The Singapore Payment Service Act entered into force in January, 2020. It’s main goal is to provide a regulation for the fintech industry that helps the numerous businesses operating in the area by creating a regulatory framework for various payment services.
In December 2019 the Monetary Authority of Singapore issued a notice for the providers of digital payment token services regarding the prevention of money laundering and the countering the financing of terrorism.
MAS has provided three general principles which should serve as a guide for all payment service providers when developing their AML/CTF measures:
- Exercising due diligence when dealing with customers;
- Operating a business in conformity with high ethical standards and not participating in transactions that may facilitate money laundering or terrorism financing;
- Assisting and cooperating with the relevant law enforcement authorities in Singapore.
Specific Guidelines for Service Providers
Apart from the three main principles MAS has also provided guidance for the adoption of certain practices in the respective operational activities of each entity that performs digital payment token services.
Risk Assessment and Mitigation
A digital token service provider should identify and understand the risks related to money laundering and financing terrorism by taking into account its customers, their countries fo jurisdiction, the products, services and transactions as well as the delivery channles of these clients.
Having considered and documented the associated risks the service provider must develop AML/CTF policies and measures and monitor their implementation.
A new risk assessment should be performed every time the business launches a new product, practice or implements a new operational technology,
Customer Due Diligence (CDD)
Token payment providers should not open or maintain anonymous accounts or accounts under fictitious names. Therefore prior to establishing business relations with a customer the provider must:
- Identify the customer or their beneficial owners
- Verify the identity of the customer or their beneficial owners;
- Obtain information on the nature of business off the customer;
- Perform an ongoing monitoring
MAS has explained two types of CDD depending on the assessed risk regarding the customer and their business activity – simplified and enhanced due diligence. In most cases the simplified CDD will be enough but for transactions and customers associated with higher ML/TF risks additional measures should be taken.
Foreign Currency exchange Transactions
Special measures should be taken by digital token service providers when a foreign exchange (FX) transaction equals or exceeds S$20000. In addition to performing CDD measures,the provider shall, to the extent possible, inquire into the background and purpose of the transaction and document its findings with a view to making this information available to the relevant authorities should the need arise.
Cash Payout Restrictions
Payment service providers are not allowed to make payments of cash exceeding the amount of S$20000. Where the provider suspects that two or more payment transactions or FX transactions are related to the deliberate restructuring of a single transaction these transactions shall be treated as a single transaction.
Specific Rules for Digital Token Payments
Specific rules have been provided for by MAS for token payment service providers. These rules are associated with the identification of the token originators (the issuers or traders) and the recording of adequate details about the token transactions.
Simple identification and verification measures should be implemented for transactions not exceeding S$1500 while more complex procedures should be provided for transactions exceeding this amount.
Suspicious Transfer Reporting
All payment service providers are expected to promptly submit reports on suspicious transactions with MAS. A suspicious transaction report may be filed online via the the STRO Online Notices and Reporting platform.