Plans to update existing payment services laws in the city state, set out before Singapore's parliament earlier this month, would bring 'virtual asset service providers' (VASPs) that are not existing regulated financial institutions within the scope of anti-money laundering (AML) requirements for the first time in the country. They would also implement international standards adopted by the Financial Action Task Force (FATF) in June 2019.
Under the proposed changes, VASPs would be considered to be businesses involved in the transfer of "digital payment tokens" (DPTs), the provision of custodian wallet services for DPTs, or in facilitating the exchange of DPTs without possession of moneys or DPTs by the DPT service provider. VASPs would need to obtain a licence from the Monetary Authority of Singapore (MAS), the body which regulates the provision of payment services in Singapore, to operate.
"The speed, anonymity and cross-border nature of VASP activities make them inherently more vulnerable to [money laundering or terrorist financing] risks," according to an explanatory brief published by MAS.
Nathanael Lim of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law, said: "The amendments show the MAS’ continued emphasis for payment service providers to properly manage their AML and CFT (combatting the financing of terrorism) risks. DPT service providers will need to invest in a proper set-up to ensure that these standards are met."
The new Payment Services (Amendment) Bill, as currently drafted, would also provide MAS with new powers to adapt to the changing nature of risk relating to DPTs in future. MAS would be able to "impose user protection measures on certain DPT service providers to ensure the safekeeping of customer assets held by the DPT service provider, where necessary; and 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", according to its briefing.
Further new provisions included in the Bill aim to address cross-border risk involving money transfers.
"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," MAS said. "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."
The Payment Services (PS) Act in Singapore began to apply on 28 January 2020.