MAS has proposed amendments will align the Payment Services Act with the most recent enhancements to the FATF Standards in relation to virtual asset service providers.
MAS (Monetary Authority of Singapore) has issued a consultation paper on proposed amendments to the Payment Services Act 2019 in relation to AML/CFT and other matters.
The Payment Services Act 2019 will commence on 28 January 2020, applying AML/CFT measures to all three classes of payment service providers: holders of a money-changing licence, standard payment institutions, and major payment institutions.
The respective AML/CFT Notices will apply to all payment service providers providing any of the following payment services: account issuance, domestic money transfer, cross-border money transfer, money-changing, DPT (digital payment token).
The new amendments follow a June consultation on the new AML/CFT Notices to be issued under the MAS Act that would apply to payment service providers. The final notices to be amended are available here and here.
The amendments will align Singapore’s new framework with the most recent enhancements to the FATF Standards in relation to VASPs (virtual asset service providers). In this regard, MAS considers that DPT transactions carry higher inherent money laundering and terrorism financing risks due to their anonymity, speed and cross-border nature.
In addition, MAS seeks views on a proposed expansion of the regulatory scope for cross-border money transfer services, in light of business models that facilitate the “brokering” of remittance transactions between entities in two different countries, without actually accepting or receiving any funds in Singapore.
MAS proposes to expand the regulatory scope of the Payment Services Act to include the following DPT service provider activities for the purposes for addressing AML/CFT risks:
- Transfer of DPTs, which could be used by bad actors to move or layer the proceeds of illicit assets. MAS will expand the definition of DPT services to include any service that accepts DPTs for the purposes of transferring them to another address or account, or arranging such a transfer, whether inside or outside Singapore.
- Provision of stand-alone custodian wallets for DPTs, which could be used to safekeep illicit assets or assets for illicit actors or act as an additional layer or front. DPT exchanges that offer custodial wallet services are already subject to AML/CFT requirements under the Act, but not stand-alone custodian wallets. MAS will expand the definition of DPT services to include the service of safeguarding or administration of a DPT or DPT instrument where the service provider has control over it.
- Brokering of DPT transactions, which under the current framework are not in scope unless the service provider comes into possession of money or DPTs. MAS will expand the definition of DPT services to include services that allow buying and selling of DPTs even where the service provider does not come into possession of money or DPTs in the exchange.
- Brokering of cross-border money transfer services, which under the current framework are not in scope unless monies are accepted or received in Singapore by the service provider. MAS will expand the definition of “cross-border money transfer service” to include situations where service providers do not accept or receive moniess in Singapore, but nonetheless provide services to
arrange for the transmission of money from one country or territory to another.
- Singapore-incorporated entities providing DPT services outside Singapore, which could be used to circumvent regulation. MAS will introduce a new class of FIs that are created in
Singapore but provide VASP services outside of Singapore. The provisions will be set out in a separate Act and consulted upon at a later stage.
MAS also proposes to make other amendments in respect of DPT services and certain technical amendments in the Act, including:
- New powers allowing MAS to impose user protection measures on certain DPT service providers that are suitable to ensure the safekeeping of customer assets, when necessary. MAS will be able to impose anti-comingling measures, requirements to ring-fence customer assets, and prescribe a proportion of customers’ or the licensee’s own assets that must be held in cold wallets (vs hot wallets).
- New powers allowing MAS to impose restrictions on certain DPT service providers by way of subsidiary legislation, in order that it may respond to market developments quickly and safeguard financial stability, the efficacy of monetary policy, or the public.
- Amendments to the scope of domestic money transfer service to also include situations where either the payer or the payee is a financial institution, and offer consumers protection for more types of payment transactions.