MAS seeks more teeth to regulate financial services amid emerging cyber risks

Singapore

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 orders prohibiting 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 relating to the authority's regulatory oversight of various financial institutions.

Laying out details of its proposals in the 98-page consultation paper, it 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 cyber-security risks, as well as ensuring safe and sound use of technology to deliver financial services and to protect data.

It also proposed that those who breach such regulations be subject to a maximum penalty of S$1 million, noting that a sufficiently high penalty is needed to signal the importance of technology risk management.

The quantum was derived after considering regimes of other government agencies.

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 that offer their services outside the city-state and are not captured under these laws.

The MAS thus intends to regulate such entities - which it considers "digital token service providers" - in order to guard against the risks of money laundering and terrorism financing.

It proposes that each digital token service provider be licensed and fulfil specific criteria, such as appointing at least one executive director who resides in Singapore and being incorporated in Singapore.

The authority also wants to widen 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 "riskproportionate" 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.