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MAS proposes new powers to regulate financial services amid emerging cyber risks
THE Monetary Authority of Singapore (MAS) is proposing new laws that will give it more teeth to regulate financial services in the Republic amid emerging risks, such as those brought on by the wider provision of digital services.
The additional powers proposed will allow the central bank to impose on financial institutions certain requirements to manage technology risks, license and regulate providers of digital token services overseas, and issue prohibition orders against individuals it deems unsuitable from operating in the industry.
It is also seeking to enhance the effectiveness of dispute resolution by providing statutory protection to mediators, adjudicators and others involved in facilitating resolution via approved channels.
The MAS made public these proposals in a consultation paper detailing a new omnibus Act for the financial sector on Tuesday and is inviting comments from industry practitioners as well as other interested parties.
If passed, these new proposals will be consolidated into a single legislation that will also include existing provisions in the MAS Act, which relate to the authority's regulatory oversight of various financial institutions.
Laying out details of its proposals in the 98-page consultation paper, the MAS noted that financial institutions today are highly reliant on technology to deliver services.
"As Singapore aims to be a smart financial centre where the use of information technology is pervasive, ensuring safety and soundness of the systems that support the delivery of financial services is key to maintaining confidence in our financial sector," it said.
The MAS thus intends to give itself power to issue directions, or make regulations, concerning any financial institution or class of financial institutions for the management of technology risks. This includes cybersecurity risks, as well as ensuring safe and sound use of technology to deliver financial services and to protect data.
It also intends to raise the maximum penalty for breaches of such regulations to S$1 million, noting that a sufficiently high penalty is needed to signal the importance of technology risk management.
Although most entities that provide virtual asset services in Singapore are subject to current legislation, the Internet-based nature of such operations means that there may be entities created in the Republic but offer their services outside the city-state and that are not captured under these laws.
The MAS thus intends to regulate such entities – "digital token service providers" – in order to guard against the risks of money laundering and terrorism financing.
The authority also wants to expand its powers to issue prohibition orders against any person it deems "not fit and proper" to engage in regulated activities, as well as roles and functions across the industry.
Currently, the MAS's powers on this front reside only in the Securities and Futures Act, the Financial Advisers Act and the Insurance Act – this means it cannot take action on individuals regulated under other Acts even if they have committed serious misconduct.
"In order to protect financial institutions and the wider financial industry, MAS needs to be able to keep out persons who have demonstrated by their misconduct that they have the potential to cause harm," said the MAS.
It noted, however, that this power will be undertaken in a "risk-proportionate" manner that takes into account the nature and severity of the misconduct, and its impact on the financial industry.
Aggrieved individuals will also be able to launch appeals against such orders.
Interested parties have until Aug 20 to email their comments on the proposed Act to the MAS or submit them by post.