22 November, 2015
1. Introduction
The Monetary Authority of Singapore (“MAS”) has issued a consultation paper on 20 October 2015 proposing various amendments to the MAS Notice PSOA-N02 on Prevention of Money Laundering and Countering the Financing of Terrorism – Holders of Stored Value Facilities (“SVFs”) (the “Notice”). With developments in the evolving SVF landscape in mind, the proposed amendments aim to update the existing anti-money laundering/countering the financing of terrorism (“AML/CFT”) requirements for holders of SVFs, as well as enhance MAS’ surveillance of SVFs.
This note summarises the key changes that will likely be made.
2. Proposed Amendments to the Notice
MAS has proposed the following changes and new requirements:
I. Applicability of the Notice
Currently, the Notice applies only to persons operating SVFs which are able to contain, and make available to the customer, a stored value of more than S$1,000.
Noting however that in practice, any SVF could potentially be used to carry out money-laundering/terrorist financing (“ML/TF”) activities, MAS has proposed that the coverage of the Notice be broadened to include all SVF holders.
II. Carve-outs in relation to AML/CFT requirements
Notwithstanding the extension of the application of the Notice to all SVF holders, MAS has said that it is aware that some SVFs pose low ML/TF risks, owing to various product features such as (i) identifiable funding sources; and (ii) restrictions on geographical reach, person-to-person transfers and/or cash withdrawals. Accordingly, MAS has proposed not to subject the holders of low risk SVFs to the AML/CFT requirements in the Notice although the proposed notification requirements (as discussed further below) will still apply to them.
With the change, MAS will provide guidance on the pre-defined classes of SVFs which will be assessed as having low ML/FT risks. In particular, MAS will exempt a SVF from AML/CFT requirements in the Notice if:
(a) It is not able to contain stored value of S$1,000 or more;
(b) It does not allow the withdrawal of any cash from the facility;
(c) It does not allow for the refund of any stored value in cash on termination of the use of the facility, except upon the
production of the customer’s identification; and
(d) It satisfies at least two of the following conditions:
(i) Does not allow any form of cross-border funds transfer or withdrawal;
(ii) Is only to be used as a means of making payment for goods or services;
(iii) The stored value is funded from an identifiable source of funding.
The expression “identifiable source of funding” refers to:
(a) An account which is maintained with a financial institution that is the subject of any direction issued, or regulation made, by the MAS under section 27B of the MAS Act; or
(b) An account which is maintained with a financial institution incorporated or established outside Singapore that is subject to and supervised for compliance with AML/CFT requirements consistent with standards set by the Financial Action Task Force.
All other holders of SVFs will be required to follow the AML/CFT requirements as provided in the Notice.
III. Notification of SVFs
Presently, MAS is empowered under section 6 of the Payment Systems (Oversight) Act (Cap. 222A) (“PSOA”) to require the provision of information by a holder of SVFs to MAS. MAS has proposed to formalise such information gathering powers for AML/CFT purposes by requiring that all holders of SVFs comply with a notification regime under the Notice. The objective of the proposed notification regime is to enhance MAS’ surveillance of the SVF sector for ML/FT risks.
Under the proposed notification regime, all holders of SVFs must notify MAS at least 30 days prior to the commencement of operations of the SVF(s), by providing the information specified in the newly prescribed Form A under the Notice (“Form A”). Information required to be furnished in Form A includes details regarding the features or business model of the SVF(s) provided by the holder of SVFs.
Thereafter, holders of SVFs must, at least 30 days prior to a change in the information previously provided to MAS in Form A, notify MAS of any such change.
MAS has also proposed that holders of SVFs submit annual statistical updates to MAS, as per the newly prescribed Form B under the Notice. The statistics will cover the preceding calendar year and have to be submitted by 31 January of the current calendar year.
IV. CDD requirements for non-account holders
Currently, SVFs cannot be used to conduct transactions without the establishment of business relations with the holder of the SVFs. MAS has however noted that future developments may potentially enable SVFs to conduct occasional transactions where no business relation was established.
Therefore MAS has proposed to introduce customer due diligence (“CDD”) requirements for relevant holders of SVFs when they undertake any transaction of a value exceeding S$5000 for any customer with whom it has not otherwise established business relations.
Various consequential changes will be made in line with the proposed CDD requirement, such as amendments to the definition of “customer” under the Notice to include, in relation to a relevant holder of SVFs, a person for whom the relevant holder undertakes or intends to undertake any transaction without an account being opened. Corresponding changes to the Notice will also be made in relation to the requirements for verification of customer’s identity, screening and record-keeping for reconstruction of transactions.
