AML/CFT Guidelines for Payment Service Providers

On 16 March 2020, The Monetary Authority of Singapore published two guidelines providing more details required on the anti-money laundering and countering the financing of terrorism (“AML/CFT”) to the payment service institutions.

  1. Guidelines to Notice PSN01 on Prevention of Money Laundering and Countering the Financing of Terrorism – Specified Payment Services
  2. Guidelines to Notice PSN02 on Prevention of Money Laundering and Countering the Financing of Terrorism – Digital Payment Token Service

These guidelines provide guidance to all payment services providers and digital payment token service providers respectively on the requirements in Notice PSN01 and PSN02 on Prevention of Money Laundering and Countering the Financing of Terrorism.

Ingenia is assisting various payment institutions in the establishment of their AML/CFT framework. Let us know if you have any questions.

Guidance on Sales and Advisory Practices in Wealth Management

MAS published an information paper on “Private Banking Sales and Advisory Practices – Observations and Supervisory Expectations from Thematic Inspections” on 14 February 2020. In this information paper, MAS shares its expectations with regards to governance, investment suitability, pricing controls and disclosures and culture and conduct and findings from thematic inspections at selected private banks in 2018 and 2019. MAS reminds wealth managers that they must act in the interest and with transparency towards its clients and the board of directors and senior management of their responsibility to establish a framework and culture to ensure this.

Contact us to discuss how your company can implement. Find an overview regarding suitability assessments in wealth management by Rolf, our Co-founder, under this link.

MAS Imposes Penalty for AML/CFT Failure

The Monetary Authority of Singapore (“MAS”) has imposed a composition penalty of SGD 400,000 on TMF Trustees Singapore Limited (“TTSL”) for failure to comply with MAS’ anti-money laundering and countering the financing of terrorism (“AML/CFT”) requirements.

In its inspection, MAS identified, in particular, the following failures in TTSL’s AML/CFT controls:

  1. TTSL failed to verify the source of wealth of settlors. Instead, TTSL had relied on the settlors’ representations regarding their source of wealth or bank reference letters which only confirmed the banking relationship between the banks and the settlors, without obtaining  information to adequately corroborate those claims;
  2. TTSL also failed to monitor, on an ongoing basis, the transactions of trust relevant parties (TRP). In particular, TTSL did not scrutinise such transactions to ensure that these were consistent with its knowledge of the TRPs’ business and risk profile as well as the source of funds.

These findings highlight once again that financial institutions must (a) corroborate material information provided by their customers and (b), in their ongoing transaction monitoring, take into consideration if a transaction is consistent with their knowledge of the client.

Find MAS’ announcement here and contact us, if you would like to discuss your AML/CFT framework or to learn about our AML/CFT screening services for small financial institutions.

Reprimand and Fine for Cross-border Activities

On 14 February 2020, the Securities and Futures Commission of Hong Kong published its Statement of Disciplinary Action against Capital Global Management Limited (“CGML”). The SFC reprimanded and fined CGML HDK 1.5 million for the distribution of investment products and offering investment advice in Taiwan without the required license and for failures in CGML’s supervision of cross-border activities.

In a circular titled “Regulatory Compliance regarding Cross-border Business Activities“, the SFC explicitly reminded financial institutions that they must adhere to legal and regulatory requirements in Hong Kong and any other relevant jurisdiction and to establish respective frameworks. In addition to a breach of regulatory requirement, the SFC considers cross-border activities without an appropriate license in the target country to put into question the fitness and properness of the financial institution and the individuals.

Financial institutions in Singapore and most other countries are also held to comply with applicable laws and regulations and subject to fit and proper status. They should thus also remain vigilant with regards to the offering of investment products and services beyond their shores.

If you are interested in learning more about cross-border compliance frameworks or are looking for guidance regarding specific jurisdictions, reach out to our partners at BRP for their advice and or their Country Manuals.

COVID-19 Measures

MAS issued multiple circulars outlining expectations regarding measures to prevent spreading COVID-19, namely regarding safe distancing, technology risk management and travel restrictions

Industry Updates & Developments

Coronavirus Rattles Markets

A rising number of infections has prompted markets to re-evaluate concerns about a global pandemic. Global Stocks have fallen sharply following confirmation that the coronavirus has spread to Italy, South Korea and Iran, raising fresh questions about the potential impact on global economic growth and business sector supply chains dependent on China. Financial markets are in turmoil since. If you are interested to know “What the Coronavirus Means for the Markets” read this article written by Robert Sharps.

Popular Payment Services

415 entities have notified MAS pursuant to the Payment Services (Exemption for Specified Period) Regulations 2019 and been granted a temporary exemption from holding a license under the Payment Services Act. These entities need to apply for a license by 28 January 2021 or, in case of digital payment token services providers by 28 July 2020.

Among these, exempt payment institutions have registered for the following payment services:

  • Account issuance service: 176
  • Domestic money transfer service: 101
  • Cross-border transfer service: 40
  • Merchant acquisition service: 65
  • Issuing of e-money (total float held by e-money issuer not exceeding SGD 30m): 45
  • Digital payment token services: 124

Many exempt payment institutions have registered for multiple services.

Find the full overview here and do reach out to us, if you need assistance in submitting your license application timely.

Growth of Wealth Management

Singapore’s wealth management industry has been picking up markedly on a year to year growth with the three major banks reporting average of 18% growth in their wealth management income in 2019. Asia continues to shine as the fastest-growing region for wealth creation, with a young population and strong valuation uplift keeping it relatively buoyed amidst the geopolitical storm. Singapore and Hong Kong will continue to lead the way as global wealth management hubs. Click here for the full story.

However, the corona crisis is a jolt to the wealth management industry. The outbreak of COVID-19 will only step up the inevitable transformation in the private banking industry. Given collapsing margins and growing costs, this crisis is likely to wipe out a few private banks. There is no choice but to innovate. For more innovative private banks, the pandemic represents a historic opportunity. Discover the eight scenarios whereby wealth managers can learn to break from past patterns and use the hour of crisis constructively to emerge as the virus crisis winners.

Alternatively, private bankers become independent. “Growing regulatory constraints have pushed private bankers – especially the more entrepreneurial sort – to set up shop on their own often in order to become more nimble and flexible to meet client needs. Singapore’s framework coupled with lower geopolitical risks has made it an especially favorable environment for independent asset managers.” (finews.asia). Talk to us if you would like to learn about the requirements to set up an external asset management company.

Succession Planning

According to a recent report by Butterfield, wealthy Asians post an all-time high demand for succession planning. An evolving regulatory environment and rising geopolitical risks in Asia led to the high requests received at private banks.

More than 80 percent of respondents surveyed saw increased requests for succession planning over the last five years, the highest ever reported, said the Singapore-based global trust and fiduciary service provider. Age was highlighted as the top motive to kickstart succession planning followed by a focus on wealth transfer, liquidity and business succession.

The findings reflect the deep complexity of succession planning in Asia. Whatever the reason, Asia’s first-generation HNWIs need to start setting the wheels in motion for succession planning, especially given the current volatile market environment and the often international residence of family members. Read here for the full coverage.

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