Singaporean official clarifies AML approach regarding virtual currency transactions

Maria Nikolova

When it comes to money laundering, Singapore’s laws do not make any distinction between transactions effected using fiat currency, virtual currency or other ways of transmitting value, Singapore’s Deputy Prime Minister says.

The Singaporean authorities have been trying to strike the balance between mitigating the risks for investors using virtual currencies and not turning their back to innovation. Questions regarding virtual currencies are piling up for top officials, with the latest one concerning the AML/CFT enforcement on virtual currency transactions.

On Monday, Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister in charge of the Monetary Authority of Singapore (MAS), replied to an MP question on how MAS and law enforcement agencies can enforce anti-money laundering and counter-financing of terrorism (AML/CFT) laws on bitcoin currency transactions.

“When it comes to money laundering or terrorism financing, Singapore’s laws do not make any distinction between transactions effected using fiat currency, virtual currency or other novel ways of transmitting value”, he said.

Further, Mr Tharman Shanmugaratnam explained that MAS’ AML/CFT requirements apply to all activities of financial institutions, whether conducted in fiat or virtual currencies. The Commercial Affairs Department (CAD) is empowered to investigate and prosecute all manner of ML/TF cases.

MAS recognizes that virtual currency transactions, given their anonymous nature, may be used to conceal illicit movement of funds, he said. Also, given the the absence of a central clearing house for such transactions, such enforcement is challenging, as it is difficult to identify the parties upon which enforcement orders can be applied.

However, at some stage, fiat currency are exchanged for virtual currency, or vice versa, at intermediaries that buy, sell or exchange virtual currency. MAS therefore intends to impose AML/CFT requirements on such intermediaries, the official noted. MAS is currently conducting public consultation on a proposed Payment Services Bill that will empower the regulator to do this.

In October last year, Mr Tharman Shanmugaratnam struck a cautionary note with regard to investments in cryptocurrencies. He said back then that MAS does not regulate such virtual currencies per se. However, he stressed that the activities that surround them if those activities fall within MAS’s more general ambit as financial regulator, are regulated.

One example is fund-raising. Virtual currencies can go beyond being a means of payment, and evolve into “second generation” tokens, whose sale of is commonly known as an initial coin offering or ICO. As these are financial activities that fall within MAS’ regulatory powers, in August , MAS clarified that if a token is structured in the form of securities, the ICO must comply with existing securities laws aimed at safeguarding investors’ interest. The requirements include having to register a prospectus and having intermediary or exchange operator licences. These intermediaries must also comply with existing rules on anti-money laundering and countering terrorism financing.

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