Welcome to Herbert Smith Freehills' monthly private wealth industry updates in Asia.
Every month we survey ten Asian jurisdictions for legal developments concerning trust and estate planning which are of interest to the private wealth industry, and provide a succinct summary in a table format. The jurisdictions covered in the update are Hong Kong, Singapore, China, Taiwan, Japan, India, Malaysia, Indonesia, Thailand and the Philippines. We hope that these updates will prove to be a useful resource to keep private clients, business people, and lawyers abreast of legal updates in the region.
Hong Kong
SFC Deputy CEO delivers speech on risks associated with increased digitalisation
The Securities and Futures Commission's (SFC) Deputy Chief Executive Officer and Executive Director, Intermediaries, Ms Julia Leung, recently delivered a keynote speech at the ASIFMA Tech & Ops Conference 2022, discussing how the advent of artificial intelligence (AI) and other technological advances have changed the way people invest and how products are distributed, as well as the risks associated with them.
- Increasing use of technology – There has been a significant increase in recent years of online financial services, including online brokerage services, distribution of investment products and advisory services. The SFC is a principles-based regulator and adopts a technology-neutral regulatory approach. To facilitate the use of technology while maintaining resilience, the SFC strives to ensure that its rules also apply in digital environments.
- Regtech – Process automation and digital transformation can enhance the efficacy of the processes intermediaries use to comply with regulatory requirements, such as those for client onboarding and anti-money laundering (AML). This includes, for example, the use of facial recognition technology as part of client due diligence, and robotic process automation for screening of politically exposed persons and sanctions. The SFC encourages firms to strengthen their AML capabilities by adopting regtech, so that resources could be more efficiently deployed to high-risk, high-priority areas.
- Suptech – In the SFC's investigations of company misconduct and enquiries into the fitness and properness of individuals, its supervisory and enforcement teams use network analytics extensively to identify relationships among target individuals and listed companies. The SFC Intermediaries Division will soon establish a suptech team comprising professionals in data analytics and cybersecurity.
- Managing the risks of digitalisation – The SFC places great emphasis on the measures firms are adopting to ensure operational resilience – including reliability of their information technology systems, adequacy of their capacity and security, as well as their contingency and recovery plans. Cybersecurity and third-party vendor risks are important areas to pay attention to.
FSTB provides update on measures to promote issuance and trading of RMB stocks in Hong Kong
The Financial Services and the Treasury Bureau (FSTB) has briefed the Legislative Council (LegCo) Panel on Financial Affairs on the legislative proposal to exempt the stamp duty on stock transfers for specified transactions conducted by market makers for dual-counter stocks, in order to promote the liquidity of RMB-denominated stocks and price efficiency, and facilitate trading by investors. The government is preparing the legislative amendments with a view to introducing the bill into LegCo within this year.
HKMA fines authorised institution HK$11 million for contraventions of AMLO
The Hong Kong Monetary Authority (HKMA) has announced that it has fined an authorised institution HK$11 million for contraventions of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).
The HKMA identified control deficiencies relating to on-going customer due diligence (CDD) and enhanced customer due diligence (EDD) in respect of high-risk situations between April 2012 and February 2016. The authorised institution had failed to:
- establish and maintain effective procedures for carrying out its duties under the AMLO in relation to ongoing CDD and EDD during the above period (for example, the institution failed to conduct periodic reviews on 249 customers to ensure that the CDD information it obtained remained up to date and relevant, failed to take EDD measures in respect of 17 high risk customers, and had a defective customer risk classification framework); and
- take all reasonable measures to ensure proper safeguards exist to prevent contraventions and to mitigate money laundering and terrorist financing risks (for example, senior management had not reviewed the effectiveness of anti-money laundering and counter-terrorist financing systems nor made necessary enhancements in a timely manner, and fundamental control issues were not discussed adequately at the relevant committee meetings nor timely addressed).
HKMA sets out policy stance and next steps on retail CBDC (e-HKD)
The HKMA has released a position paper titled "e-HKD: Charting the Next Steps" to set out its policy stance and next steps on retail central bank digital currency (CBDC), i.e. e-HKD.
As part of its "Fintech 2025" strategy to future-proof Hong Kong in terms of CBDC readiness (see previous update), the HKMA has examined the prospect of issuing e-HKD in Hong Kong and conducted two rounds of market consultation, one on high-level technical design and the other on key policy and design issues (see previous update). The respondents were generally supportive of the e-HKD initiative but pointed out the need to further examine issues such as privacy protection, legal considerations, and use cases.
Taking into account the findings of the study and the feedback received, the HKMA plans to take the following steps to pave the way for implementation of the e-HKD:
- Laying the technology and legal foundations for the implementation of the e-HKD – The HKMA will formulate a plan for developing the wholesale layer of the two-tier e-HKD system. It will also identify and examine areas to prepare for legislative amendments, with a view to enabling the issuance of a digital form of fiat currency with legal tender status in Hong Kong.
- Taking deep dives into use cases as well as application, implementation, and design issues – This will run in parallel to the above. The HKMA will conduct a series of pilots in close collaboration with various stakeholders to gain actual experience.
- Launching the e-HKD – The HKMA will consolidate the outcomes of the above steps for more thorough implementation planning, and will set the timeline for launching the e-HKD. The timing will depend on the progress made in the above steps, as well as the pace of relevant local and international market development.
Singapore
MAS establishes Sustainable Finance Advisory Panel and ESG Impact Hub
The Monetary Authority of Singapore (MAS) announced the establishment of a Sustainable Finance Advisory Panel (SFAP) to help guide MAS on its strategies and initiatives to build a credible and vibrant sustainable finance ecosystem. The SFAP comprises a diverse group of senior sustainability experts from financial institutions, academia, and other stakeholders from across the world. MAS also launched an ESG Impact Hub to spur co-location and collaboration between ESG FinTech start-ups and solutions providers, financial institutions, and real economy stakeholders.
ABS guidelines (sustainable practices) and PBIG common sustainable finance training benchmark
The Association of Banks in Singapore (ABS) has launched the ABS Sustainable Private Banking and Wealth Management Guidelines, comprising principles for private banks to integrate sustainability considerations with their business models and practices. The Private Banking Industry Group (PBIG) Sustainability taskforce, in consultation with the Institute of Banking and Finance Singapore (IBF) and the MAS, has developed a common industry training benchmark to upskill private banking relationship managers in the area of sustainability, taking reference from the IBF-MAS developed Sustainable Finance Technical Skills and Competencies which are part of the Skills Framework for Financial Services.
India
RBI issues Concept Note on Central Bank Digital Currency
The Reserve Bank of India (RBI) has released a Concept Note on Central Bank Digital Currency (CBDC) for India. The purpose behind the issue of this Concept Note is to create awareness about CBDCs in general and the planned features of the Digital Rupee, in particular. It explains the objectives, choices, benefits, and risks of issuing a CBDC in India, and the RBI's approach towards introduction of the CBDC. The Concept Note covers key considerations such as technology and design choices, possible uses of Digital Rupee, issuance mechanisms, etc., and it also considers the implications of introduction of CBDC on the banking system, monetary policy, financial stability, and analyses privacy issues. The RBI intends to commence pilot launches of the Digital Rupee for specific use cases soon.
Malaysia
BNM publishes Financial Stability Review for the first half of 2022
Bank Negara Malaysia (BNM) has published its Financial Stability Review for the first half of 2022. It concludes that domestic financial markets have remained orderly, with businesses continuing to show improvement in financial performance, and household resilience continuing to be supported by improving economic and labour market conditions. Ensuring operational and cyber resilience of financial institutions remains a high priority, and financial institutions have been required to implement additional measures against online banking fraud. BNM concludes that the domestic financial system remains well-positioned to withstand shocks and support economic recovery.
BNM Governor addresses Khazanah Megatrends Forum 2022
BNM has published the remarks delivered by Tan Sri Nor Shamsiah Mohd Yunus, the Governor, at the Khazanah Megatrends Forum 2022 in Kuala Lumpur. The Governor commenced with observations about current economic conditions before moving on to speak about reforms to secure "a more sustainable and prosperous future". In particular, she spoke about BNM's Financial Sector Blueprint which was launched in January 2022 and set out five key priorities for the financial sector:
- to foster a vibrant funding ecosystem that supports Malaysia's economic transformation;
- to elevate the financial well-being of households and businesses;
- to advance digitalisation of the financial sector while managing associated risks;
- to position the financial system to facilitate an orderly transition to a greener economy; and
- to advance value-based finance through Islamic finance leadership.
Philippines
SECP showcases digital transformation
The Securities and Exchange Commission of the Philippines (SECP) has published a press release following the 2022 Corporate Registers Forum Annual Conference in the Maldives at the end of September. The SECP showcased the digital transformation of its company registration processes, highlighting that the launch of the Electronic Simplified Processing of Application for Registration of Company led to a sharp jump in the number of newly registered domestic corporations and partnerships in 2021, rising by 50.5% and 33.4%, respectively, despite the pandemic.
BSP recognises collective effort of the banking industry in supporting economic growth and digitalisation
Bangko Sentral ng Pilipinas (BSP) hosted its Annual Reception for the Banking Community at which Governor Felipe M. Medalla thanked the banking sector for their collective effort and collaboration, noting that the banking system is well-managed, and recognised the digitalisation efforts of the banking system through InstaPay and PESONet, which now allow convenient electronic fund transfers between banks, and thus improving service delivery for their clients.
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