The Money-Changing and Remittance Businesses (Amendment) Bill 2005
Second Reading Speech by Mr Tharman Shanmugaratnam, Minister for Education and Deputy Chairman, Monetary Authority Of Singapore
Mr Speaker Sir, on behalf of the Senior Minister, I beg to move, "That the Bill be now read a Second time."
2 Sir, this Bill seeks to amend the Money-Changing and Remittance Businesses Act (Cap. 187). The amendments aim to refine and better reflect MAS' supervisory approach towards holders of remittance licences and money-changer's licences. I should state at the outset that MAS' supervision of these activities focuses on anti-money laundering (AML) and countering the financing of terrorism (CFT). MAS does not supervise holders of these licences for their safety and soundness. This approach is similar to those adopted in other reputable financial centres, and places responsibility on customers to choose their remittance channels wisely.
3 Remittance houses perform a useful service in transmitting money from Singapore to recipients in other countries, at relatively low cost. The industry has grown over the years but most of the remittance houses remain small players. Many are sole proprietorships or family-owned partnerships who operate through informal networks such as friends, relatives or overseas agents, operating on the basis of relationships and trust, to deliver funds to the intended recipients. These small players often may not have the resources to put in place the same degree of internal controls that larger financial institutions like banks have. The same is true of most holders of licenses as money-changers. Their modus operandi, and more importantly the fact that they pose no systemic risk to our financial system, make it impractical and unnecessary for MAS to supervise them for purpose of ensuring their safety and soundness. Other reputable jurisdictions such as Australia, Hong Kong, Switzerland and the UK adopt the same regulatory approach.
4 MAS' supervision of holders of remittance licences and money-changer's licences will continue to focus on AML and CFT. Like other established financial centres, Singapore is committed to the global fight against the laundering of proceeds from criminal and terrorist activities.
5 Sir, this Bill carries two messages. First, MAS intends to raise the AML and CFT standards in this industry. Second, consumers have to take personal responsibility and exercise discretion in choosing remittance channels to transmit their funds. They should not assume that the MAS or the safeguards in the Bill will insulate them from losses or ensure the safety and soundness of remittance houses.
6 To raise the AML and CFT standards in this industry, we will be pushing up the entry requirements. We will be requiring the holder of a remittance licence to be incorporated as a company with a minimum paid-up capital of $100,000. This higher entry requirement will help to weed out the weaker remittance licensees. We will also extend the present AML and CFT regulations to their inward remittance business, not just their outward remittances. And we will strengthen market discipline by publishing MAS' regulatory actions against errant licensees.
7 To raise the level of public awareness of the scope of MAS' supervisory approach, remittance licensees will be required to post cautionary statements at their business premises to alert the public that MAS is not supervising remittance licensees for their safety and soundness. MAS will also be working with the Ministry of Manpower to educate foreign workers, who are the main users of remittance services, on what to look out for when remitting their money overseas.
8 But the Bill is not intended to remove all safeguards for customers. Basic safeguards are built into our regulations, and the Bill enhances certain safeguards which serve to mitigate against potential losses by customers. First, MAS will continue to conduct background checks on applicants to prevent undesirable persons from conducting money-changing and remittance business. MAS will also maintain the requirement for remittance licensees to furnish a security deposit of $100,000 for due performance of their obligations. This security deposit may allow customers to recover some of their losses in the event that a remittance licensee fails. But it is not intended to nor can it insure customers against all losses. To do so will require a prohibitively high security deposit that will render many remittance businesses unviable.
9 In addition to these existing measures, the Bill will now provide that officers, partners or managers of businesses holding a money-changer's licence or remittance licence may be made personally liable for losses suffered, if the court finds the licensee to have carried out its business with the intention to defraud or for any fraudulent purpose. These measures are aimed at discouraging fraudulent practices and providing customers and creditors with some recourse, should losses occur.
10 In sum, MAS cannot for practical reasons supervise remittance houses to ensure their safety and soundness, but we will retain basic regulatory safeguards that serve customers' interests. This is unlike the case of banks and other financial players whose failure can pose systemic risks. For such players, MAS has to engage in close and active prudential supervision, in addition to regulatory safeguards such as minimum capital requirements.
11 It is therefore important for the public to understand that MAS cannot prevent failure of remittance businesses. In cases of failure arising from fraud, the Bill provides an additional avenue for customers to pursue the assets of the guilty partner or officer. But customers have to take responsibility to weigh the benefits and risks of using the remittance services offered by the various businesses in the market, including the services offered by banks regulated by MAS.
12 The introduction of higher entry requirements for remittance licensees will weed out the weaker players in the industry. However, I would like to assure the House that the new Bill will not deprive the public of remittance and money-changing services. Over the last 2 years, MAS has allowed six banks to set up additional outlets aimed exclusively at providing remittance and money-changing services. Large international remittance houses such as Western Union also continue to operate in Singapore. There are also established companies such as Singapore Post Limited, with an extensive distribution network that also offer remittance services.
13 Sir, I shall now highlight the key amendments that are proposed in the Bill.
Incorporation Requirement for Holder of a Remittance Licence
14 Currently, a remittance licence can be granted to a sole proprietor, a partnership or a company. The Bill requires the remittance licensee to be incorporated as a company with a minimum capital of $100,000. This aims to raise the professional and AML standards in the industry by ensuring that remittance licensees have a minimum level of financial resources needed to put in place AML procedures for their operations.
Scope of MAS' Powers
15 The Bill expands the scope of MAS' powers to revoke or suspend a money-changer's or remittance licence to include cases where the licensee has failed to comply with any written direction issued by the MAS. These powers will enable MAS to deal with recalcitrant licensees more effectively. In addition, the Bill spells out the circumstances under which a money-changer's or remittance licence will lapse, expire, or is voluntarily surrendered.
16 As I have mentioned earlier, the Bill empowers MAS to issue directions to require a remittance licensee to display cautionary statements at its place of business. The cautionary statements aim to alert the public on what MAS does and does not supervise with respect to the business of the remittance house.
17 Currently, the inward remittance business is not a regulated activity. The Bill will empower MAS to issue directions in respect of a money-changing or remittance licensee's inward remittance business, to strengthen our anti-money laundering arsenal.
Personal Liability for Losses
18 Presently, many remittance and money-changing licensees operate as sole proprietors or partnerships, where the sole proprietors and partners are personally liable for any loss suffered by the business. This is not the case for officers of a company or partners and managers of a limited liability partnership. Therefore, the Bill will provide that officers, partners or managers of holders of money-changing licences or remittance licences, may be made personally liable for losses suffered, if the court finds that the licensee has carried out any of its business with the intention to defraud or for any fraudulent purpose.
Approval of Substantial Shareholders, Partners and Directors
19 MAS will be empowered under the Bill to approve the appointment of directors, partners and substantial shareholders of a money-changing or remittance licensee, as such persons may be in a position to influence the management of the business.
20 The Bill requires the holder of a remittance licence to submit a closure certificate to MAS upon the cessation of remittance business. This certifies that all customers' funds have been received by the intended recipients and that adequate provision has been made to meet unforeseen liabilities in respect of the remittance business.
Publication of Information
21 The Bill will give MAS the power to disclose regulatory actions taken against the remittance or money-changing licensee, where it is in the public interest to do so. This is aimed at enhancing market discipline in the industry.
Quantum of Penalties
22 For more effective deterrence, the Bill will increase the quantum of penalties for certain offences. For instance, the penalties for persons carrying on an unlicensed money-changing business or remittance business will be increased from $50,000 to $100,000.
23 Other Clauses of the Bill that I have not elaborated on are minor technical amendments to clarify or expand the existing provisions, or to remove obsolete provisions.
24 Sir, in conclusion, the Bill introduces changes which enhance MAS' oversight of holders of remittance and money-changer's licences, for purposes of AML and CFT. It aims to raise the level of professionalism in the industry over time without depriving the public of affordable remittance and money changing services. The Bill reflects MAS' supervisory approach, which does not extend to the prudential supervision of remittance licensees and money-changing licensees. While it retains existing safeguards and introduces new measures to discourage fraudulent practices, these cannot insulate the public from all losses. Customers have to take personal responsibility and exercise discretion in choosing the channels through which they want their funds transmitted.
25 Sir, I beg to move.