Compliance in Europe is getting more complex: there’s just a whole lot more of it. But what can this tell us about what’s coming next for Asian firms?

1. European Regulatory Themes:
Are they heading East?
Bovill Briefing 19 November
Ben Blackett-Ord, Rebecca Thorpe and Billie-Jo Dixon

2. Agenda
2
1. Greater focus on the individual
2. Europe’s borders expanding
3. Financial Crime
4. Questions

3. Greater focus on the individual
Ben

4. Drivers for change
4
• Increased scrutiny by regulators
• Greater definition of responsibilities
• Pressure from Remuneration Codes

5. • The UK FCA’s approach to supervision is increasingly
focussed on holding individuals to account:
o Increased use of attestations
o More enforcement action against individuals
o Specific legislation to enhance individuals’ accountability
• The risk of working in a senior position in banks or financial
services firms is increasing
Increased scrutiny
5

6. UK FCA’s new approach to supervision of senior individuals
requires:
• Detailed statements of responsibilities for senior staff;
• Allocation of “Required Responsibilities” to senior managers
…Leading to requests for higher pay for taking on additional
responsibilities
Greater definition of responsibilities
6

7. • Remuneration Codes across Europe remains a hot topic
• Almost all areas of Financial Services are impacted in some way
• Some restrictions particularly emotive
• General shift from annual incentives to base salary
Singapore is not immune
Few hard and fast rules
Rules under FAIR
Remuneration
7

8. Europe’s borders expanding
Billie-Jo

9. Europe
• AIFMD – end of the first chapter
• Safe-keeping of assets
• More UCITS …
Singapore
• Certain collectives being brought into the fold
• Joining the European funds passport
The funds world
9

10. Equivalence: European Commission assesses
Singapore Government regulatory framework
Co-operation Agreements: between ESMA and
MAS
MiFID II
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The prudential and business conduct framework of a third
country may be considered equivalent if its firms are:
Subject to
authorisation,
supervision and
enforcement
Governed by
conduct of
business rules
Bound by
organisational
requirements &
controls
Subject to
sufficient capital
requirements
Preventing
market abuse
and enabling
market
transparency

11. Macro and Financial Crime
Rebecca

12. 12
Shadow Banking
“Credit intermediation that takes place outside the regular
banking system”
• NOT a European theme, firmly a global theme
• Singapore is part of the annual global shadow banking
monitoring report
• MAS Macro Surveillance Department monitors shadow banking
threats annually
• This compares to much action in EU. For example,
o Regulation on MMFs
o Regulation on SFTs

13. 13
EU Financial Crime Regs in the pipeline
The 4th Money Laundering Directive:
• The changing definition of a PEP
• Widening definition of Correspondent Banking
• Business Risk Assessments
• Simplified Due Diligence justification

14. 14
Politically Exposed Persons
Implementation
Update PEP definitions in
policies and procedures
Inclusion of domestic PEPs in
screening processes and data
Update PEP risk assessment
models
Risk adjusted controls
Changes
Legal definitions
updated to include
domestic PEPs
Recognition that not
all PEPs carry the
same financial crime
risk

15. 15
Correspondent Banking
Changes
Broader definition of
‘Correspondent
Relationship’
Implementation
Review Financial Institution
relationships to focus
resources in line with risk and
reward
Build specialist EDD teams to
evaluate correspondent
banks’ AML/CTF controls
Use of KYC registries and
Global LEIs

16. 16
Risk Assessments
Changes
EC to issue supra-national
risk assessment
Countries to issue national
risk assessment
Firms to undertake
business risk assessments
inc info from above
Increased importance of
CDD being risk-based
Implementation
Enhance information flows
to/from public and private
sectors
Enhance business risk
assessment models and
processes
Re-design customer risk
assessment models for
greater depth and
sophistication

17. 17
Simplified Due Diligence
Changes
SDD no longer an
exemption and will be
only permitted for use
in low risk
circumstances
Implementation
Revise customer risk
assessment to enable low risk
judgements and ensure
evidenced
Assign risk ratings to
customers previously subject
to SDD and conduct
additional due diligence
where necessary

18. 18
On the horizon...
• Introduction of Unexplained Wealth Orders
• Supra-national harmonisation of suspicious reporting
• Virtual currencies
• Sectoral sanctions
• Cyber crime
• Anti-Bribery and corruption standards

19. 19
So, what is heading East?
• Greater focus on the individual potentially
leading to increased salary costs
• If there’s the political will, increased funds
and securities regulation
• Change to prevent shadow banks causing
systemic risk
• Practical (as opposed to legislative) focus
to ensure AML / KYC is genuinely risk
based

20. Questions?
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