Co-authored by Carolyn Chia and Tania Teng
The Monetary Authority of Singapore (MAS) has published a response to its consultation paper of 16 January 2018 (the 2018 CP), which proposed changes to the anti-money-laundering and countering-the-financing-of-terrorism (AML/CFT) rules for money-changing and remittance businesses (together, licensees) licensed under the Money-changing and Remittance Businesses Act (Cap. 187) (MCRBA).
This alert summarises these changes and considers the key practical impact for affected institutions.
Overview of changes
Prohibition on issuance of bearer negotiable instruments and restrictions on cash payouts
The 2018 CP proposed that licensees should be prohibited from issuing bearer negotiable instruments (broadly, traveller's cheques and other instruments in bearer form the title to which passes to the recipient on delivery) to the following persons:
- in the case of a money-changer, any person for whom the money-changer undertakes a transaction;
- any person to whom a licensee makes a cash or cash-equivalent payment in Singapore following an inward remittance from overseas; and
- any person on whose behalf a licensee conducts a foreign exchange purchase or sale transaction which is not a money-changing transaction, without the use of foreign currency notes (respectively, an FX Counterparty and an FX Transaction).
In respect of any inward remittance transaction from overseas or any FX Transaction, licensees would also be prohibited from making any payment in cash of S$20,000 or more to any of the recipients outlined above or to any person they may appoint to act on their behalf (although such payments may be made by cheque under certain conditions).
The above changes have now been implemented as proposed.
Removal of requirement for MAS approval to conduct non-face-to-face business
In the 2018 CP, the MAS proposed to remove the requirement for licensees to obtain prior MAS approval to conduct non-face-to-face (NFTF) business with customers.
However, a licensee which has not previously obtained prior MAS approval would need to appoint an auditor or qualified independent consultant to assess the effectiveness of the policies and procedures it has put in place to mitigate the risks associated with NFTF business. A report of this assessment would need to be submitted to the MAS no later than one year after commencement of the licensee's NFTF relations. Customer due diligence (CDD) measures would need to be at least as robust as those required to be performed for face-to-face contact.
The above changes have been largely implemented as proposed. Additionally, licensees are required to appoint an auditor or qualified independent consultant to assess the effectiveness of the above-mentioned policies and procedures where there has been a substantial change in these, and to submit a report of this assessment to the MAS no later than one year after implementation of the change.
Requirement to carry out CDD on FX Counterparties
The 2018 CP proposed that licensees should be required to conduct CDD on FX Counterparties on whose behalf they conduct FX Transactions.
The finalised rules retain this CDD requirement, but apply it to a narrower set of circumstances than originally proposed. While the 2018 CP had suggested that simplified CDD could be carried out on certain types of FX Counterparty (namely, Singapore-licensed banks, approved merchant banks and certain overseas banks), no CDD will be required at all where the FX Counterparty is an MAS-regulated financial institution or an overseas financial institution subject to supervision to ensure compliance with Financial Action Task Force standards; further, the CDD requirement only applies to FX Transactions of S$20,000 or more in value.
Form and timing of changes
The prohibition on issuance of bearer negotiable instruments and restrictions on cash payouts are set out in the new MAS Notice 3006, which takes effect on 8 July 2019.
All other requirements are reflected in updates to MAS Notice 3001 and the guidelines thereto, all of which take effect on 10 January 2019, with the exception of the requirement to carry out CDD on FX Counterparties, which takes effect on 8 April 2019.
Practical impact on licensees
Licensees will need to ensure that their internal policies and procedures, as well as their customer-facing processes and documentation, are adapted to the above requirements ahead of the relevant effective dates.
While these new requirements therefore heighten the compliance burden for licensees, the removal of the requirement for licensees to obtain prior MAS approval to conduct NFTF business will be welcomed by the industry, as it will facilitate innovation and reflects technological advances in the payment services space.
It should be noted that the regulation of licensees will in due course move from the MCRBA to the Payment Services Act (the Payment Services Bill had its second reading in the Singapore parliament on 14 January 2019). However, it is likely that these new AML/CFT provisions will in substance be retained.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.