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Singapore’s Ministry of Home Affairs (MHA) has announced plans to introduce a Protection From Scams Bill intended to safeguard individuals at risk from online fraud. Published on August 30, the bill is designed to empower Singapore’s police to issue so-called restriction orders (ROs) to banks.
The legislation is highly interventionist, and will allow banks to temporarily restrict banking transactions for individuals who are targets of ongoing scams but refuse to believe they are being deceived.
As it it is currently at consultation stage, it is unknown how quickly these compliance requirements will be enacted. However, there is a chance that an update could come in November during the Singapore Fintech Festival, as this is when Singapore has precedence for making announcements on financial regulation. This was when the Shared Responsibility Framework was unveiled last year, and in previous years regulatory changes such as for stablecoins.
The bigger picture
Fraud has evolved in recent years, and many criminals are preying on the vulnerable by persuading them to make significant transactions. Often, by the time that the scam has been undertaken, it is very hard to get the money back.
Jurisdictions including the UK, EU and Australia are overhauling their fraud reimbursement rules, and Singapore is no different.
Since 2022, banks in Singapore have implemented various measures to protect customers from scams, including the "kill-switch", which allows customers to freeze their accounts if they suspect fraud, and "money lock", where funds can be set aside and protected from online transfers.
Despite these safeguards, the incidence of scams involving victims voluntarily transferring money to fraudsters remains high.
In the first half of 2024, according to the MHA, 86 percent of reported scams in the city-state involved authorised push payment (APP) scams, whereby victims were manipulated into willingly giving money to scammers.
Often, these individuals were warned by the authorities such as the police and banks, as well as family members, about the potential scam risk, but chose to proceed with the transactions anyway.
Currently, the police lack the authority to stop these transactions if the victim insists on making them. The proposed Protection From Scams Bill aims to fill this gap by granting the police the authority to issue ROs in specific circumstances.
These ROs would allow banks to suspend certain transactions and credit facilities to prevent further financial losses.
They will be applicable only to scams conducted entirely through digital or telecommunication channels, such as online communications or phone calls, where there has been no in-person interaction.
Cases involving face-to-face interactions, meanwhile, such as disputes with contractors or family members, will not be covered by this legislation, with the MHA stating that these situations often do not immediately disclose a criminal offence, rendering police intervention unnecessary or impractical.
Why should you care?
Although the rules currently are set to only apply to banks operating in the country, it seems likely that this will expand.
For example, the country’s Shared Responsibility Framework, which is set to outline the share of scam losses between financial institutions, telecoms and consumers, is due to apply to payment institutions.
Meanwhile, the country’s Fair Dealing guidelines have also been recently expanded to cover payments and other financial services firms operating in the country, whereby they had previously been exempt.
The regulatory change does, for now, bring benefits for financial institutions that will be granted these rights.
For example, the ability to restrict transactions for scam targets enhances security, reducing fraud-related losses and improving safety for both banks and their customers.
By actively preventing fraud, banks can build trust, demonstrating a commitment to customer protection.
The legislation also provides a clear compliance framework, potentially reducing legal liability and minimising costs associated with fraud recovery and investigation.
However, the legislation is not without risks for financial institutions in Singapore, and it certainly goes further than legislation in other jurisdictions taking on the issue of scams, like the UK.
Restricting transactions, even with good intentions, could lead to customer dissatisfaction and disputes, potentially harming relations.
No bank wants to receive bad press, and overuse of this mechanism could negatively affect a bank's reputation, leading to a loss of customers.
