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Issue #1: 2021 | PAYMENT SERVICES (AMENDMENT) BILL

Updated: Apr 12

12 January 2021 Bill passed to tighten regulations on Virtual Asset Service Providers (“VASPs”).

Background


On 4 January 2021, the Singapore Parliament passed the Payment Services (Amendment) Bill to broaden the scope of the Payment Services Act 2019 (“PSA”) which came into force on 28 January 2020. The new Bill seeks to implement the enhanced international standards adopted by the Financial Action Task Force (“FATF”) in June 2019. The enhanced standards are aimed at addressing the money laundering and terrorist financing (“ML/TF”) risks posed by VASPs that are not already regulated as financial institutions.


The Monetary Authority of Singapore (“MAS”) takes the view that the speed, anonymity and cross-border nature of VASP activities make them inherently more vulnerable to ML/TF risks. After conducting a public consultation in December 2019 on the proposed changes, the Payment Services (Amendment) Bill was read for the first time in Parliament on 2 November 2020 and passed upon its second reading on 4 January 2021.


Upcoming Changes


Enhanced regulatory framework for VASPs

The definition of the term “DPT service” will be expanded to include the following services:

  1. Transfer of DPTs

  2. Provision of custodian wallets for DPTs; and

  3. Facilitating the exchange of DPTs without possession of moneys or DPTs by the DPT service provider.


Broader definition of Cross-Border Money Transfer Service

The definition of cross-border money transfer service will be broadened 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.


MAS will have increased powers to impose certain measures on DPT service providers

MAS will have enhanced powers to impose:

  1. User protection measures on certain DPT service providers to ensure the safekeeping of customer assets held by the DPT service provider, where necessary; and

  2. 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.


Miscellaneous amendments

The new Bill also introduces the following changes:

  1. Allow MAS to prescribe additional licensees or class of licensees in respect of certain payment services that must safeguard customer money;

  2. Broaden the scope of domestic money transfer service to include situations where either the payer or the payee is a financial institution; and

  3. 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.

"Companies can come up with products that are more attractive. And today, what we are doing, we believe, is an appropriate and calibrated response."

Minister Ong Ye Kung


How will you be affected?


VASPs

The current PSA regime 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. Therefore, no further action is required from such service providers as they would have already applied for a licence under the PSA.

However, any service provider that provides any of the three services in the expanded definition and carries on a business in Singapore will need to be licensed and subject to MAS’ AML/CFT regulations.



Exception period

The MAS intends to grant an exemption for six months to service providers who will fall under the new categories and have to apply for a license, and to service providers who have already applied for a licence but have to vary their licence in light of the new changes. The MAS will hold a consultation on the intended exemption in Q1 2021 and will stipulate the length of exemption and the deadline for licence applications or variations under the new categories thereafter.



MAS’ enhanced powers in mitigating ML/TF risk

Although MAS already regulates DPT service providers for ML/TF risks, it has stated that it needs to be equipped to implement appropriate measures to mitigate new risks in a timely manner. It recognizes that the DPT sector continues to evolve rapidly and the development of new DPTs like stablecoins could lead to user adoption gaining traction very quickly.

MAS has stated that when considering any user protection measures, it will also take into consideration the DPT service landscape and the appropriate level of protections, including market conduct-type protections, depending on the prevailing business models in the industry and the implications on the public. MAS has also stated that it will carefully consider the risks and impact of the proposed measures, and intends consult on the nature of the measures to be implemented.


Cross-border money transfer services

A cross-border money transfer service provider which carries on a business in Singapore of providing such services will need to be licensed under the amended Bill and subject to MAS’ AML/CFT regulations

Contact us: general@magnalawcorp.com to find out more.

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