SINGAPORE Law and Practice Contributed by: Kenneth Pereire and Lin YingXin, KGP Legal LLC
Differences to Legacy Players While both fintechs and traditional financial institu - tions must comply with similar regulations, fintechs face higher scrutiny due to their tech-driven business models. They must meet stricter standards, particu - larly in privacy, cybersecurity and the ethical use of AI. Fintechs also benefit from flexible regulatory approaches, like the MAS FinTech Regulatory Sand - box, allowing for more agile testing of innovations compared to legacy players. 2.12 Review of Industry Participants by Parties Other Than Regulators Apart from the regulators, there are industry asso - ciations in Singapore, such as the Singapore Fintech Association, which function more as intermediaries between the fintech participants and stakeholders. The prevailing industry practices involve maintain - ing well-documented and transparent assessment records. In practice, industry participants commonly engage external auditors, consultants and technology assessors to support independent reviews of govern - ance, controls and compliance, particularly in relation to cybersecurity, AML/CFT and operational resilience. 2.13 Conjunction of Unregulated and Regulated Products and Services In Singapore, some entities offering regulated finan - cial products may also engage in unregulated activi - ties, though this practice is subject to careful scrutiny by the MAS. For example, CMS licence holders may engage in regulated activities, depending on their structure and characteristics. These activities are often structured within the same legal entity; however, the MAS closely monitors these practices to ensure that the unregulated activities do not compromise the integrity or stability of the regu - lated services. Regulators have issued guidance to address the risks posed by combining regulated and unregulated services, emphasising that firms must manage potential conflicts of interest, operational risks and consumer protection issues. Following the passing of the Financial Institutions (Miscellaneous Amendments) Act 2024, the MAS has expanded authority to issue directives to CMS licence holders in relation to unregulated activities conducted
alongside regulated businesses. These directives will set minimum standards and safeguards to ensure that even unregulated activities do not undermine the regulated functions of these entities. 2.14 Impact of AML and Sanctions Rules Singaporean fintech companies must comply with MAS’s robust AML and sanctions rules aligned with FATF standards. They conduct risk assessments, CDD, KYC and EDD for high-risk customers like PEPs (politically exposed persons). Regular account reviews and reporting suspicious transactions to the Suspicious Transaction Reporting Office are manda - tory. The Payment Services (Amendment) Act 2021 strengthens compliance with AML/CTF standards for virtual assets. 2.15 Financial Action Task Force (FATF) Standards Singapore’s AML and sanctions rules align with the FATF standards. The MAS enforces regulations under the PSA, SFA and FAA, requiring customer due dili - gence, transaction monitoring and reporting of sus - picious activities. Additionally, Singapore complies with international sanctions, including those from the United Nations and other jurisdictions. These efforts ensure that Singapore’s financial sector adheres to global AML and sanctions standards. 2.16 Reverse Solicitation Singapore’s laws do allow for otherwise regulated products and services to be offered from another juris - diction under a reverse solicitation scenario, without triggering domestic regulations. Under the SFA and FAA, reverse solicitation permits foreign financial institutions to offer services to Sin - gapore-based clients without being subject to local licensing requirements, provided that the services are solicited by the client, not by the provider. In such cases, the client must initiate the contact, and the foreign provider must not actively market or promote its services within Singapore. However, the MAS emphasises that firms must still comply with relevant AML regulations. If any promo - tional activities occur within Singapore or if the ser -
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