The new Payment Services Act in Singapore has now come into force and as ever the devil is in the detail. Anyone affected should make sure they understand the notices, guidelines and regulations published in December, and are familiar with the amendments announced in the recent consultation paper which aim to align the act with FATF.
The Payment Services Act is set to streamline payment services under a single legislation and expand the scope of regulated payment services and provides a proportionate regulatory framework that differentiates between major payment institutions and smaller players. Equally, The Act also puts digital payment tokens and merchant acquisition under the remit of the MAS.
Although the final Payment Services Act contains no surprises, there is a lot to read. In December, the MAS published both a document outlining the Notices, Guidelines and Regulations and a consultation paper outlining proposed amendments with regard to AML/CTF. The details can be found on the Monetary Authority of Singapore website here: MAS Payment Services Act.
It’s also worth noting that the MAS have published specimen forms to help make it easier for firms to swiftly apply to the new regime.
Payment Services Notices, Guidelines and Regulations – a summary
Payment Service Notices
- Notice of submission of statement of transaction and P&L – applies to all existing money-changing and remittance licensees under the Money-changing and Remittance Businesses Act.
- Notice on submission of regulatory returns – applies to all licensees, and sets out the periodic regulatory reporting of information related to the licensees’ payment services.
- Notice on Disclosure and Communication – sets out the requirements for licensed and exempted payment services providers to provide certain disclosures to customers and potential customers.
- Notice on Specified Matters and Forms – sets out regulatory forms and other administrative matters for payment service providers, operators of designated payment systems and settlement institutions of designated payment systems.
- Notice of Conduct – sets out the conduct requirements for all entities licensed under the Payment Services Act.
- Notice PSN05 Technology Risk Management – sets out requirements for a high level of reliability and recoverability of critical IT systems and for such entities to implement IT controls to protect customer information from unauthorised access or disclosure.
- Notice PSN06 Cyber Hygiene – sets out the cyber security requirements on securing administrative accounts, security patching, establishing security standards etc.
Payment Service Guidelines
- Guidelines on Fit and Proper Criteria [FSG-G01] – these existing Guidelines will now include Payment Services Providers as ‘relevant persons’ and scope of application.
Payment Services Regulations
- Payment Services Regulations 2019.
- Payment Services (Composition of Offences) Regulations 2019.
- Payment Services (Exemption for Specified Period) Regulations 2019.
- Payment Services (Saving and Transitional Provisions) Regulations 2019.
- Payment Services (Singapore Dollar Cheque Clearing System and Inter-bank Giro System) Regulations 2019.
Payment Service Providers AML Notices and Guidelines
- Notice PSN01 Prevention of Money Laundering and Countering the Financing of Terrorism – Specified Payment Services – requirements for payment service providers (other than a digital payment token service provider)
- Notice PSN02 Prevention of Money Laundering and Countering the Financing of Terrorism – Digital Payment Token Service – requirements for digital payment token service providers to put in place robust controls to detect and deter the flow of illicit funds through Singapore’s financial system.
- PSN03 Notice on reporting of suspicious activities and incidents of fraud – requirements for all payment service providers to report any suspicious activity or incident of fraud that will affect their safety, soundness or reputation.
- PSN01A Prevention of Money Laundering and Countering the Financing of Terrorism – Persons Providing Account Issuances Services who are Exempted under the Payment Services (Exemption for Specified Period) Regulations 2019 – intended to substantially apply to persons who are exempted under the Payment Services (Exemption for Specified Period) Regulations 2019 during the transition period.
- PSN10 Prevention of Money Laundering and Countering the Financing of Terrorism – Exempt Payment Service Providers – sets out the application of AML/CFT Notices to persons exempt under Payment Services Act 2019 in relation to the provision of payment services for a specified product that involves account issuance, domestic money transfer and e-money issuance services.
Consultation on the Payment Services Act 2019: Proposed Amendments to the Act – December 2019
On 23rd December, the MAS issued a consultation paper proposing amendments to the Payment Services Act 2019 in relation to AML/CFT. The MAS highlighted the AML/CFT measures will apply to all three classes of payment service providers (holders of a money-changing licence, standard payment institutions, and major payment institutions), more specifically:
- account issuance service
- domestic money transfer service
- cross-border money transfer service
- money-changing service
- digital payment token (DPT) service.
The MAS intends to amend the Payment Services Act to align with the enhanced FATF Standards applicable to DPT service providers, this includes expansion of the scope of DPT service providers’ activities.
- Transfer of DPTs – Under the FATF Standards, transfer of DPTs could be used in the layering process to illicit assets by transferring value in the from one person to another.
The MAS will amend the PS Act to expand the definition of ‘digital payment token service’, to include:
- “any service of accepting digital payment tokens from one digital payment token address or account, whether in Singapore or outside Singapore, as principal or agent, for the purposes of transferring, or arranging for the transfer of, the digital payment tokens to another digital payment token address or account, whether in Singapore or outside Singapore”
- “any service of arranging for the transmission of digital payment tokens from one digital payment token address or account, whether in Singapore or outside Singapore, to another digital payment token address or account, whether in Singapore or outside Singapore”.
- Provision of custodian wallets for or on behalf of customers – the MAS understands DPT exchanges offer custodial wallet services that are already subjected to AML/CFT requirements, however, entities that offer standalone custodial services for DPTs are equally exposed to potential ML/TF risks.
The MAS proposes to amend the Act and expand the definition of digital payment token service, to include the service of safeguarding or administration of:
- a digital payment token where the service provider has control over the digital payment token; or
- a digital payment token instrument where the service provider has control over the digital payment token associated with the digital payment
- Brokering of cross-border money transfer services – Under the current PS Act, cross-border money transfer service providers who do not accept or receive moneys in Singapore are excluded from the scope of regulation. The MAS have since responded it is aware there are business models of cross border broking services where moneys are not necessarily accepted or received in the country where the service provider operates, such as Singapore, and as such present ML/TF risks similar to entities that are already within the scope of the PS Act.
The MAS intends to expand the definition of “cross-border money transfer service” to include:
- the situation where the payment service provider does not accept or receive moneys in Singapore, but nonetheless provides the service of arranging the transmission of money accepted in one country or territory, to another country or territory.
Other proposed amendments to the Act include:
- Enabling the MAS to impose user protection measures on certain DPT service providers;
- Enabling the MAS to impose restrictions on certain DPT service providers;
- Amendments to section 23 of the Act (Safeguarding of money received from customer)
- Amendments to section 94 of the Act (General duty to use reasonable care not to provide false information to Authority)
- Amendments to the scope of domestic money transfer service
Specimen forms available for application for a MAS Payment Service License
The MAS understands there are companies keen to move forward quickly and have published specimen forms for entities applying for a payment service provider license and subsequent reporting forms for those entities. There are four different applicable forms:
- Form 1 – Application for a Payment Service Provider License: This form is to be used for new FI’s looking to apply Payment Service Provider License.
- Form 2 – Application for the Variation or Change of a Payment Service Provider Licence: This form is used for existing payment providers to change its current license regime.
- Form 3 – Application for the Approval of Chief Executive Officer, Director or Partner of a Payment Service Provider: This form is used to request the appointment of CEO, Director and Partner of the Payment Providers.
- Notification Form for the Purpose of Exemption from Holding a Licence under the Payment Services Act for the Specified Period: This form is to notify the MAS of the date on which the payments providers commenced the business of providing the specific payment services under the Payment Services (Exemption for Specified Period) Regulations 2019.
How can Bovill help?
We specialize in advising MAS regulations, licencing applications and ongoing support to a wide range of payment services providers across Asia, Europe and the US. If you are looking to apply for a Payment Services Licence in Singapore, please get in touch to with our consultants to find out more.