Under the Monetary Authority of Singapore Act, the MAS presently has supervisory powers over anti-money laundering and countering the financing of terrorism (AML/CFT), control of financial institutions (FIs), and oversight of financial sector dispute resolution schemes.
In recognition of the increasing need for a financial sector-wide regulatory approach, the FSM Bill was introduced to enhance the MAS’ agility and effectiveness in addressing financial sector-wide risks in our ever-changing and increasingly integrated world.
Key aspects of the FSM Bill
(A) Harmonised and expanded powers to issue prohibition orders
The MAS currently has the power to issue prohibition orders (POs) to bar certain persons specified under the Securities and Futures Act 2001, the Financial Advisors Act 2001, and the Insurance Act 1966 from conducting certain activities or from holding key roles in FIs. Such POs serve as a deterrent against serious misconduct, to preserve trust in Singapore’s financial sector.
However, the MAS’ current power to issue POs has its limitations. While POs may be issued to relevant persons specified in the relevant acts, the MAS is unable to issue POs to persons who are regulated under other MAS-administered acts. Furthermore, the existing grounds for issuing POs are limited to a list of specific criteria under the relevant acts, and the prohibitions relate mainly to taking up specified positions, such as a directorship, and conducting the relevant regulated activity, such as providing a financial advisory service.
Under the FSM Bill, the MAS will introduce a more harmonised and expanded power to prohibit any person who is not fit and proper from engaging in any activity regulated by the MAS. The fit and proper criterion will be the sole ground on which a PO can be issued. This will provide the MAS with more discretionary powers in issuing POs, and potentially widen the scope of activities to which POs may apply. The MAS will also have the power to prohibit persons from performing a wider range of specified functions, which include the handling of funds, the safeguarding or administration of digital payment tokens (DPTs), risk-taking, risk management and critical system administration.
Despite the wider reach of the MAS’ power to issue POs, POs will generally only be issued to persons with a nexus to the financial sector. Further, the MAS will exercise such powers commensurate to the risk, nature, and severity of the misconduct, and the potential or actual impact of the misconduct on the financial sector. Persons informed of the MAS’ intention or those issued POs will also be given the opportunity to defend themselves before the MAS or an appeal right to the minister.
(B) Enhanced regulation of virtual asset service providers for money laundering and terrorist financing risks
Virtual asset service providers
Under the enhanced Financial Action Task Force (FATF) standards adopted in June 2019, virtual asset service providers (VASPs) must be licensed or registered in the jurisdictions where they are created.
In alignment with the enhanced FATF standards, the FSM Bill will regulate all VASPs created in Singapore that provide virtual asset services outside of Singapore. Such VASPs which provide digital token (DT)1 services outside of Singapore will be regulated as a new class of FIs, and will be subject to licensing and ongoing requirements. This serves to mitigate the reputational risks of money laundering and terrorist financing (ML/TF), and ensures that the MAS has adequate supervisory oversight over such VASPs.