The Monetary Authority of Singapore (MAS) conducted a public consultation on two proposed notices (the Notices) on anti-money laundering and countering the financing of terrorism (AML/CFT)[1] that will apply to the providers of certain services to be regulated under the Payment Services Act 2019 (the PSA).  The Notices are expected to be issued when the PSA, which became law in February 2019, becomes effective in early 2020. MAS conducted the consultation from 6 June to 5 July 2019.

The PSA regulates seven categories of payment services.  One Notice (PSN01[2]) will apply to four categories of payment services: account issuance services, domestic money transfer services, cross-border money transfer services and money-changing services.  The second Notice (PSN02[3]) will only apply to digital payment token (DPT) services.  MAS is not currently proposing to apply AML/CFT requirements to the remaining two categories of payment services, merchant acquisition and e-money issuance, consistent with international practices.  MAS has aligned the Notices with standards adopted by the Financial Action Task Force (the FATF), which is recognised as the global authority on AML/CFT standards.

PSN01 and PSN02 together consolidate and update the AML/CFT notices issued under the Payment Systems (Oversight) Act (the PSOA) and the Money-Changing and Remittance Businesses Act (the MCRBA), and also cover some of the payment services regulated under the PSA that are not regulated under either the PSOA or the MCRBA.  The PSA will supersede and repeal both the PSOA and the MCRBA when it becomes effective.

Principles Applicable to Both PSN01 and PSN02

In general, consistent with the AML/CFT notices issued under the PSOA and the MCRBA, both PSN01 and PSN02 will require licensed payment service providers (PSPs) to:

• take appropriate steps to identify, assess and understand their money laundering and terrorism financing (ML/TF) risks;

• develop and implement policies, procedures and controls to manage and mitigate the identified ML/TF risks effectively, including, for example, customer due diligence (CDD), transaction monitoring, screening and suspicious transactions reporting;

• monitor the implementation of those policies, procedures and controls, and enhance them if necessary; and

• perform enhanced measures where higher ML/TF risks are identified.

If a PSP provides DPT services and other payment services that are subject to PSN01, PSN02 will apply to the DPT services and PSN01 will apply to the other payment services.

Certain products involving account issuance services, domestic money transfer services or cross-border money transfer services are deemed to involve lower risks and are exempted from most requirements of PSN01.  An example of an exempted product is one involving a cross-border money transfer service that is used only to pay for goods or services and is funded from an identifiable source.  No products involving DPT services are exempted because MAS considers all DPT services to have inherently higher risks due to the anonymity, speed and cross-border nature of DPT transactions.  A PSP offering both exempted and non-exempted products must comply with all relevant requirements of PSN01 or PSN02, as the case may be, with respect to the non-exempted products and must implement measures to ensure that the exempted products continue to satisfy the applicable exemption criteria.

MAS recommends that PSPs adopt a risk-based approach to CDD. That means a PSP may conduct simplified CDD when it determines the ML/TF risks for a customer are low or for certain designated types of transactions but must conduct enhanced CDD when risks are higher.  PSPs providing money-changing services need not conduct CDD for occasional transactions of less than S$5,000 or transactions of less than S$20,000 that are funded from an identifiable source.

PSPs may rely on third parties to conduct CDD if certain criteria are satisfied, including that the third party is a suitably qualified financial institution or company related to the PSP and the third party will provide documents and information to the PSP to enable the PSP to satisfy its CDD obligations.

PSPs are prohibited from issuing bearer negotiable instruments to their customers and from paying cash in amounts of S$20,000 or more.

Special Requirements Under PSN02

Transfers of DPTs will be treated like wire transfers.  Thus, PSPs that originate transfers of DPTs must obtain and hold information about the originating customer and the recipient, must provide that information to the DPT service provider receiving the transfer, and must make the information available on request to the appropriate authorities.  PSPs that receive transfers of DPTs must obtain and hold information about the originator and the recipient and make that information available on request to the appropriate authorities.

Unlike the occasional transaction exception to CDD for money-changing as discussed above, PSPs providing DPT services will be required to conduct CDD ‘from the first dollar’.

Additional AML/CFT Notices

MAS also announced its intention to issue further AML/CFT notices in two areas:

• To align its AML/CFT requirements for virtual asset services providers with FATF’s standards.  Virtual asset service providers are entities that exchange DPTs and fiat currencies, exchange between DPTs, transfer DPTs, provide custodian wallets and provide services related to an issuer’s offer and/or sale of a virtual asset (e.g., ICOs).

• To impose AML/CFT requirements on PSPs for non-payment business activities which may also carry ML/TF risks, such as dealing in precious stones and precious metals, even if those other activities are not covered by, or are exempted from, the AML/CFT requirements of other Singapore regulatory authorities.

[1] Proposed Payment Services Notices on Prevention of Money Laundering and Countering the Financing of Terrorism, Monetary Authority of Singapore, 06 June 2019

[2] Draft Notice to Payment Services Providers (Specified Payment Services) on Prevention of Money Laundering and Countering the Financing of Terrorism (“PS Notice 01”), Monetary Authority of Singapore, 06 June 2019

[3] Draft Notice to Payment Services Providers (Digital Payment Token Service) on Prevention of Money Laundering and Countering the Financing of Terrorism (“PS Notice 02”), Monetary Authority of Singapore, 06 June 2019

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