Jul 27 2020 | by OrionW
The Monetary Authority of Singapore (MAS) has proposed a new omnibus Act (the New Act) to enhance its powers to tackle risks that threaten Singapore’s financial sector. The New Act will give MAS additional financial sector-wide regulatory authority to complement its existing entity- and activity-based regulations. MAS outlined its proposal in a consultation paper published on 21 July 2020.
The New Act will include certain provisions moved from the Monetary Authority of Singapore Act (the MAS Act) as well as new provisions. The provisions to be moved from the MAS Act relate to anti-money laundering and countering the financing of terrorism (AML/CFT), the control and resolution of financial institutions and oversight of financial sector dispute resolution schemes. The new provisions include:
Other provisions of the New Act will include statutory protection from liability for mediators, adjudicators and employees of an approved dispute resolution scheme operator; enhanced inspection powers; and a general duty to use reasonable care not to provide false information to MAS.
Regulation of Virtual Asset Service Providers for AML/CFT
MAS proposes to license and regulate persons in Singapore who provide virtual asset services outside Singapore (MAS calls those persons digital token or DT service providers). Under existing laws, MAS’s regulatory powers capture entities that are engaged in virtual asset activities in Singapore, regardless of whether the entities are created in Singapore. With the new provisions, MAS aims to capture DT service providers that are created in Singapore but are engaged in virtual asset activities abroad.
The new provisions align Singapore’s regulatory regime with the enhanced standards ratified by the Financial Action Task Force (FATF) for VASPs. The FATF Recommendations 2019 enhanced standards require VASPs to be registered or licensed in the jurisdictions where they are created in order to mitigate the risk of regulatory arbitrage and regulatory circumvention.
MAS’s primary objective for licensing DT service providers is to regulate them for AML/CFT purposes. MAS will propose the specific AML/CFT regulations to apply to DT service providers in a future consultation, but noted that it intends those regulations to be similar to those applicable to digital payment token service providers under the Payment Services Act 2019, set out in MAS Notice PS-N02 Prevention of Money Laundering and Countering the Financing of Terrorism – Holders of Payment Service Licence (Digital Payment Token Service).
MAS’s proposed regulation of DT service providers is not limited to AML/CFT matters, however. Licensees will also be required to have a permanent place of business in Singapore with at least one person present at prescribed times; keep records of all transactions; notify MAS of certain events and provide information and reports to MAS; refrain from granting credit facilities to persons in Singapore; and annually appoint an auditor who must audit its transactions. MAS will also have authority over controllers of licensees and the power to approve directors and the CEO.
Harmonised Power to Impose Requirements on Technology Risk Management
Taking into account the widespread use of technology and the complexity of cyber threats, MAS proposes to harmonise and extend its current powers to impose new requirements concerning technology risk management standards, cyber security risk and data protection to all regulated financial institutions and irrespective of whether the financial institutions’ systems support regulated activities. In addition, to align the maximum penalties with the severity of the technology breaches that can occur, MAS proposes to increase the maximum penalty to S$1 million for breaches of regulations and notices and any violation of the new requirements.
Harmonised and Expanded Powers to Issue Prohibition Orders
MAS proposes to expand its power to issue POs to preserve trust and dissuade misconduct in Singapore’s financial sector. At present, MAS’s PO powers reside only in the Securities & Futures Act, the Financial Advisers Act, and the Insurance Act. MAS cannot currently issue prohibition orders to persons regulated under other Acts even if they have committed serious misconduct in the financial industry. The proposed expansion of powers allows MAS to issue POs against any person who is not fit and proper to engage in regulated activities and identified roles and functions across the financial industry. MAS also proposes to prohibit the performance of specified functions under the POs, including (i) handling of funds, including safeguarding or administration of a digital payment token or digital payment token instrument, (ii) risk-taking, (iii) risk-management and control, and (iv) critical system administration.
The new powers will allow MAS to determine holistically whether a person’s misconduct renders him unfit for the financial sector and the appropriate action to be taken under the PO powers. In exercising this power, MAS will use a risk-proportionate approach that considers the nature, severity and impact of the misconduct.