Speech by Mr. Louis Ng Kok Kwang, MP for Nee Soon GRC, at the Second Reading of the Payment Services (Amendment) Bill (Bill No. 41/2020)
Sir, the proposed amendments in this Bill will expand anti-money laundering and counter-terrorism financing regulations to cover more categories of payment service providers.
The list will include those providing services centered on Digital Payment Token (DPT) and those facilitating cross-border money transfers where the money does not pass through Singapore.
I agree with this step. The fight against money laundering and terrorism financing is the fight to make sure that crime does not pay. This mission, by necessity, must include all players of our finance industry.
Before I continue, let me thank MAS for conducting a public consultation which shaped the proposed amendments we see today. Public consultations help us formulate better policies. I hope MAS will continue this practice.
I have three points of clarification to make on this Bill.
My first point is about anonymity in our payment ecosystem.
In its public consultation, MAS made clear that this Bill will obligate DPT service providers to conduct customer due diligence to guard against money laundering and terrorism financing.
These requirements mean that short of peer-to-peer trading, there is no way to trade cryptocurrencies in Singapore anonymously. This removes one benefit of cryptocurrency, which is its anonymity.
I will say, first, that I fully agree with the intent of this Bill: Bad actors must not be allowed to use Singapore’s financial system for their purposes.
But cryptocurrency’s quest for anonymity is perhaps one we can empathize with. Today’s world is plagued by compulsive tracking. You can’t access any digital services without someone storing every little bit of information about where you are, what you do and who you are.
Today’s world is also plagued by massive data leakages and malicious hackers. A month doesn’t go by before some company we know spills our private information and order history into the wild.
Having sought the views of the public and the industry, can MAS share whether it has reached a final policy stance on whether it envisions providing any space for anonymised financial transactions in Singapore?
My second point relates to the user protection.
The Bill provides powers for MAS to enact regulations on licensed DPT service providers. Many of the regulations pertain to the DPT service provider’s maintenance of and safeguarding of assets belonging to users.
I support these powers. User protection is essential. It helps keep our financial system stable and it protects the assets of Singaporeans.
As part of its efforts to protect users, will the Ministry consider introducing other forms of user protection measures?
In particular, will the Ministry consider regulating DPT service providers to ensure they do not engage in misleading or deceptive conduct concerning their offerings?
DPTs are fresh, different, and interesting. Service providers will likely latch onto these qualities when marketing to unsuspecting consumers.
Regulating how DPTs at an earlier point when they are marketed to consumers would complement regulations at a later stage on money management by service providers.
After all, it’ll be harder to defraud or otherwise harm a customer who knows what they’re getting themselves into.
Illegal wildlife trade
My third point relates to the illegal wildlife trade.
This Bill expands our regulatory scrutiny of international money transfers, and that is a good thing.
In this spirit, I ask that we work more closely with financial institution to ensure that their internal controls can accurately identify signs of illegal activity, particularly when it comes to illegal wildlife trade.
This is not a new idea from me. It is a best practice recommended in a June 2020 report by the Financial Action Task Force (FATF), titled “Money Laundering and the Illegal Wildlife Trade”.
I quote: “There is a need both for the public sector to share additional information with reporting entities, including feedback on [suspicious transaction reports] filed, and for reporting entities to review whether current internal controls against ML from the illegal wildlife are in line with identified risks. … where competent authorities have shared information, financial institutions have been able to incorporate this into their transaction monitoring systems and, in turn, provide richer intelligence for [law enforcement authorities].”
My team spoke to some employees of local financial institutions who monitor transactions. They agreed with this recommendation. Some shared their concerns that they may only receive generic responses from the authorities with regard to the suspicious transaction reports they file.
This creates two problems. One, the employees do not know whether the signals they are looking out for are relevant or not. The feedback from the authorities with regard to the suspicious transaction reports is not specific enough to motivate meaningful operational changes.
Two, the employees have little information on the status or outcomes of government investigations. This means they struggle to take internal follow-up actions to adjust the risk levels of these clients.
Better feedback will help our Government get more relevant reports as well as help financial institutions take strong internal actions against bad actors.
Industry experts say the same thing. At a seminar held by the Association of Certified Anti-Money Laundering Specialists (ACAMS) last October, the panelists from the industry noted that there has not been sufficient focus on the financial aspect of tackling the illegal wildlife trade.
Will the Government consider sharing feedback with greater details when financial institutions do provide suspicious transaction reports, including on the illegal wildlife trade?
To ensure that its feedback is relevant, will the Government also consider holding discussions with ground staff at financial institutions to assess the efficacy of its existing feedback?
Sir, notwithstanding my clarifications, I stand in support of this Bill.
Watch the speech here.