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The Monetary Authority of Singapore (MAS) has proposed new amendments to the Payment Services Regulations 2019 in a bid to streamline the country’s rules for payment firms.
The proposed changes aim to align Singapore's payment service regulations with those of the Financial Action Task Force's (FATF) Standards, while strengthening the security and competitiveness of the payments sector.
The proposed amendments cover a range of aspects of payment services, including licensing and registration requirements, enhanced customer due diligence and stronger anti-money laundering and counter-terrorism financing (AML/CTF) controls.
The amendments also aim to clarify the scope of regulated activities, expand the regulations to new areas such as “digital payment token” (DPT) services, and introduce new requirements for recordkeeping, reporting and risk management.
The MAS is seeking feedback from financial institutions (FIs) on the proposed amendments before the consultation period ends on June 7, 2023.
Streamlining obligations
The first aim of the proposed amendments is to lighten the compliance burden on firms that provide payment services through Singapore but who are not necessarily serving payers or payees within Singapore.
For example, a proposed amendment to Section 23 of the Payment Services Act would exempt certain firms from “safeguarding” obligations in transactions where both the payer and payee are foreign persons.
This exemption would apply to “major payment institutions (MPIs) ” — a designation under Singapore law — in transactions where the relevant money is not “accepted or received” by the MPI.
In other words, in transactions where the MPI’s role is one of arranging for the transmission of money from a person in one country to another, whether as a principal or an agent.
“This is in line with the current approach of not requiring MPIs to safeguard funds of foreign persons to whom they provide merchant acquisition services and e-money issuance services,” the MAS added.
Uniform AML/CTF controls
The amendments also propose that payment service providers (PSPs) that are incorporated in Singapore must develop and implement group-wide AML/CTF controls.
As noted by the MAS, these should include policies and procedures for sharing information required for customer due diligence and ML/TF risk management within the group.
If a PSP has a branch or subsidiary in a host country or jurisdiction known to have “inadequate” AML/CTF measures, based on FATF Standards, the amendments would require that the group policy becomes the new policy of that branch or subsidiary.
Similarly, if the AML/CTF requirements in the host country or jurisdiction differ from those in Singapore, the higher of the two standards should be applied as the policy of the group.
“These requirements are currently imposed on other financial institutions, such as banks, capital markets intermediaries and life insurance companies,” said the MAS.
The proposals are expected to ensure a “consistent and effective” approach to identifying and managing group-wide AML/CTF risks to which PSPs may be exposed.
Person-to-merchants wires go free
In line with FATF Standards, the amendments also propose a new exemption for wire transfers related to the purchase of goods and services.
Specifically, the MAS proposes to exclude wire transfers from ML/TF requirements that flow from a transaction carried out using a charge card, credit card, debit card, prepaid card or electronic wallet for the purchase of goods or services.
As proposed, the exemption would apply as long as both the charge card, credit card, debit card, prepaid card or electronic wallet number and the name of the issuer — collectively known as the “payment information” — accompany the transactions.
“The payment information would allow the funds to be traced through the transfer to the originator and beneficiary more easily, if needed,” said the MAS.
“To be clear, the exclusion does not apply when a charge card, credit card, debit card, prepaid card or electronic wallet is used as a payment system to effect a person-to-person wire transfer.”
More data helps MAS
In another of the proposed amendments, the MAS would require PSPs to expand their data collection capabilities to “augment” MAS surveillance efforts for AML/CTF purposes.
For example, additional data relating to a PSP’s number of higher-risk customers, their transaction value and volume and account statistics are proposed to be collected. The MAS said such data will enhance its monitoring of the ML/TF risk profile of licensees.
The MAS also wants financial institutions to report additional data on their exposure to anonymity-enhancing technologies that can be used to obfuscate the identities of senders or recipients of digital payment tokens.
As covered by VIXIO, these technologies came to prominence in August last year, when the US Treasury sanctioned Tornado Cash, a popular virtual currency “mixer”, due to its use in crypto-based money laundering.
This amendment would come into force six months after the amended Payment Services Act comes into force, to give PSPs time to comply.
Tidying up payment service disclosures
Finally, the MAS has proposed new amendments covering general conduct and disclosure requirements for PSPs.
These include disclosures of exchange rates and fees, where applicable, and contractual information related to cross-border payments.
The MAS also proposes to give certain firms a six-month exemption from these amendments, to prepare their compliance needs.
These firms would include those that are newly regulated under the Payment Services Act, and those that are currently licensed under the Payment Services Act but who have to vary their licence to comply with the new amendments.
This could apply to firms that provide domestic money transfer services, cross-border money transfer services and/or digital payment token services.
