MAS imposes new user protection requirements on digital payment token service providers

Source: The Straits Times
Author: Mia Pei

SINGAPORE - The Monetary Authority of Singapore (MAS) has launched new measures to keep digital payment token (DPT) service providers out of money laundering and the financing of terrorism.

It did so by amending the Payment Services Act and its subsidiary legislation on April 2 to expand the scope of payment services under the central bank's regulation.

This is to impose user protection and financial stability-related requirements on DPT service providers, said MAS, one day after announcing the first centralised digital platform Cosmic to combat illegal financing and money laundering.

The Payment Services Act will include three more activities under its regulation:

The amendments will take effect in stages from April 4.

MAS noted that it will give transitional arrangement to entities currently conducting activities under the expanded scope.

"Such entities must notify MAS within 30 days, and submit a licence application within six months from Apr 4, if they wish to continue the activities on a temporary basis while MAS reviews their licence applications.

"The licence application must be accompanied by an attestation report of the entity's business activities and compliance with anti-money laundering and countering the financing of terrorism requirements, duly completed by a qualified external auditor, within nine months from Apr 4," said MAS, adding that entities not fulfilling the requirements will have to cease the activities when the amendments come into effect.

The amendments to the Payment Services Act's subsidiary legislation - Payment Services Regulations - will take effect six months from April 4.

These will focus on protecting the assets of the customers of DPT service providers, including placing the assets in a trust account for the benefit of customers, maintaining proper books and records, as well as ensuring that effective systems and controls are in place to protect the asset integrity and security.

The announcement came after the Financial Services and Markets (Amendment) Act 2023 and its accompanying subsidiary legislation commenced on April 1, setting out the legal basis for information sharing on money laundering and terrorism financing among financial institutions.

The Financial Services and Markets Act 2022 (FSMA) was also amended in May 2023 to set out the legislative framework for Cosmic. THE BUSINESS TIMES