Payment Services (Amendment) Bill
The Payment Services Act came into force in January 2020. It was released on 4th January 2021 that the Payment Services Act will be read for a second time to make further changes to keep up with evolving innovation and technology, and emergence of new business models in the payment services space.
Enhancing the Regulatory Framework for Virtual Asset Service Providers
The revised Payment Services Act will be expanded to regulated service providers of Digital Payment Tokens (“DPTs”) that facilitate the use of DPTs for payments and may not possess the moneys or DPTs involved. They are sometimes also referred to as Virtual Assets Service Providers. The revised Payment Services Act, in relation to Virtual Assets Services Providers, will regulate the payment service providers who facilitate the transmission of DPTs from one account to another, provide custodial services for DPTs, facilitating the exchange of DPTs where the service provider does not come into possession of the moneys or DPTs involved.
Virtual Assets Service Provider activities are inherently more vulnerable to money laundering and terrorism financing risks due to their speed, anonymity and cross-border nature and therefore becomes critical to be regulated for money laundering and terrorism financing risks. As such, Virtual Assets Service Providers will be required to be licensed under the Payment Services Act and be subject to anti-money laundering / countering financing of terrorism regulations.
Mitigating Money Laundering and Terrorism Financing Risks
The revised Payment Act will address money laundering and terrorism financing risks and will be expanded wherein definition of cross-border money transfer service will include facilitating transfers of money between persons in different jurisdictions, where money is not accepted or received by service provider in Singapore. Therefore, money that does not flow into Singapore will also be caught under the revised Payment Services Act.
Empowering MAS to impose measures on Digital Payment Token service providers
Other sets of changes to the Payment Services Act will look to impose measures on DPT service providers to ensure better consumer protection and maintain financial stability and safeguard the efficacy of monetary policy. Monetary Authority of Singapore (“MAS”) will impose user protection measures on DPT service providers such as the need to segregate customer assets from own assets. Measures will be accorded to the MAS to impose powers on certain Digital Payment Token service providers where it is in MAS’ new necessary or expedient in the interest of the public or section of the public, the stability of the financial system in Singapore, or the monetary policy of MAS.
Other Miscellaneous Amendments
The new Payment Services Act will be amended to broaden the scope to accord protection to protect individuals involved in domestic money transfer transaction with financial institutions. Currently only major payment institutions providing services like e-money issuance are required to safeguard customer money. This will be amended to include other classes of licensee as well. The revised Payment Services Act will also require extend the duty of care to provide information to MAS which are not false or misleading to all persons including non-individuals.
The various changes to the Payment Services Act will enable MAS to address greater, newer risks identified in the industry and be inline with global regulatory requirements.