MAS reminds crypto exchanges to comply with economic sanctions against Russia

The Monetary Authority of Singapore (MAS) has issued a statement targeting licensed digital payment token service providers (DPTSPs), reminding them of their obligation to comply with economic sanctions against Russia. In response to a question from Channel News Asia, MAS stressed that DPTSPs must have “robust controls” to avoid dealing with sanctioned banks and prohibited activities.

In March 2022, Singapore’s Ministry of Foreign Affairs formally dropped the country’s sanctions against Russia, focusing on export controls on military and technological goods and financial measures against Russian banks and activities. In addition to fiat transactions, Singapore’s targeted financial sanctions cover all transactions with Russian entities involving cryptocurrencies, including the payment and settlement of trades related to digital assets, such as non-fungible tokens (NFTs).

Pro-Russian crypto donations

MAS’s statement follows research by Chainalysis that revealed pro-Russian military groups had raised over $2.2 million in crypto to finance Moscow’s war with Ukraine and avoid sanctions. In the report, Chainalysis notes that 54 volunteer groups used social media to spread disinformation and crowdfund military purchases, such as drones, weapons, bulletproof vests and communication devices.

Head of sanctions strategy at Chainalysis, Andrew Fierman, told Channel News Asia that the firm “cannot say for sure” whether DPTSPs in Singapore have been used to donate to these voluntary groups. However, he noted that since the groups have public cryptocurrency wallets, anyone with access to cryptocurrency “could conceptually make a payment.”

Singapore’s Crypto Hub Aspirations

Through 2022, the Singapore government has taken several steps to cement its position as a key player in the crypto industry. From the new Financial Services and Markets (FSM) Bill addressing regulatory weaknesses to the MAS granting major payment institutions licenses for digital payment token services, Singapore has shown its ambition to strengthen its global reputation as a regulated destination for crypto services.

In addition to ongoing plans to consult the public on stablecoin regulation, MAS proposed on October 26 that retail investors undertake a risk awareness assessment before being allowed to trade cryptocurrencies. If enacted into law, DPTSPs will be required to provide relevant risk disclosures to enable retail users to make informed crypto trading decisions. More information about MAS’s proposed measures for DPTSPs can be found in this consultation note. Companies should note that comments on the proposals must be submitted by 21 December 2022

Important takeaways

Compliance staff should ensure that they are aware of their compliance obligations relating to Singapore’s economic sanctions against Russia. Companies may consider reviewing their ongoing monitoring efforts to ensure that their system can detect and prevent transactions to or from sanctioned persons, entities and geographies. These measures should also be calibrated to identify transactions that use anonymity features (such as tumblers and mixers) to hide the identity of counterparties.

Originally published November 4, 2022, updated November 4, 2022