A Brief Overview of the Payment Services Act 2019

21 March 2019

Dharma Sadasivan

The Payment Services Act 2019 ("PSA") combines the 2006 Payment Systems (Oversight) Act ("PS(O)A") and the 1979 Money-Changing and Remittance Businesses Act ("MCRBA"), and aims to unify payment services regulation under a coherent and comprehensive regulatory framework.

The PSA establishes two sets of frameworks – one for licensing payment services, and another for designating payment services that are deemed to be significant. The Monetary Authority of Singapore ("MAS") is the regulatory body overseeing and enforcing the PSA. The PSA does not apply to public authorities.
 
The PSA was formerly known as the Payment Services Bill before receiving the assent of the President of the Republic of Singapore on 11 February 2019. As at the time of publishing, the PSA has yet to take effect.


Licensing of payment services
Payment services must be licensed under the PSA.
 
Definition
What is a "payment service"? Part 1 of the First Schedule to the PSA defines it as:
 

• an account issuance service;
• a domestic money transfer service;
• a cross‑border money transfer service;
• a merchant acquisition service;
• an e-money issuance service;
• a digital payment token service;
• a money‑changing service.

 
There are exceptions to this, which are set out at Part 2 of the First Schedule to the PSA.
 
Licensing required
Payment services cannot be provided or advertised unless the payment service provider ("Provider") is licensed or exempt.
 
There are three (3) types of licenses: (a) money-changing license; (b) standard payment institution license; and (c) major payment institution license.
 
If a Provider only provides money-changing services, the Provider only needs a money-changing license.
 
If a Provider provides payment services other than or in addition to money-changing services, the Provider will need either a standard payment institution license or, if the value or transaction thresholds described at section 6(5) of the PSA are exceeded, a major payment institution license.
 
Critically, a person that provides payment services incidental to their main business (the "primary business") is still required to obtain a license. In other words, provision of payment services as a secondary business requires licensing even if it is only related or incidental to the primary business.
 
Licensed Providers ("Licensees") are also prohibited from providing payment services through an agent unless the agent is also licensed or exempted in respect of that type of payment service.
 
Licensing exemptions
Pursuant to section 13 of the PSA, Banks licensed under the Banking Act, merchant banks approved as financial institutions under the Monetary Authority of Singapore Act, finance companies licensed under the Finance Companies Act, and licensed credit or charge card issuers under the Banking Act are exempt from the requirement for Providers to be licensed.
 
A general catch-all is also provided to allow for other persons or classes of persons to be prescribed as exempt.
 
Additional obligations on major payment institutions
Among other things, major payment institutions must (i) maintain security of a prescribed amount with MAS in the form of a cash deposit bank guarantee, or other form permitted by MAS, for the performance of its obligations to its customers; and (ii) provide for interoperability between payment accounts and payment systems, as well as between different payment systems themselves.
 
Self-audits
Licensees must appoint an auditor and conduct a self-audit annually.
 
 
Designated payment services
MAS may designate a significant payment service as a "designated payment service". A designated payment service may be so designated for a variety of reasons, from financial stability, to ensuring competition and efficiency.
 
Obligations on operators and settlement institutions of designated payment services
Sections 47-50 of the PSA set out obligations on operators and settlement institutions (collectively, "Operators") of designated payment services.
 
Briefly, Operators must have a permanent place of business or registered office in Singapore, with a representative present to address customer queries or complaints, and for transaction records relating to the designated payment system to be kept.
 
Operators must notify MAS if certain prescribed events occur (see section 48 of the PSA for the list of events). Generally these are events that may potentially impact the Operator's operations.
 
Operators must submit periodic reports to MAS in the form, manner, or frequency prescribed by MAS, but at present, the form, manner and frequency are not stipulated in the PSA.
 
Operators must notify MAS if they carry on a business other than that of operating a payment system or a business that is incidental to operating a payment system, or if they acquire a business other than a business that operates or is incidental to operating a payment system.
 
Operators must also notify MAS if they carry on a business other than that of operating a payment system or a business that is incidental to operating a payment system within 2 months of their payment system being designated as a designated payment system.
 
In response, MAS can issue directions that may include directing the Operator to cease carrying on the non-payment system business, or to dispose of its shares in the non-payment system business.
 
Self-audits
As with Licensees, Operators must appoint an auditor and conduct a self-audit annually.

 
Other powers and regulations
MAS has a broad range of powers, including:

• appointing auditors and conducting audits on Licensees and Operators;
• imposing conditions or restrictions on Operators or participants of designated payment systems;
• imposing an access regime to ensure that payment systems are fair and non-discriminatory;
• general powers of inspection and investigation;
• in an emergency, emergency powers such requiring a Licensee or Operator to take or not take any action or do or not do any act relating to its business, appointing a statutory advisor, and assuming control of or managing an insolvent Licensee or Operator;
• in an emergency and where the payment entity is an Operator, additional emergency powers such as applying to the High Court to wind up the Operator.

 
Control of controllers
Pursuant to sections 28 and 59, MAS approval is required for a person to be a 20% controller of a Licensee, and for a person to be a 5%, 12%, 20%, or indirect controller of an Operator. MAS may serve an objection on any person who is a controller described above and can issue directions that include directing the transfer or disposal of shares in the Licensee or Operator held by the controller, or restricting the transfer or disposal of the controller's shares.
 
Control of officers
Similarly, MAS approval is required under sections 34 and 65 for Licensees to appoint a CEO, director, or partner, and for Operators to appoint a CEO or director. MAS can direct a Licensee or Operator to remove the CEO, director, or partner (as the case may be) if it is satisfied that the individual is not fit and proper to act as such.
 
Voluntary transfer of business
Under section 56 of the PSA, an Operator requires the consent of MAS and the Court to transfer the whole or any part of its business, even if the business (or part thereof) being transferred is not the usual business of the Operator.
 
Assistance to foreign regulators
MAS may provide assistance to foreign regulatory authorities by:

• transmitting material in MAS's possession to the foreign regulator;
• ordering any person, ministry, government department, or statutory authority to transmit material directly to the foreign regulator; or
• ordering any person, ministry, government department, or statutory authority to provide material or an oral statement to MAS for MAS to transmit to the foreign regulator.

Disclosure of information

Self-incrimination
A person is not excused from disclosing information to MAS in the course of its inspections or investigations simply because the information may be self-incriminating. However, if the person claims that the information may be self-incriminating before disclosing it, that statement will not be admissible in evidence against the person in criminal proceedings other than proceedings for an offence under section 94(3) of the PSA (providing false or misleading information).
 
Legal privilege
Pursuant to sections 76(1) and 87(4), legal privilege continues to apply and advocates and solicitors do not need to disclose privileged communications made by or to them in that capacity.
 
Notwithstanding this, under sections 76(2) and 87(5), an advocate and solicitor will still be required to provide the name and address (if known) of the person to/by/on behalf of whom the privileged communication was made.


Dharma Sadasivan
Associate Director, BR Law Corporation
[email protected]