RegWatch: March 2023

Staying up to date with the ever-evolving regulations and navigating the complex regulatory landscape can be challenging. In this edition of the Synpulse RegWatch, we provide the latest developments in regulatory compliance across Singapore, Hong Kong, Taiwan, and Australia. Join us as we explore these updates and provide recommendations to help you stay compliant.

ESG Option 1
Recent regulatory updates
  • Singapore: The Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) published the Sustainable Private Banking and Wealth Management Guidelines, setting the minimum standards to integrate into the member banks’ business models. The guidelines promote transparency and periodic environmental, social, and corporate governance (ESG)-related disclosures. These disclosures include climate-related risks and opportunities aligned with the Task Force on Climate-Related Financial Disclosures (TCFD) and International Sustainability Standards Board (ISSB) Framework.
  • Hong Kong: The Hong Kong Mortgage Corporation (HKMC) set up its Social, Green and Sustainability Financing Framework (SGS Framework) to integrate sustainability into its business strategy. The framework is used to structure and issue social, green, or sustainability bonds and asset-backed securities to support environmentally and socially beneficial projects. The Hong Kong Monetary Authority (HKMA) subsequently published a framework for banks to conduct due diligence on green and sustainable products. This includes (i) setting up a robust product governance framework, (ii) conducting comprehensive greenness assessments, (iii) performing post-offering monitoring and controls, (iv) enhancing transparency and accountability, and (v) building appropriate expertise in product development.
  • Taiwan: The Financial Supervisory Commission (FSC) published guidance on sustainable economic activities and Green Finance 3.0 to support the goal of net zero and promote green finance.
Synpulse’s recommendations
  • Implement ESG integration throughout key functions, such as lending, by incorporating regulatory guidance with the current banking practice.
  • The issuers will need to develop their issue document accordingly so that it benefits from the specific securities and remain compliant with the regulatory requirements.
  • Other sectors can develop their own strategy to gain a good understanding of climate risk measurement.

Find out how Synpulse can support your ESG transformation journey >>

Digital Assets Option 1
Recent regulatory updates
  • Singapore: Apart from the various sandbox projects, MAS has published two consultation papers proposing regulatory measures to reduce consumer harm from cryptocurrency trading and support stablecoin development. The proposed measures cover consumer access, business conduct, and technology risks.
  • Hong Kong: Hong Kong’s Securities and Futures Commission (SFC) published a circular on virtual asset futures exchange-traded funds (ETFs), outlining requirements for authorisation. They also cautioned investors of the risks associated with virtual asset platform offerings, such as deposits, savings, earnings, and staking.

Following the guidelines set by the Basel Committee on Banking Supervision (BCBS), the HKMA broadly categorised cryptoassets into two broad groups, namely Group 1 cryptoassets, which consist of qualifying tokenised assets and stablecoins, and Group 2 cryptoassets, which are cryptoassets that fail to meet all the Group 1 classification conditions.

Read what the virtual assets industry should take note with SFC’s new rules on Virtual Assets Trading Platforms >>

Synpulse’s recommendations
  • Get a clear understanding of the evolving regulatory framework across APAC jurisdictions.
  • Strengthen your investment suitability and AML/KYC frameworks to meet the regulatory requirements.
  • Develop investor protection to mitigate any risks linked to virtual assets.
  • Leverage regtech solutions to elevate risk management while managing operational impact.

Culture and Conduct Option 1
Recent regulatory updates
  • Singapore: MAS’s consultation paper updates the fair dealing guidelines, expanding the scope of application to include all products and services offered by financial institutions (FIs). This includes assessing suitability before marketing the product or service to customers, requiring line managers to ensure financial advisors’ recommendations meet clients’ financial objectives. Read our response to MAS’ guidelines on Fair Dealing >>
  • Hong Kong: HKMA emphasises that there is no single “sound” culture applicable to all banks. They encourage banks to foster a sound culture through focusing on three pillars: strong governance, appropriate incentive systems, and effective assessment and feedback mechanism.
Synpulse’s recommendations
  • Measure culture and conduct separately. They are often grouped together, but different metrics should be used for each.
  • On culture, regularly benchmark your governance framework to the industry’s best practices to ensure its relevancy.
  • On conduct, deploy behavioural analytics and data science to detect and manage conduct risks. One use case is front office supervision, where data is aggregated to provide holistic insights of sales activities and regulatory breaches for the market teams.

Capital adequacy and Basel III reforms Option 1
Recent regulatory updates
  • Singapore: MAS released a circular regarding the implementation timeline of Basel III reforms in Singapore and the reporting schedules for locally incorporated banks through MAS' Data Collection Gateway.
  • Hong Kong: HKMA, on the other hand, published the approach for implementing the Basel III Countercyclical Capital Buffer (CCyB) for AIs incorporated in Hong Kong. They also published revised implementation timelines for Basel III final reforms.
  • Australia: The Australian Prudential Regulation Authority (APRA) has updated the Australian Prudential Standard APS 330 to allow authorised deposit-taking institutions to maintain consistent public disclosures with the new capital framework until 1 January 2025.
Synpulse’s recommendations
  • Start adopting the new Basel III framework. Despite the implementation being deferred to between 1 January 2024 and 1 January 2025, Singapore remains committed to fully implementing the final Basel III reforms at the earliest opportunity.
  • Leverage HKMA’s CCyB for protection against system-wide risks.
  • As a benefit, the CCyB may also tend to lean against the build-up of excessive exuberance in the credit cycle in the first place, potentially containing credit growth to some degree and helping to moderate swings in asset prices and/or the economy.

AML KYC Option 1
Recent regulatory updates
  • Singapore : To serve as a blueprint for preventing terrorism financing risks, Singapore formulated its National Strategy for Countering the Financing of Terrorism (CFT). It highlights a five-point strategy, including coordinated and comprehensive risk identification, strong legal and sanctions frameworks, robust regulatory regime and risk-targeted supervisory framework, decisive law enforcement actions, and international partnerships and cooperation. In addition, MAS published the circular on ML/TF financing risks in the wealth management sector which sets out MAS’ expectations for FIs to review its existing controls to ensure that they remain adequate to mitigate the ML/TF risks from high growth areas. Read about what you should know about the latest MAS circular and our recommendations >>
  • Hong Kong: HKMA and SFC hosted AML seminars in December 2022 on topics like risk assessment and mitigation, regulatory updates, source of wealth requirements, and suspicious transaction reports. An AML/CFT amendment bill was also passed to align politically exposed person definitions with the Financial Action Task Force (FATF) requirement and support the use of regtech related to digital identification.
Synpulse’s recommendations
  • Enhance detection capabilities to address regulatory priorities on proliferation financing, shell and front companies, and misuse of legitimate business operations.
  • Adopt advanced technologies, such as Network Link Analysis (NLA), and utilise AI and machine learning to address complex typologies and efficiency of compliance operations.
  • Revisit and update policy, procedures, and technology implementation to reflect the changes in definitions and alignment to the regulatory standard.

Investment suitability and customer protection Option 1
Recent regulatory updates
  • HKMA: Observations from Review of Selling Processes of Investment Products (Announcement) (Annex)

Hong Kong: HKMA streamlined investor protection measures and provided guidance on flexible selling processes to enhance customer experience while ensuring customer protection. This includes standards related to risk disclosure for subsequent transactions of comparable products, assessment of customer’s investment horizon and concentration risk, and handling of execution-only transactions.

Read our overview of the key changes from HKMA >>

Synpulse’s recommendations
  • Conduct a thorough review of existing frameworks to align with regulatory expectations. This includes a review of business and governance model, product lifecycle, suitability and disclosure frameworks, and training.
  • Review existing investment suitability framework to find streamlining opportunities and improve the customers’ experience.

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