30 July 2019
The Monetary Authority of Singapore (“MAS”) has issued a consultation paper seeking comments on draft notices and guidelines that will be issued under the Payment Services Act 2019 (“PS Act”). The Payment Services Bill was passed by Parliament on 14 January 2019. The PS Act is targeted to come into force in January 2020. Under the PS Act, MAS will regulate significant payment systems and the provision of payment services in Singapore. Payment services will be streamlined through the combination of the Payment Systems (Oversight) Act (“PS(O)A”) and the Money-Changing and Remittance Businesses Act (“MCRBA”) in the PS Act. The PS(O)A and the MCRBA will be repealed when the PS Act comes into force.
With the repeal of the PS(O)A and MCRBA, the notices and guidelines currently issued thereunder will be cancelled. The current MAS consultation paper sets out the proposed notices and guidelines to be issued under the PS Act that contain a majority of the requirements currently found in the PS(O)A and MCRBA notices and guidelines and where necessary, are adapted for payment services providers regulated under the PS Act with changes or new requirements.
Key proposals of the current MAS consultation paper on “Proposed Payment Services Notices and Guidelines” are highlighted below. Comments on the consultation paper must be submitted to MAS by 5 August 2019.
The PS Act provides for the licensing and regulation of payment services providers and the oversight of significant payment systems. The PS Act sets out three classes of licences (collectively, “Licensees”):
- Money-changing licensee: Money-changing licensees can provide only money-changing services. They will continue to be regulated under the PS Act in largely the same way as they are under the MCRBA.
- Standard payment institution: Standard payment institution licensees (“SPI”) may provide any combination of the seven defined payment services, but below specified transaction flow or e-money float thresholds.
- Major payment institution: Major payment institution licensees (“MPI”) can go above the specified thresholds. As the scale of their operations would pose more risk, they will be subject to more regulation.
Payment services are defined under the PS Act as services relating to account issuance, domestic money transfer, cross-border money transfer, merchant acquisition, e-money issuance, digital payment token (“DPT”) and money-changing (subject to some exceptions) (collectively, “Payment Services”).
MAS conducted two earlier consultation exercises on the following specific aspects relating to the new regulatory framework:
- Payment Services Regulations, the main regulations for licensees and other regulated persons under the PS Act, which include control of provision of payment services, financial and business conduct requirements (from 10 April 2019 to 10 May 2019); and
- Notices on anti-money laundering and countering the financing of terrorism (from 6 June 2019 to 5 July 2019).
Reporting to MAS
MAS proposes to issue three notices on reporting requirements under the PS Act:
- MAS Notice PSN04 on Submission of Regulatory Returns (“PSN04”)
- MAS Notice PSN04A on Submission of Statement of Transactions and Profit/Loss
- MAS Notice PSN03 on Reporting of Suspicious Activities and Incidents of Fraud
PSN04 introduces periodic regulatory submission of information related to the Licensees’ payment services, as part of MAS’ ongoing supervision of payment service providers. PSN04 is adapted and expanded from the current MAS Notice 3003 on Submission of Statement of Transactions and Profit/Loss (for both Money-Changing & Remittance Licensees) issued under the MCRBA.
Among other things, PSN04 will require:
- Licensees carrying out money-changing activities to make submissions annually;
- SPIs and MPIs to collect account statistics, transaction value and volume, as well as e-money float amount on a monthly basis;
- MPIs subject to safeguarding requirements to collect monthly data on the money required to be safeguarded; and
- Licensees to collect information on transactions involving higher risk customers that are determined by a Licensee to present a higher risk for money laundering or terrorism financing.
Existing money-changing licensees and remittance licensees under the MCRBA, as well as approved holders of a widely accepted stored value facility under the PS(O)A (“approved SVF holders”) will have a period of six months to comply with the requirements under PSN04 after the PS Act commences. However, they would need to maintain records of the necessary information for compliance with PSN04 subsequently after the six-month period.
Technology risk management and cyber hygiene
MAS proposes to replace MAS Notice 3203 and PSOA-N05 on Technology Risk Management that are issued under the MCRBA and PS(O)A respectively with a new MAS Notice PSN05 on Technology Risk Management (“PSN05”). PSN05 will retain the requirements for operators and settlement institutions of designated payment systems (“DPS”). MAS does not intend to apply PSN05 to the Licensees but will consult the public should MAS consider doing so in future.
The consultation paper contains a new MAS Notice PSN06 on Cyber Hygiene that will apply to the Licensees and DPS operators (“PSN06”). The Notice sets out basic cyber security measures that all financial institutions must implement to establish baseline defences against cyber threats. These proposed cyber hygiene requirements were published for consultation on 6 September 2018 and have not been implemented. PSN06 will commence on the same date that the Notice on Cyber Hygiene issued to other financial institutions will commence
(i.e. targeted July 2020).
The proposed MAS Notice PSN07 on Conduct sets out conduct requirements for the Licensees, in respect of the relevant payment services and certain exempt payment services providers (“PSN07”). Certain conduct requirements will also apply to DPS operators and settlement institutions.
PSN07 will replace MAS Notices issued under the MCRBA that deal with requirements on record of transactions, issuance of receipts, transmission of money and exchange rate. Under PSN07, the requirements on these four matters apply to the Licensees and certain exempt payment services providers in respect of all the Payment Services with the following exceptions:
- Requirements on the four matters do not apply to account issuance services;
- Requirements on issuance of receipts, transmission of money and display of exchange rate do not apply to merchant acquisition services;
- Requirements on transmission of money do not apply to DPT services.
MAS proposes to introduce the following three new types of conduct requirements in PSN07:
- Determining Singapore residency of customer: PSN07 sets out the criteria for the Licensees or exempt payment service providers to determine how Singapore residency of their customers may be ascertained for the purposes of the definition of “specified e-money” and for the purpose of ascertaining the scope of payment accounts that sections 6, 19 and 24 of the PS Act apply to. When e-money has been issued in Singapore to a person whom the issuer of the e-money has not determined to be resident outside Singapore, the e-money must be safeguarded.
- Specifying days and hours for place of business to be manned: MAS proposes to require a Licensee, DPS operator and settlement institution to appoint at least one person to be present at the entity’s permanent place of business or registered office for at least 10 days a month and at least eight hours for each of those days during its normal business hours.
- Determining exchange rate for money to be safeguarded: MPIs are required to safeguard customer money under section 23 of the PS Act. PSN07 provides MPIs with a standardised form of determining the exchange rate to be used for computing the amount of money to be safeguarded when the MPIs safeguard the customer money in a currency different from that received from their customer.
In addition, the consultation paper contains draft provisions in the proposed Payment Services Regulations that prescribe the exchange rate that the Licensees must use to calculate Singapore dollar equivalent of foreign currency amounts for purposes including the determination of licence class under section 6 of the PS Act, as well as in relation to the security deposit requirement under section 22 of the PS Act and personal e-wallet restrictions under section 24 of the PS Act.
Disclosure and communications
MAS Notice PSN08 on Disclosures and Communications (“PSN08”) sets out disclosure and communications requirements applicable to the Licensee and certain exempt payment service providers. The disclosure requirements aim to give customers accurate information about the extent to which an entity is regulated under the PS Act and whether customer money is required to be protected under the PS Act. The communications requirements aim to give the public accurate information about an entity’s status under the PS Act.
The specific disclosure requirements that apply to a Licensee or exempt payment service provider differ depending on the licence class, scope of exemption and the payment service provided.
The risk disclosure requirement that is currently applicable to money changing licensees will be retained in PSN08. DPT service providers will also be required to provide their customers with a specified risk disclosure statement as MAS is of the view that it is important to ensure that their customers understand that, by adopting DPTs as a form of payment, they are exposed to the risk of the DPTs losing their value.
Transitional arrangements and guidelines
MAS intends to issue savings regulations to smoothly transition existing remittance licensees under the MCRBA to the PS Act in respect of their dealing with customer money for remittance transactions. Details of the savings regulations are set out in the consultation paper.
MAS will also extend the MAS Guideline No. FSG-G01 on Fit and Proper Criteria to the Licensees. MAS proposes to amend the E-Payments User Protection Guidelines so that the Guidelines will start applying to all MPIs and exempt payment service providers that issue payment accounts which contain specified e-money after a six-month period from the commencement date of the PS Act to allow for any necessary system enhancement by affected Licensees.
Implementation timeframe for the notices and guidelines
MAS proposes that the notices and amended guidelines that are set out in the current consultation paper will come into force on the commencement date of the PS Act, except for some of the amendments to the E-payments User Protection Guidelines, PSN04 for certain licensees and PSN06.
To give the industry adequate notice of the commencement of the PS Act and the relevant subsidiary legislation, MAS intends to publish the commencement notification for the PS Act as well as all finalised versions of the subsidiary legislation and guidelines at least four weeks before the PS Act commencement date.
The following materials are available on the MAS website www.mas.gov.sg:
- Consultation paper on “Proposed Payment Services Notices and Guidelines” and Annex A
- Annex B - PSN03 Notice on Reporting of Suspicious Activities and Incidents on Fraud
- Annex C - PSN04 Notice on Submission of Regulatory Returns
- Annex D - PSN04A Notice on Submission of Statement of Transactions and Profit-Loss
- Annex E - PSN05 Technology Risk Management Notice
- Annex F - PSN06 Notice on Cyber Hygiene
- Annex G - PSN07 Notice on Conduct
- Annex H-1 - PSN08 Notice on Disclosures and Communications
- Annex H-2 - Payment Services Regulations on Exchange Rates
- Annex I-1 - E-payments User Protection Guidelines at Commencement
- Annex I-2 - E-payments User Protection Guidelines Six Months After
- Annex J - FSG-G01 Guidelines on Fit and Proper Criteria
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