MAS Temporarily Suspends Non-Bank Channels for Cross-Border Money Transfers to China

The Monetary Authority of Singapore (MAS) has taken a significant step by issuing a notice directing licensed payment service providers, particularly remittance companies, to suspend the use of non-bank and non-card channels when transmitting money to individuals in the People's Republic of China (PRC). This move, effective from January 1, 2024, to March 31, 2024, comes in response to a recent incident where Chinese police froze a small percentage of remittances, leaving the reasons for these fund freezes unclear.

The decision is driven by reports of remittances made by individuals, primarily Chinese nationals working in Singapore, facing freezing in their beneficiaries' bank accounts in China. Remittance companies typically opt for overseas third-party agents, bypassing traditional banks to keep transaction costs low. Although the majority of remittances are successfully deposited in beneficiaries' Chinese bank accounts, a recent uptick in freezing by Chinese law enforcement agencies has prompted MAS to take preventive action.

MAS has directed remittance companies in Singapore to exclusively engage a bank, a card network operator (such as Union Pay International), or a licensed financial institution working with a bank or card network for the transmission of money to China during this three-month period. Despite potential increased costs for customers, MAS deems this suspension necessary for the immediate protection of consumers and to curb the occurrence of new instances of frozen accounts in China.

In response to the situation, MAS has been actively engaging with the remittance companies involved, instructing them to provide necessary assistance to affected customers, enhance their complaints handling processes, and review existing arrangements with partners in the China remittance corridor.

The temporary suspension, which begins 14 days from the notice date, allows remittance companies the necessary time to adjust their existing practices, and MAS has cautioned against a rush of remittances through overseas third-party agents during this period. Individuals are advised to use alternative channels, such as banks or card networks, to prevent inadvertent freezing of funds or accounts.

Highlighting its commitment to monitoring the situation and practices of remittance companies, MAS retains the flexibility to terminate, extend, or implement further measures after March 31, 2024, as deemed appropriate. This proactive approach underscores MAS's dedication to ensuring the security and reliability of cross-border money transfers to China during a period of heightened scrutiny.

By fLEXI tEAM