Rapidly evolving technology advancements have significantly altered the worldwide payment services landscape, leading to the emergence of technology and Money Laundering (ML)/Terrorist Financing (TF) risks that often fall beyond the current scope of regulations. Regulators across globe are in a race to find standardised regulations to handle, record and secure global payments.
The Monetary Authority of Singapore (MAS) recognises the need to have a new regulatory regime that is flexible, caters for regulatory certainty and consumer safeguards, while encouraging innovation and growth of payment services. MAS has therefore combined and enhanced, the Payment Systems (Oversight) Act (PSOA) and the Money-Changing and Remittance Businesses Act (MCRBA) into a new consolidated Payment Services Bill, which is now the Payment Services Act (PSA) after passing into law on 14 January 2019.
PSA Comprises Two Regulatory Regimes:
– Designation regime that enables MAS to regulate systemically important payment systems for financial stability and efficiency reasons
– Licensing regime that focuses on retail payment services provided to customers and merchants.
Under the designation regime, the systems being regulated are similar to the current regulations.
On the licensing regime, the PSA has identified seven activities – account issuance, e-money issuance, domestic money transfer, cross border money transfer, merchant acquisition, purchase and sale of digital payment tokens, and money changing. Due to the differences in the nature of risks, the Bill will differentiate regulatory requirements accordingly, instead of implementing a blanket set of rules. To provide for flexibility and scaling of payment services, the licensee only needs to apply for one licence to conduct any number of these activities. The three licence classes are money-changing license, the standard payment institution, or the major payment institution, depending on the type and size of the operations.
It is worth highlighting that PSA has included the regulation of domestic money transfers, merchant acquisition, and digital payment token services. Operators of these services will also have to adhere to the ML/TF requirements as these services carry with them an inherently high level of risk due to the anonymous and borderless nature of the services provided. This is also in line with protecting the integrity of the financial system in Singapore as a global world-class financial hub.
In all, PSA hopes to balance the need for a flexible regulatory framework while still enabling MAS to effectively execute their roles as regulator and enforcer. The new Bill would also create a more level playing field for all institutions and may give rise to a more unified, low-cost, efficient payments network in Singapore..