Singapore legislation

Section 23

of Payment Services Act 2019

Section 23

Safeguarding of money received from customer

Amended by1/2020

(1)

Subsection (2) applies to every major payment institution that carries on a business of providing any of the following payment services:

(a)

a domestic money transfer service;

(b)

a cross‑border money transfer service;

(c)

a merchant acquisition service;

(d)

any other payment service that may be prescribed.

(2)

A major payment institution mentioned in subsection (1) must ensure that no later than the next business day after any relevant money is received from, or on account of, a customer, the whole or such part, as may be prescribed, of the relevant money, is safeguarded in one of the following manners:

(a)

by an undertaking, from a safeguarding institution, to be fully liable to the customer for the relevant money;

(b)

by a guarantee given by a safeguarding institution for the amount of the relevant money;

(c)

by depositing the relevant money in a trust account maintained with a safeguarding institution;

(d)

in such other manner as may be prescribed.

(3)

Subsection (4) applies to every major payment institution that carries on a business of providing either of the following payment services:

(a)

an e‑money issuance service;

(b)

any other payment service that may be prescribed.

(4)

A major payment institution mentioned in subsection (3) must ensure that from the time any relevant money is received from, or on account of, a customer, the whole or such part, as may be prescribed, of the relevant money is safeguarded in one of the following manners:

(a)

by an undertaking, from a safeguarding institution, to be fully liable to the customer for the relevant money;

(b)

by a guarantee given by a safeguarding institution for the amount of the relevant money;

(c)

by depositing the relevant money in a trust account maintained with a safeguarding institution; (d)in such other manner as may be prescribed.

(5)

The Authority may make regulations under section 103 to provide for all or any of the following matters:

(a)

any matter concerning the safeguarding of relevant money under subsection (2) or (4) by any safeguarding institution;

(b)

any matter concerning the depositing of relevant money in a trust account mentioned in subsection (2)(c) or (4)(c), including —

(i)

any matter concerning the trust governing the account;

(ii)

the extent (if any) to which the relevant money may be commingled with any other money;

(iii)

the manner in which the relevant money must be treated and dealt with, despite any other written law, on the occurrence of either or both of the following:

(A)

any event affecting the ability of the major payment institution to perform its obligations, such as in the event of the insolvency of the major payment institution;

(B)

any event affecting the ability of the safeguarding institution to perform its obligations, such as in the event of the insolvency of the safeguarding institution; and

(iv)

the circumstances (if any) in which a major payment institution may withdraw money from the account;

(c)

any matter concerning the safeguarding of relevant money in any manner mentioned in subsection (2)(d) or (4)(d), including —

(i)

the extent (if any) to which a major payment institution may commingle the relevant money with any other money;

(ii)

the manner in which the relevant money must be treated and dealt with, despite any other written law, on the occurrence of any event affecting the ability of the major payment institution to perform its obligations, such as in the event of the insolvency of the major payment institution; and

(iii)

where the relevant money is safeguarded by being deposited in an account (other than a trust account mentioned in subsection (2)(c) or (4)(c)), the circumstances (if any) in which the major payment institution may withdraw any money from that account;

(d)

the obligations of a major payment institution to record and maintain a separate book entry for each customer, in relation to that customer’s relevant money and, where applicable, e‑money;

(e)

the obligations of a safeguarding institution that must be set out in a contract between a major payment institution and the safeguarding institution;

(f)

the form of acknowledgment that a major payment institution must obtain from a safeguarding institution;

(g)

the information that a major payment institution must provide to a safeguarding institution, including the date or time by which any relevant money must be safeguarded;

(h)

the manner in which a major payment institution conducts its dealings with a customer for the purposes of safeguarding the customer’s relevant money, including the disclosure of any information to the customer;

(i)

any other matters relating to this section.

(6)

Despite any other written law, where subsection (2)(b) or (4)(b) applies, the proceeds of the guarantee are payable, in the event of the insolvency of the major payment institution, into a separate trust account held by the major payment institution, which —

(a)

must be designated in such a way as to show that it is an account held for the purpose of safeguarding the relevant money in accordance with this section; and

(b)

must be used only for holding such proceeds on trust for each customer that had provided the relevant money to the major payment institution.

(7)

All moneys deposited in an account mentioned in subsection (2)(c), (4)(c), (5)(b) or (c)(iii) or (6) —

(a)

cannot be used for the payment of the debts of the major payment institution; and

(b)

are not liable to be taken in execution under an order or a process of any court.

(8)

The Authority may, on the application of any person, by written notice grant approval, subject to such conditions as the Authority may specify in the notice, to any major payment institution to safeguard any relevant money in 2 or more of the manners mentioned in subsection (2)(a) to (d) or (4)(a) to (d).

(9)

A major payment institution must notify the Authority, in such form or manner as the Authority may specify by written notice, of —

(a)

the manner mentioned in subsection (2)(a) to (d) or (4)(a) to (d) that the major payment institution has chosen to safeguard the relevant money;

(b)

the name of the safeguarding institution (if any) that will safeguard the relevant money in the manner mentioned in paragraph (a); and

(c)

any change to the manner mentioned in paragraph (a) that the major payment institution has chosen to safeguard the relevant money.

(10)

Where the major payment institution mentioned in subsection (2) or (4) is any of the following financial institutions, the major payment institution must not concurrently be the safeguarding institution mentioned in paragraph (a) or (b) of the applicable subsection in relation to the relevant money received by the major payment institution under the applicable subsection:

(a)

a bank licensed under the Banking Act 1970;

(b)

a merchant bank licensed under the Banking Act 1970;

(c)

a finance company licensed under the Finance Companies Act 1967;

(d)

any other financial institution that may be prescribed.

Amended by1/2020

(11)

A major payment institution that contravenes subsection (2), (4), (9) or (10), or fails to comply with any condition imposed under subsection (8), shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $250,000 and, in the case of a continuing offence, to a further fine not exceeding $25,000 for every day or part of a day during which the offence continues after conviction.

(12)

This section applies, with the necessary modifications, to any licensee (other than a major payment institution) that may be prescribed, and for the purposes of such application, any reference in this section to a major payment institution is to be read as a reference to the prescribed licensee.

(13)

Where any digital payment token service is prescribed for the purposes of subsection (1)(d) or (3)(b), any reference in this section to e‑money or specified e‑money is to be read as including a reference to digital payment tokens.

(14)

In this section —

Definition

“business day” means any day other than a Saturday, Sunday, public holiday or bank holiday;

Definition

“relevant money” —

(a)

means any money —

(i)

that is received by a major payment institution from, or on account of, a customer in respect of the provision of one or more of the payment services mentioned in subsections (1)(a) to (d) and (3)(a) and (b); and

(ii)

that the major payment institution —

(A)

where subsections (1) and (2) apply — continues to hold at the end of each business day; or

(B)

where subsections (3) and (4) apply — has held at any time, and has issued specified e‑money in exchange for; but(b)does not include all of the following:

(i)

any money paid to the major payment institution to reduce the amount owed to the major payment institution by that customer;

(ii)

any money that is repaid by the major payment institution to that customer;

(iii)

any money which is paid to the major payment institution, or which the major payment institution has informed that customer will be used, to defray any fee or charge imposed by the major payment institution for providing any payment service to that customer;

(iv)

where subsection (1)(a) or (c) or (3)(a) applies, any money that is paid to, and received by, a recipient in accordance with the instructions of that customer to the major payment institution;

(v)

where subsection (1)(b) applies, any money that is paid to a recipient in accordance with the instructions of that customer to the major payment institution, whether or not the recipient has received that money;

(vi)

any money paid to any other person that is entitled to the money;

Definition

“safeguarding institution” means —

(a)

in the case of subsections (2)(a) and (4)(a) —

(i)

a bank in Singapore; or

(ii)

any other financial institution that may be prescribed for this sub‑paragraph;

(b)

in the case of subsections (2)(b) and (4)(b) —

(i)

a bank in Singapore; or

(ii)

any other financial institution that may be prescribed for this sub‑paragraph;

(c)

in the case of subsections (2)(c) and (4)(c), a person that the trust account mentioned in subsection (2)(c) or (4)(c) (as the case may be) is maintained with, being a person that satisfies such criteria as may be prescribed;

(d)

in any case where any relevant money is safeguarded in such manner as may be prescribed for the purposes of subsection (2)(d) or (4)(d), a person safeguarding the relevant money in that manner, being a person that satisfies such criteria as may be prescribed; or

(e)

in any other case, any bank in Singapore or financial institution mentioned in paragraph (a) or (b) or any person mentioned in paragraph (c) or (d).

Read in full context — Payment Services Act 2019 →