In this edition of the Synpulse RegWatch, we present the most recent updates on regulatory compliance in both Singapore and Hong Kong.
Join us as we explore these updates and provide recommendations to help you stay compliant.
Singapore: The Monetary Authority of Singapore (MAS) has published multiple articles on environmental, social, and governance (ESG) and convened the Green Finance Industry Taskforce, which recently launched a final public consultation on a green and transition taxonomy. The consultation defines the activities to be considered and establishes the criteria for determining whether an activity is classified as “green” or “transition”. The MAS also launched the Finance for Net Zero Action Plan, aiming to achieve four outcomes: (i) promote consistent, comparable, and reliable climate data and disclosures, (ii) deepen climate scenario analysis and stress testing to identify climate-related financial risks, (iii) development of credible regional sectoral decarbonisation pathways, and (iv) credible green and transition financing solutions and markets to support decarbonisation efforts.
Hong Kong: The industry saw the inaugural launch of a tokenised green bond offering. The Hong Kong Monetary Authority (HKMA) has published FAQ on climate-related financial risks, providing more clarity on the calculation of risk-weighted assets for (i) credit risks, (ii) operational risks, and (iii) market risks, as well as the (iv) liquidity coverage ratio. Additionally, the Green and Sustainable Finance Cross-Agency Steering Group (Steering Group) and CDP co-organised a seminar on sustainability reporting. The seminar focused on the Steering Group's Questionnaire as a tool for SMEs to effectively convey their sustainability initiatives to stakeholders. It also emphasised the role of financial institutions (FIs) in gathering climate data from clients and assisting them in their transition to low-carbon practices. Lastly, the HKMA issued guidelines on climate risk stress testing, covering stress testing scenarios, assessment requirements, and reporting standards.
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Singapore: The MAS has published a circular addressing the risks of money laundering and terrorism financing (ML/TF) in the wealth management sector. The circular highlights key measures for FIs, including (i) strengthening the Board and Senior Management (BSM) oversight and risk and control functions, (ii) conducting added review and quality assurance testing, and (iii) continuing to exercise vigilance over higher risk customers and transactions. Moreover, an upcoming digital platform will be established to facilitate information sharing among FIs, strengthening their ML/TF risks detection capabilities.
Hong Kong: The HKMA has issued a circular outlining the requirements for account opening and ongoing monitoring for private banking customers. FIs face three key challenges, namely (i) establishing the source of wealth and source of funds, (ii) ongoing monitoring, and (iii) adopting regtech in their AML efforts. To strengthen risk management, a set of “dos and don’ts” and good practices have been prepared. Additionally, the HKMA published updated guidance, focusing on general AML/CFT guidelines, transaction monitoring, screening, and suspicious transaction reporting. The HKMA also released the AML Regtech: Network Analytics report, promoting the adoption of network analytics capability to strengthen the response of AML systems to deception and other financial crimes.
The MAS and the HKMA primarily addresses a few focus areas, which include:
We recommend that banks and other relevant authorised institutions all take a few essential steps to ensure that they are functioning in accordance with the relevant regulatory guidance while enhancing the overall customer experience:
Hong Kong: The HKMA has published two papers on anti-fraud. The first circular provides detailed guidelines for payment card issuers in the handling of unauthorised payment card transactions and the resolution of related disputes with cardholders. While cardholders are expected to exercise reasonable care to protect their cards and information, banks must also consider the actual circumstances and limitations cardholders face. The second circular focuses on strengthening security controls for binding of payment cards to contactless mobile payment services, such as Apple Pay, Google Pay, and Samsung Pay. Examples of such authentication measures include (i) two-factor authentication, (ii) in-app confirmation, and (iii) call back.
Hong Kong: The Securities and Futures Commission (SFC) has issued a circular to licensed corporations (LCs) to remind them of the importance of managing operational and remote booking risks. The areas identified for improvement includes (i) establishing a sound risk governance framework, (ii) implementing appropriate controls and monitoring practices, and (iii) ensuring proper management of loss allocation under transfer pricing arrangements. Expected standards and how LCs could act upon were also discussed in this publication.
Singapore: The MAS has published two consultation papers on proper conduct of prospecting to clients at public places, telemarketing, digital prospecting, and marketing activities. These publications are aimed at protecting consumers from unfair and misleading practices. The consultation period for these papers will conclude on 30 June 2023.
Hong Kong: In addition to protecting investors, the HKMA places emphasis on enhancing customer experience in its supervision efforts. It seeks to streamline protection measures while providing guidance to banks. Recent reviews have identified certain practices within banks that unnecessarily lengthen the selling process. Examples of such practices include overly conservative thresholds and unnecessary suitability assessments.
Review investment suitability frameworks to ensure compliance with regulatory requirements, client protection, and optimisation. Key topics should include product profiling, client profiling, controls and disclosures, suitability assessment, and reviews. The investor protection measures and product due diligence can be streamlined to enhance the overall client experience.
Hong Kong: The SFC has provided an overview of the industry landscape and current market practices, as well as detailed guidance to facilitate FIs’ ongoing refinement of data risk management processes. The topics covered include (i) data risk governance and (ii) data lifecycle controls and monitoring. According to the publication, FIs should clearly define roles and responsibilities for managing data risks, as well as have a robust process for identifying, assessing, mitigating, and monitoring such risks. It also emphasises the importance of appropriate controls to protect data against unauthorised access, use, disclosure, modification, or destruction. The HKMA has also released an updated version of its regtech adoption practice guide, with customer data and privacy as the spotlight topic. The guide aims to illustrate how regtech solutions can address privacy risks and support customer data protection, providing practical implementation guidelines and use cases as references for FIs.