Apr 18 2019 | by OrionW
The Monetary Authority of Singapore (MAS) conducted a public consultation last February 2019 on improvements to MAS’s oversight of outsourcing arrangements managed by banks and merchant banks. In the consultation, MAS proposes to:
MAS’s central proposal in the consultation is to amend the Banking Act to strengthen its oversight of outsourcing arrangements by banks and merchant banks. MAS’s proposed new authority includes:
Currently, outsourcing arrangements by banks and merchant banks are regulated by MAS Notice 634 and MAS Notice 1108, respectively. Both notices provide a comprehensive list of conditions for banks and merchant banks to observe when their outsourcing arrangements involve a disclosure of customer information outside Singapore. However, both notices will be repealed when MAS issues the Outsourcing Notices.
The new Outsourcing Notices will apply to material outsourcing arrangements. MAS proposes to include a significantly broadened definition of ‘outsourcing arrangements’ in the Banking Act and to define ‘material outsourcing arrangement’ to include any outsourcing arrangement where customer information is disclosed or where the service provider has access to customer information, regardless of where the outsourced function is to be performed, the tenure of the arrangement and the impact of unauthorised disclosure or access, and even if customers have given their written consent for the disclosure of their personal information.
Some of the requirements MAS intends to include in the Outsourcing Notices are:
Banks found guilty of contravening MAS’s directions under the proposed new section of the Banking Act will be liable to a fine not exceeding S$250,000, with additional penalties for continuing offences. MAS proposes to similarly enhance its oversight of the outsourcing arrangements of merchant banks. Banks and merchant banks will be given 12 months to make the necessary arrangements to fully comply with the proposed Outsourcing Notices.
MAS also intends to seek feedback on the requirements applicable to outsourcing arrangements managed by other classes of financial institutions. Until then, MAS expects those other institutions to observe the Guidelines on Outsourcing MAS issued in July 2016.