Singapore’s central bank plans to expand anti-money laundering regulations to cover the booming market in digital payment tokens.
The Monetary Authority of Singapore (MAS) has issued a consultation paper on its proposals to update the existing anti-money laundering and countering the financing of terrorism (AML/CFT) rules for financial institutions and variable capital companies (VCCs).
The MAS said it was planning to amend its existing AML/CFT Notices “to ensure that the requirements for all financial institutions and VCCs continued to be effective in mitigating and managing the evolving money laundering and terrorist financing risks in Singapore’s financial sector.”
The updated rules seek to clarify that existing AML/CFT requirements for banks, merchant banks, finance companies and credit card operators also cover any digital payment token (DPT) services and transactions they conduct.
Institutions will be required to conduct customer due diligence (CDD) from the first dollar, so there will be no minimum threshold for transactions involving DPTs.
“There could be instances of occasional transactions, for example, where DPTs are sold through kiosks, such as a Bitcoin automated teller machine,” the MAS said.
It is also proposing a value transfer requirement on digital tokens that are capital markets products.
The MAS defines a digital payment token (DPT) as any digital representation of value that is expressed as a unit, not denominated in any currency or pegged to any currency, intended to be a medium of exchange accepted by the public as payment and can be transferred, stored or traded electronically.
DPT service providers buy and sell DPTs, operate DPT exchanges and participate in and provide financial services related to an issuer’s offer and/or sale of a DPT. They may also transfer or transmit DPTs from one DPT address or account to another; and provide custodian DPT wallets for or on behalf of customers.
As part of the same overhaul of regulations, the MAS also wants greater due diligence requirements for so-called “higher risk shell companies”.
Financial institutions and VCCs will be required to assess whether a customer could be a shell company which presents a high money laundering or terrorist financing risk and, if so, perform enhanced customer due diligence measures.
“This is consistent with MAS’ expectation for financial institutions and VCCs to adopt a risk-based approach to AML/CFT measures by imposing tighter controls on higher-risk customers while not imposing an undue burden on other customers,” it said.
The consultation on AML/CFT updates closes on 10 August 2021. Changes are expected to come into force in the fourth quarter of 2021.