAS currently regulates DPT service providers primarily for ML/TF risks. Nonetheless, MAS recognises that the DPT sector continues to evolve and the development of new DPTs, including stablecoins, could lead to user adoption of some DPTs gaining traction quickly. To ensure that MAS is equipped to implement appropriate measures to mitigate new risks in a timely manner, the Bill will provide MAS with new powers to impose:
(a) User protection measures on certain DPT service providers to ensure the safekeeping of customer assets held by the DPT service provider, where necessary; and
(b) Measures on certain DPT service providers where it is in MAS’ view necessary or expedient in the interest of the public or a section of the public, the stability of the financial system in Singapore, or the monetary policy of MAS.
(IV) Other miscellaneous amendments to the PS Act
11 The Bill will introduce the following other amendments:
(a) Allow MAS to prescribe additional licensees or classes of licensees in respect of certain payment services that must safeguard customer money;
(b) Broaden the scope of domestic money transfer service to include situations where either the payer or the payee is a financial institution; and
(c) Provide that the general duty to use reasonable care not to provide false information to MAS applies to all persons, whether or not the person is an individual.