Payment Services Act 2019 — Part 2: LICENSING OF PAYMENT SERVICE PROVIDERS

Sushant Shukla

Part of a comprehensive analysis of the Payment Services Act 2019

All Parts in This Series

Licensing and Regulation of Payment Service Providers under Part 2 of the Payment Services Act 2019

The Payment Services Act 2019 (PSA) establishes a comprehensive regulatory framework for payment service providers (PSPs) in Singapore. Part 2 of the PSA is pivotal as it governs the licensing, conduct, control, and auditing of PSPs. This article provides an authoritative analysis of the key provisions in Part 2, explaining their purposes and the rationale behind their inclusion in the legislation. It also highlights the penalties for non-compliance and relevant cross-references to other statutes.

Licensing of Payment Service Providers: Ensuring Regulatory Oversight and Consumer Protection

Part 2 begins with Division 1, which sets out the licensing regime for payment service providers. Sections 5 to 13 detail the requirements and procedures for obtaining, varying, or revoking a licence, as well as the obligations of licensees to comply with the Act.

"5 Licensing of payment service providers" — Section 5, Payment Services Act 2019

Verify Section 5 in source document →

"6 Application for licence" — Section 6, Payment Services Act 2019

"7 Variation or change of licence" — Section 7, Payment Services Act 2019

Verify Section 7 in source document →

"11 Lapsing, surrender, revocation or suspension of licence" — Section 11, Payment Services Act 2019

Verify Section 11 in source document →

"13 Exempt payment service providers" — Section 13, Payment Services Act 2019

The licensing provisions exist to ensure that only qualified and fit entities operate as PSPs, thereby safeguarding the integrity of Singapore’s payment ecosystem. By requiring applications and granting licences, the Monetary Authority of Singapore (MAS) can assess the suitability of applicants, including their financial soundness and operational capabilities. The ability to vary, suspend, or revoke licences under Sections 7 and 11 allows MAS to maintain ongoing regulatory control and respond to non-compliance or changing circumstances.

Section 13 provides for exemptions, which recognize that certain entities may not require full licensing due to the nature or scale of their activities. This flexibility prevents unnecessary regulatory burdens while maintaining oversight where necessary.

Conduct of Business Obligations: Promoting Transparency, Security, and Consumer Confidence

Division 2 of Part 2 imposes conduct of business obligations on licensees, spanning Sections 14 to 26. These provisions regulate the operational aspects of PSPs to ensure transparency, security, and consumer protection.

"14 Place of business or registered office of licensee" — Section 14, Payment Services Act 2019

Verify Section 14 in source document →

"15 Obligation of licensee to notify Authority of certain events" — Section 15, Payment Services Act 2019

Verify Section 15 in source document →

"16 Obligation of licensee to provide information to Authority" — Section 16, Payment Services Act 2019

Verify Section 16 in source document →

"17 Obligation of licensee to submit periodic reports" — Section 17, Payment Services Act 2019

Verify Section 17 in source document →

"18 Prohibition against use of unlicensed agent" — Section 18, Payment Services Act 2019

Verify Section 18 in source document →

These provisions require licensees to maintain a registered office or place of business in Singapore (Section 14), notify MAS of significant events (Section 15), and provide information and reports as required (Sections 16 and 17). Such requirements enable MAS to monitor licensees’ ongoing compliance and operational status effectively.

Section 18 prohibits the use of unlicensed agents, which prevents unauthorized intermediaries from engaging in payment services, thereby reducing risks of fraud and enhancing consumer protection.

Further, Sections 19 to 21 impose specific prohibitions and regulatory requirements, such as prohibiting the exchange of e-money withdrawn from payment accounts for Singapore currency (Section 19), and applying provisions of the Currency Act 1967 to payment services (Section 21). These provisions ensure that PSPs operate within the bounds of Singapore’s monetary and currency laws, preserving monetary stability and preventing illicit activities.

Sections 22 to 26 impose additional obligations on major payment institutions, including security measures (Section 22), safeguarding customer money (Section 23), restrictions on personal payment accounts containing e-money (Section 24), and powers granted to MAS to ensure interoperability between payment accounts and systems (Sections 25 and 26). These provisions are essential to maintain the safety and efficiency of payment systems, fostering trust and seamless transactions across platforms.

Control of Controllers and Officers: Ensuring Responsible Governance

Divisions 3 and 4 of Part 2 focus on the control of controllers and officers of licensees, covering Sections 27 to 36. These provisions regulate the ownership and management of PSPs to ensure responsible governance and prevent conflicts of interest or undue influence.

"28 Control of shareholding in licensee" — Section 28, Payment Services Act 2019

Verify Section 28 in source document →

"29 Objection to existing control of licensee" — Section 29, Payment Services Act 2019

Verify Section 29 in source document →

"34 Approval of chief executive officer, director or partner of licensee" — Section 34, Payment Services Act 2019

Verify Section 34 in source document →

"35 Removal of chief executive officer, director or partner of licensee" — Section 35, Payment Services Act 2019

Verify Section 35 in source document →

Section 28 empowers MAS to regulate the shareholding structure of licensees, ensuring that controllers are fit and proper persons. Section 29 allows MAS to object to existing controllers if they pose risks to the licensee’s soundness or the public interest. These controls prevent unsuitable persons from exerting influence over PSPs.

Similarly, Sections 34 and 35 require MAS approval for key officers such as CEOs and directors, and allow MAS to remove them if necessary. This oversight ensures that licensees are managed by competent and trustworthy individuals, which is critical for maintaining confidence in the payment services sector.

Audit Requirements: Enhancing Accountability and Transparency

Division 5, comprising Sections 37 to 40, mandates audit requirements for licensees to promote accountability and transparency.

"37 Auditing" — Section 37, Payment Services Act 2019

"38 Powers of auditor appointed by Authority" — Section 38, Payment Services Act 2019

Verify Section 38 in source document →

"39 Restriction on auditor’s and employee’s right to communicate certain matters" — Section 39, Payment Services Act 2019

Verify Section 39 in source document →

"40 Offence to destroy, conceal, alter, etc., records" — Section 40, Payment Services Act 2019

Verify Section 40 in source document →

Section 37 requires licensees to undergo audits, which provide independent verification of their financial and operational integrity. Section 38 grants auditors appointed by MAS the necessary powers to conduct thorough audits. Section 39 restricts auditors and employees from disclosing certain information, balancing transparency with confidentiality.

Section 40 criminalizes the destruction, concealment, or alteration of records, which is vital to preserve the integrity of audit processes and prevent fraudulent activities. These audit provisions collectively enhance regulatory oversight and protect consumers and stakeholders.

Penalties for Non-Compliance: Enforcing Regulatory Discipline

Part 2 also contains provisions imposing penalties for non-compliance to ensure adherence to the regulatory framework.

"32 Offences, penalties and defences" — Section 32, Payment Services Act 2019

"40 Offence to destroy, conceal, alter, etc., records" — Section 40, Payment Services Act 2019

Verify Section 40 in source document →

Section 32 outlines offences and penalties related to control of licensees, including breaches of shareholding and management requirements. Section 40 imposes offences for tampering with records. These penalties serve as deterrents against misconduct and reinforce the seriousness of compliance obligations under the PSA.

Cross-References to Other Legislation: Integrating Singapore’s Legal Framework

Section 21 of Part 2 explicitly cross-references the Currency Act 1967:

"21 Application of section 14 of Currency Act 1967" — Section 21, Payment Services Act 2019

Verify Section 21 in source document →

This cross-reference ensures that certain provisions of the Currency Act, which governs the issuance and use of Singapore currency, apply to payment service providers. This integration prevents conflicts between statutes and ensures a cohesive regulatory environment for payment services.

Absence of Definitions within Part 2

It is notable that Part 2 does not contain explicit definitions of terms. Definitions relevant to payment service providers and related concepts are typically found in the preliminary or interpretation sections of the PSA. This structural choice centralizes definitions for clarity and consistency across the Act.

Conclusion

Part 2 of the Payment Services Act 2019 establishes a robust framework for the licensing, conduct, control, and auditing of payment service providers in Singapore. The licensing provisions ensure that only suitable entities operate in the sector, while conduct of business obligations promote transparency, security, and consumer protection. Controls over controllers and officers safeguard responsible governance, and audit requirements enhance accountability. Penalties for non-compliance reinforce regulatory discipline. Cross-references to other legislation integrate the PSA within Singapore’s broader legal framework. Collectively, these provisions uphold the integrity and stability of Singapore’s payment services industry.

Sections Covered in This Analysis

Section 5 – Licensing of payment service providers
Section 6 – Application for licence
Section 7 – Variation or change of licence
Section 8 – Holding out as licensee, etc.
Section 9 – Prohibition against solicitation
Section 10 – Annual fees of licensees
Section 11 – Lapsing, surrender, revocation or suspension of licence
Section 12 – Appeals to Minister
Section 13 – Exempt payment service providers
Section 14 – Place of business or registered office of licensee
Section 15 – Obligation of licensee to notify Authority of certain events
Section 16 – Obligation of licensee to provide information to Authority
Section 17 – Obligation of licensee to submit periodic reports
Section 18 – Prohibition against use of unlicensed agent
Section 19 – Prohibition against exchanging e‑money withdrawn from payment account for Singapore currency
Section 20 – Prohibition from carrying on certain businesses
Section 21 – Application of section 14 of Currency Act 1967
Section 21A – Additional requirements in respect of licensee providing digital payment token service
Section 22 – Security
Section 23 – Safeguarding of money received from customer
Section 24 – Restrictions on personal payment account that contains e‑money
Section 25 – Powers of Authority to ensure interoperability between payment accounts and payment system
Section 26 – Powers of Authority to ensure interoperability between payment systems
Section 27 – Application and interpretation of this Division
Section 28 – Control of shareholding in licensee
Section 29 – Objection to existing control of licensee
Section 30 – Power of Authority to issue directions for this Division
Section 31 – Power of Authority to obtain information relating to this Division
Section 32 – Offences, penalties and defences
Section 33 – Appeals to Minister
Section 34 – Approval of chief executive officer, director or partner of licensee
Section 35 – Removal of chief executive officer, director or partner of licensee
Section 36 – Appeals to Minister
Section 37 – Auditing
Section 38 – Powers of auditor appointed by Authority
Section 39 – Restriction on auditor’s and employee’s right to communicate certain matters
Section 40 – Offence to destroy, conceal, alter, etc., records

Source Documents

For the authoritative text, consult SSO.

Written by Sushant Shukla

Topics

Singapore SSOStatutes Legislation