On 10 April 2019, the Monetary Authority of Singapore (MAS) released a consultation paper on proposed regulations in furtherance of the Payment Services Act 2019 (PSA).  For more information regarding the PSA, please refer to our Overview of Singapore’s Payment Services Act 2019.

MAS’s role under the PSA is to regulate significant payment systems and the provision of payment services in Singapore.  To achieve the objectives of the PSA, MAS intends to prescribe three sets of regulations and one order, namely:

• the Payment Services Regulations (PS Regulations);
• the Payment Services (Exemptions for a limited period of time) Regulations;
• the Payment Services (Singapore Dollar Cheque Clearing System and Inter-Bank GIRO System) Regulations; and
• the Payment Services (Designated Payment Systems) Order.

This article will only discuss the requirements and exemptions under the PS Regulations.

Payment Services Regulations

The PS Regulations are intended to be the primary regulations governing licensees and other regulated persons under the PSA, covering the requirements for licensees and designated payment system (DPS) entities and exemptions from certain PSA provisions.

Requirements for Licensees

Apart from general procedural requirements such as the method of applying for licences, forms to be submitted, submission deadlines and fees, the key provisions of the PS Regulations applicable to licensees are as follows:

Post-Licencing Process

MAS proposes that the licence of a payment service provider (Provider) will lapse if the Provider does not begin providing at least one of its licensed services within six months from the grant of its licence or it ceases providing all its licensed services for six consecutive months. MAS will also implement a licence variation process for changing licence class or the types of payment services covered under an existing licence. As a general guide, MAS’s approval is required to vary any licence.

Solicitation Restriction

The PSA prohibits solicitation in Singapore for payment services in or outside Singapore by a person who is not a licensee or exempt Provider or a person (including a licensee or exempt Provider) acting on behalf of an overseas person who is not a licensee or exempt Provider.

The PS Regulations will set out the factors in determining when solicitation is made in Singapore, including, amongst others, whether the offer, invitation or advertisement:

• contains any information specifically relevant to Singapore;
• is published any medium that is circulated for use, or to persons, in Singapore;
• states that e-money or a digital payment token may be purchased by persons in Singapore or that e-money denominated in Singapore Dollars may be acquired; or
• is for dealing in digital payment tokens in exchange for Singapore Dollars.

Residency Requirement for Executive Directors

The PSA requires applicants for a standard or major payment institution licence to have at least one executive director who is a Singapore Citizen or Permanent Resident or who satisfies other prescribed conditions. To allow both local and foreign incorporated companies to provide payment services in Singapore, MAS proposes to allow employment pass holders to act as an executive director, provided that the applicant has at all times at least one director who is a Singapore Citizen or Permanent Resident.

Financial Requirements

MAS proposed the following minimum initial and ongoing financial requirements for standard and major payment institutions:

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‍Safeguarding Requirements and Security Deposits

The PSA requires major payment institutions to safeguard relevant customer monies, including by obtaining undertakings or guarantees from, or by depositing the relevant monies into a trust account with, safeguarding institutions.  To facilitate compliance with this requirement, the PS Regulations provide that licensed merchant banks or finance companies can also be safeguarding institutions.  In each case, the licensee must satisfy itself of the suitability of the safeguarding institution both at the time of issuance of the undertaking or guarantee or opening of the trust account, and periodically thereafter. Where the safeguarding requirement is met by depositing money into a trust account, the licensee may not commingle customer monies with other monies. If the licensee deals with foreign currency, the licensee may safeguard the relevant monies in the same foreign currency or in Singapore Dollars based on the conversion method to be prescribed by MAS.

The PS Regulations also prescribes the required security deposit amount for major payment institutions, to act as a small buffer for the protection of customer monies:

• S$100,000 for major payment institutions conducting S$6,000,000 or less in payment transactions per month; and
• S$200,000 deposit for those that conduct a higher volume of transactions per month.

Requirements for DPS entities

The requirements for DPS entities under the PS Regulations are similar to those currently imposed on DPS operators, settlement institutions and participants under the existing Payment Systems (Oversight) Act.  The requirements generally include providing MAS information, submitting periodic reports, obtaining MAS approval for appointments of CEO and directors of DPS operators, business continuity requirements and grounds for determining a failure by the CEO or directors of DPS operators and settlement institutions to discharge their duties or functions.

Exemptions

The PS Regulations also include exemptions from certain PSA provisions, such as:

• Exemption of hotel operators providing money-changing services from compliance with certain provisions on control of controllers and officers, where the service is incidental to the hotel business;
• Exemption from the requirement to hold a standard payment institution licence where the entity conducts payment services that carry low money laundering or terrorism financing risks and satisfies certain other conditions;
• Exemption for certain domestic money transfer service providers who facilitate cross-border money transfer services such as remittance; and
• Exemption from the prohibition against soliciting for a payment service if MAS has by regulation exempted the person from holding a licence for that payment service.

The comment period for this consultation ended on 10 May 2019.  Final versions of the regulations are expected to be issued when the PSA is made effective in January 2020.

[1] MAS proposed to require a minimum base capital instead of a minimum paid-up capital as the former factors in losses such as operational losses or dividend payouts.  This would ensure that Providers have sufficient funds during economically-difficult periods.

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