Singapore’s Protection from Scams Bill- Compliance Impact on Banks

As digital transactions become more prevalent and scams grow increasingly sophisticated, countries worldwide are implementing measures to safeguard individuals and mitigate the broader social and economic impact of such fraudulent activities. Singapore has not been immune to the rising wave of scams and has been increasingly targeted by fraudsters. According to statistics provided by the Singapore Police in 2023 alone, victims lost approximately S$651.8 million. To combat these threats, the Monetary Authority of Singapore (MAS) has mandated several measures, including the Kill-Switch, which enables users to instantly freeze their bank accounts if they suspect unauthorized activity. Additionally, banks have introduced features like Money Lock, allowing customers to set aside funds that cannot be transferred online. However, over 26,500 scam cases were recorded in the first half of 2024, leading to financial losses exceeding S$385 million.

This highlights the need for stricter scam prevention measures. To address these risks and concerns, the Singapore government has introduced the Protection from Scams Bill. This Bill aims to combat the rising incidence of scams, particularly those conducted through remote communication channels like the internet, phone calls and online messaging. This law will grant specified officers including police officers, the authority to issue Restriction Orders (ROs) to banks. These orders once issued will temporarily restrict specific banking transactions for individuals suspected of being vulnerable to scam activities.  While the Bill is designed to protect individuals from fraud, it also imposes significant compliance obligations on businesses—particularly banks—and will impact financial institutions, e-commerce platforms and the technology sector. In this blog, we will explore the impact of Singapore’s Protection from Scams Bill on the compliance measures banks must implement and the broader regulatory implications.

A brief overview of the Bill

Scope of Application: The Bill primarily targets scams conducted remotely and excludes traditional in-person cheating cases. The law will initially apply to seven major retail banks in Singapore with provisions to extend them to other intermediaries if required.

Authority to Issue Restriction Orders (ROs) – Police officers and specified authorities can direct banks and financial institutions to temporarily freeze transactions of suspected scam victims.

Duration of Restriction Orders – ROs can last for up to 30 days, with upto 5 extensions possible. If an individual is no longer deemed at risk the RO can be lifted earlier.

Appeal Mechanism: Individuals subjected to an RO have the right to appeal to the Commissioner of Police or an appropriate person designated by the Commissioner. While the regulations in this regard are yet to be prescribed the belief is that the process will be designed for swift resolution and Commissioner’s decision in the matter is final.

Safeguards: Individuals affected by the RO can apply to access their funds for legitimate purposes, such as daily living expenses or bill payments, upon application to the police or special authorities.

While these provisions aim to curtail scam-related losses suffered by individuals, the Bill significantly impacts banks, financial institutions (FIs), by imposing new compliance obligations and enforcement measures to prevent scams.

Compliance obligations on Banks

• Enforce Restriction Orders– When an RO is issued, banks must immediately freeze specific transactions and restrict fund transfers.
• Implement Real-Time Transaction Monitoring – Financial institutions must enhance their fraud detection mechanisms to identify transactions that could potentially be linked to scams. (Monetary Authority of Singapore (MAS))
• Establish Clear Appeal Mechanisms – Since affected individuals can appeal, banks must have dedicated compliance officers/channels to handle these cases efficiently.
• Co-operate with Authorities to Provide Data– The Bill provides civil and criminal liability immunity to a bank or its officers for acting in good faith to comply with the RO. This will require banks to co-operate with the authorities on real-time basis and to share data that can identify scam trends.
• Compliance with Data Protection and Cybersecurity Requirements– Although banks are already required to comply with existing regulations in this area, this Bill may further increase the volume of sensitive information they handle, thereby imposing additional compliance responsibilities. Banks must strengthen cybersecurity protocols, particularly for transaction authentication.
• Strengthen Know Your Customer (KYC) and Anti-Money Laundering (AML) Measures – Banks need to refine their KYC protocols to verify customer identities more rigorously and detect suspicious financial activities in real-time.

Legal and Financial Consequences of Non-Compliance

Non-compliance with the Protection from Scams Bill could result in penalties, including regulatory fines and potential reputational damage/s

• Regulatory Fines and Sanctions – Under the Bill non-compliance with an RO can result in a fine not exceeding $3000 compounded to $1500.
• Reputational Damage – Banks failing to prevent scam-related transactions may lose consumer trust, leading to reduced customer retention and market share.
• Legal Liability – Banks that do not implement the required compliance measures may face lawsuits from affected customers or regulatory bodies.

Preparing for Compliance with the Bill

The regulatory landscape in Singapore requires banks and other financial institutions to implement robust compliance frameworks. To mitigate risks and align with the Protection from Scams Bill, businesses should enhance their compliance framework. Key steps include:

• Developing an Internal Compliance Program for Scam Prevention Measures particularly for handling appeals (as this will require timely submission of relevant information to authorities for swift resolutions)
• Enhancing Employee Training on Scam Prevention
• Adopting Technology-Driven Compliance Solutions

With the Protection from Scams Bill, Singapore is pioneering legislation that empowers police to manage individuals’ bank accounts in cases of suspected scams though it hopes to use Restriction Orders as a last resort. This approach could set a global precedent, encouraging other countries to consider similar measures to protect their citizens from financial fraud. By taking this step, Singapore is not only demonstrating leadership in the fight against financial fraud but is also paving the way for more comprehensive and proactive anti-scam strategies around the world. While the Protection from Scams Bill is designed to protect individuals from scams, the stricter financial regulations significantly impact businesses by introducing new compliance requirements.Banks and financial institutions must take proactive steps to align with the new law. By prioritizing compliance, businesses can mitigate risks, avoid penalties and contribute to securing Singapore’s digital economy.

Written by: Anuska Chanda

Co-authored by: Swapna Umakanth

Disclaimer

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