MAS Publishes "Regulatory Sandbox" Guidelines for Fintech Services

On 16 November 2016, the Monetary Authority of Singapore (“MAS”) published final Fintech Regulatory Sandbox Guidelines.  The Guidelines were originally proposed in a Consultation Paper that MAS released in June 2016.

The regulatory sandbox is not a means to avoid licensing and regulatory compliance.  Rather, the sandbox is a scheme that relaxes, for a limited time and under specific conditions, certain legal and regulatory requirements that the provider of a financial service would otherwise be subject to.  The objective of the sandbox is to encourage innovation by enabling new fintech services to be tested in a production environment in circumstances where the consequences of failure can be contained.  If the sandbox test is successful, the fintech service would exit the sandbox and the relaxed legal and regulatory requirements would be reinstated to apply in full.  If the sandbox test is a failure, the provider can redesign its service to fix the problems and apply again for the sandbox.

The Guidelines set out the criteria that MAS will use to assess applications for the sandbox, including:

• The financial service uses new technology, or existing technology in new ways
• The applicant intends to deploy the service broadly in Singapore after exiting the sandbox
• The specific legal and regulatory requirements to be relaxed are identified
• Test scenarios for the sandbox are clearly defined and capable of being reported to MAS periodically
• Boundary conditions are clearly defined that enable meaningful testing while protecting customers
• Significant risks identified in laboratory or preliminary testing have been identified and mitigations proposed
• Exit and transition plans are clearly defined both for failure and success

Implicit in the Guidelines is MAS’s expectation that applicants for the sandbox will have conducted rigorous tests of their services in the laboratory and in pre-production environments and that the sandbox is a necessary and final step before the services are made generally available to customers.

The types of legal and regulatory requirements that MAS would consider relaxing include those relating to cash, assets, and capital; management experience and board composition; credit rating and financial soundness; and reputation and track record. MAS has indicated that certain other requirements would not be considered for relaxation, including those concerning confidentiality of customer information; criteria for honesty and integrity; handling of customers’ moneys and assets by intermediaries; and AML/CFT compliance.

MAS’s announcement of the final Guidelines can be found here: http://www.mas.gov.sg/News-and-Publications/Media-Releases/2016/MAS-Issues-Regulatory-Sandbox-Guidelines-for-FinTech-Experiments.aspx.

Please contact us if you have questions concerning the Guidelines or if you require advice or assistance in connection with filing a sandbox application.