Explanatory Brief: Monetary Authority of Singapore (Amendment) Bill 2015
1 The Deputy Prime Minister and Chairman of the Monetary Authority of Singapore (“MAS”), Mr Tharman Shanmugaratnam, today moved the Monetary Authority of Singapore Bill (“MAS Bill”) for First Reading in Parliament.
2 The large size of the financial sector, high volume of transactions and wide international reach inevitably exposes Singapore to its share of money laundering and terrorism financing (“ML/TF”) risks. MAS has put in place a robust preventive regime that combines strong licensing requirements, stringent anti-money laundering and countering the financing of terrorism (“AML/CFT”) regulations and rigorous supervision to mitigate these risks.
3 The proposed amendments to the Monetary Authority of Singapore Act (“MAS Act”) will clarify MAS’ powers in relation to AML/CFT supervision and enhance the effectiveness of Singapore’s AML/CFT regime, particularly in relation to international cooperation. These enhancements will also align our regime with the international AML/CFT standards set by the Financial Action Task Force (“FATF”)1 and the Core Principles for Effective Banking Supervision issued by the Basel Committee on Banking Supervision. The MAS Bill will achieve the following:
a) set out requirements for financial institutions (“FIs”) to conduct customer due diligence (“CDD”) and retain such records;
b) set out MAS’ powers to conduct AML/CFT inspections on FIs and to approve such inspections by home AML/CFT supervisors2;
c) subject to strong safeguards, enable MAS to provide information3 to:
i. foreign AML/CFT supervisors, in connection with the AML/CFT supervision of foreign FIs carrying on financial activities in that country; and
ii. domestic authorities, in connection with the investigation or enforcement action of an offence, or any supervisory action taken against a person regulated by that authority for the contravention of AML/CFT requirements.
d) clarify that the scope of the AML/CFT regime extends to designated financial holding companies (“FHCs”) and non-bank credit card or charge card issuers.
4 MAS conducted a public consultation in June 2014 on the proposed enhancements. The consultation paper and MAS’ responses to comments received are published on MAS’ website.
KEY PROVISIONS IN THE MAS BILL
Set out AML/CFT Requirements in the MAS Act
5 The FATF’s expectation and international best practice is for CDD and record keeping requirements to be set out in primary legislation to demonstrate the country’s political commitment to combat ML/TF. Jurisdictions like the United States, Australia and New Zealand adopt such an approach. CDD and record keeping requirements are fundamental to an effective AML/CFT regime4 and are currently imposed on FIs in Singapore through AML/CFT Notices that are not primary legislation. The MAS Bill will set out the following requirements in the MAS Act:
a) conduct CDD; and
b) maintain records on transactions and information obtained through their CDD measures.
6 The details of such CDD measures and record keeping requirements will continue to be reflected in the respective AML/CFT Notices.
Powers in the MAS Act for MAS to conduct AML/CFT inspections and to authorise such inspections by home AML/CFT supervisors
7 To align MAS’ powers to conduct AML/CFT inspections of relevant classes of FIs in Singapore, such powers will be set out in the MAS Act5. The MAS Act will be amended to allow MAS to inspect FIs for compliance with the directions issued or regulations made pursuant to sections 27A and 27B of the MAS Act. With these amendments, MAS will also be able to inspect an expanded scope of FIs for AML/CFT purposes, including holders of stored valued facilities and non-bank credit card or charge card issuers.
8 Where information obtained from an inspection is relevant to the supervision of an FI’s parent, MAS may share that information with the home financial supervisor, as well as the home AML/CFT supervisor.
9 The amended MAS Act will also allow MAS to appoint a third party (e.g. an audit firm) to inspect an FI on MAS’ behalf, as is currently allowed for certain classes of FIs. In general, MAS will bear the costs for such appointment. However, if a third party inspection is carried out on the basis that MAS has reason to believe that the FI has contravened or is contravening any direction issued or regulation made under section 27A or 27B of the MAS Act, MAS may direct the FI to bear the cost of such inspection.
10 To facilitate effective group supervision in relation to AML/CFT controls, MAS currently may approve home AML/CFT supervisors with prudential regulatory oversight of the FIs in Singapore to conduct on-site inspections of the FIs’ branches or subsidiaries in Singapore. These are authorities that would exercise consolidated supervision of the FIs as part of a financial group.
11 However, in certain jurisdictions, responsibility for AML/CFT supervision resides in an authority that does not also have prudential supervision responsibilities.
12 Amendments are made for MAS to approve inspections6 in Singapore by the relevant home AML/CFT supervisor, whether or not it is also the FI’s prudential supervisor. The scope of such inspections will be limited to those for AML/CFT supervisory purposes7. Home AML/CFT supervisors may also appoint a third party to perform the inspection on their behalf.
Powers to share information subject to strong safeguards
13 To enhance cooperation between MAS and foreign AML/CFT supervisors in line with international standards, the MAS Bill will introduce a new Part on “Assistance to Foreign Authorities and Domestic Authorities for their Supervisory and other Actions in respect of Money Laundering, Financing of Terrorism, and other Offences” to allow MAS to :
a) share information with foreign AML/CFT supervisors for supervising their FIs on AML/CFT issues; and
b) make AML/CFT supervision-related enquiries on behalf of foreign AML/CFT supervisors.
14 For domestic cooperation, the new Part will allow MAS to share information with relevant Singapore authorities for the purposes of taking AML/CFT supervisory actions, investigation or enforcement of any applicable offence. This would enable MAS to assist relevant domestic authorities to take appropriate actions in relation to illicit activities in a timely manner.
15 The following legislative safeguards, amongst others, have been included to prevent “fishing expeditions” and other forms of abuse in connection with a foreign AML/CFT supervisor’s request:
a) assistance to be rendered in relation to bona fide requests8 only;
b) information shared is to be proportionate to the specified purpose; and
c) the foreign AML/CFT supervisor has to undertake not to use the information for any purpose other than a purpose that is specified in the request and to protect the confidentiality of any information obtained.
Clarification that the scope of the AML/CFT regime under the MAS Act extends to designated FHCs and non-bank credit card or charge card issuers
16 To support consolidated group supervision, the FHC Act was enacted in April 2013 to extend MAS’ regulatory powers to non-operating holding companies that hold as subsidiaries, banks or insurance companies in Singapore.
17 Whereas MAS has powers to regulate non-bank credit card or charge card issuers (“non-bank issuers”)9 under the MAS Act, we have hitherto not regulated them for AML/CFT. As there are emerging money laundering cases involving the abuse of such cards internationally, non-bank issuers are increasingly considered by international bodies to warrant closer scrutiny. MAS intends to regulate non-bank issuers for AML/CFT going forward.
18 Currently, designated FHCs10 and non-bank issuers are not explicitly listed as classes of financial institution under section 27A(6) of the MAS Act. The MAS Bill amends the definition of “financial institution” to explicitly list designated FHCs and non-bank issuers.
2 These home AML/CFT supervisors may either be the parent supervisory authority, or a pure AML/CFT supervisor without prudential supervisory responsibility of the FI in the home jurisdiction. For example, Australia’s, China’s and UK’s parent AML/CFT supervisor is the Australian Transaction Reports and Analysis Centre (“AUSTRAC”), People’s Bank of China and the UK Financial Conduct Authority respectively. As they do not have responsibility over activities equivalent to those regulated under the Banking Act (“BA”), MAS currently cannot rely on the BA to authorise AML/CFT inspections by these authorities.
3 This can include information that is protected from unauthorised disclosure under a prescribed written law such as customer information under section 40A of the Banking Act and protected information under section 49 of the Trust Companies Act.
4 FIs should carry out CDD to identify and verify all its customers, including the beneficial owners, understand the purpose of the relationship and monitor the transactions. Record keeping is necessary to provide information for risk assessment purposes, maintain audit trails, as well as evidence for prosecution of criminal activity, where necessary.
5 MAS has the power to carry out inspection of FIs under various sector-specific Acts such as the Banking Act, Insurance Act, Securities and Futures Act etc., but the scope of such powers vary.
6 A home AML/CFT supervisor may conduct inspection of the FI in Singapore with MAS’ written approval only if the conditions in the MAS Bill are satisfied. For example, the home AML/CFT supervisor should have consolidated supervision authority over the FI and the inspection must be for the purpose of such supervision. The home AML/CFT supervisor also has to give a written undertaking to protect the confidentiality of the information obtained.
7 Similar existing provisions in the other Acts will remain, and cover inspections by parent supervisory/foreign regulatory authorities for other purposes beyond AML/CFT.
8 The request has to be for the purpose enabling the foreign AML/CFT supervisor to carry out AML/CFT supervision or take supervisory action. The request also has to specify information such as the purpose of the request, the FI in Singapore which possess the information requested for and the relevance of the information requested to the AML/CFT supervision or supervisory action.
9 Credit and charge cards in Singapore are mostly issued by the banks but there are card network providers in Singapore that issue cards directly.
10 MAS can designate an FHC as such where the FHC is an ultimate holding company of a financial group headquartered in Singapore or where doing so will strengthen its supervision of the Singapore bank or insurance subsidiary.