The Singapore Payment Services Act (“PS Act”) came into force in January 2020. The main aim of the PS Act is to regulate the FinTech industry by providing a regulatory framework for payment systems and payment service providers in Singapore.
In December 2019 the Monetary Authority of Singapore (MAS) issued a notice on the prevention of money laundering and the countering the financing of terrorism for providers of digital payment token services. Digital payment token service providers are required to be vigilant and adopt robust anti-money laundering (AML) and countering the financing of terrorism (CFT) measures in the conduct of their operations and business activities. Here are some points on AML/CFT measures you should note.
MAS has provided three general principles which all payment service providers should use as a baseline when developing their AML/CFT 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
In addition to the above principles, all payment service providers (including digital payment token service providers) should also adhere to specific guidelines provided by the MAS. These include the following:
Risk Assessment and Mitigation
A payment service provider must identify and understand the risks related to money laundering and terrorism financing by taking into account its customers, their background (e.g. country of origin/jurisdiction), as well as the risks associated with the products, services, transactions and delivery channels which the service provider uses.
Having considered and documented the associated risks, the service provider must develop AML/CFT 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 new operational technology.
Customer Due Diligence (CDD)
Payment service 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 of the customer;
- Perform an ongoing monitoring
MAS has identified two types of CDD: simplified and enhanced due diligence. These will apply depending on the assessed risk of the customer and their business activity. In most cases, simplified CDD will suffice. However, if the transactions and customers are 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$20,000. 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$20,000. 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 STRO Online Notices and Reporting platform.