New podcast on conducting internal investigations in Asia

Robert Hunt, a partner in the firm’s corporate crime and investigations practice, has recorded a podcast for the Corporate Compliance and Ethics Blog on trends in internal investigations in Asia.

Whilst investigations used to be largely corruption-related, Rob is seeing an increasing number of investigations into sales and revenue fraud, money laundering and sanctions. Robert discusses these as well as the rise of data privacy and privilege issues and the role played by language and culture in investigations.

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AML/CFT compliance in Hong Kong: Recent record fine and reminder of latest guidance

Authors: William Hallatt, Hannah Cassidy, Natalie Curtis, Valerie Tao and Jennifer Fong.

The Hong Kong Securities and Futures Commission (SFC) has recently reprimanded and fined Guosen Securities (HK) Brokerage Company (Guosen) HK$15.2 million for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) regulatory requirements when handling third party fund deposits.

This is the largest fine imposed under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) to date.

In this e-bulletin, we provide an overview of the Guosen case and other recent cases, the regulators’ approach to AML/CFT enforcement, as well as a reminder of the recent AML/CFT regulatory guidance.

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HKMA turns up the heat and announces consultation on IBOR transition

On 12 February 2019, the Hong Kong Monetary Authority (HKMA) announced in a briefing to the Legislative Council Panel on Financial Affairs that the Treasury Markets Association (TMA) will hold a long-awaited consultation this quarter on alternative reference rates.

The announcement follows signals from regulators globally that firms should transition away from the London Interbank Offered Rate (LIBOR) and other IBORs to alternative, risk-free, reference rates.

While there is no immediate plan to discontinue the Hong Kong Interbank Offered Rate (HIBOR), the HKMA noted that “as a FSB member, [the HKMA] has an obligation to put in place an alternative reference rate as a contingent fall-back”, tentatively suggesting the HKD Overnight Index Average (HONIA) as the most suitable alternative. Click here to read more.

HERBERT SMITH FREEHILLS’ 2019 GUIDE TO CORPORATE INVESTIGATIONS IN CHINA

Authors: Kyle Wombolt and Anita Phillips

Kyle Wombolt, global head of corporate crime and investigations, and Anita Phillips, professional support consultant, have updated their guide to corporate investigations in China. This forms part of GIR’s acclaimed text, The Practitioner’s Guide to Global Investigations 2019, third edition. It is regarded as the only text covering the nuts and bolts of multi-jurisdictional corporate investigations.

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SFC seeks to halt “rolling bad apples” in their tracks with licensing reforms

On 1 February 2019, the Securities and Futures Commission (SFC) announced significant changes to its licensing forms and processes (Licensing Reforms). Included in these changes was the long-awaited arrival in Hong Kong of measures intended to stop the “rolling” of “bad apples” within the financial industry by requiring licensed corporations and registered institutions to provide the SFC with more information about the circumstances under which their employees depart.

In addition to these reforms targeting “bad apples”, the Licensing Reforms also include:

  1. sweeping changes to the SFC’s licensing forms. These changes include streamlining and consolidating the forms, as well as reforms which will mean that applicants must now provide the SFC with significantly more granular information regarding matters relevant to fitness and properness; and
  2. a thorough refresh of the SFC’s Licensing Handbook, which now includes key aspects of the licensing-related guidance issued by the SFC since the publication of the previous Licensing Handbook in April 2017.

The new licensing forms can be used from 11 February 2019. However, the SFC will accept current standard forms during a two-month transition period, before the new forms become compulsory from 11 April 2019.

We have been following these developments for some time and were part of the informal consultation held by the SFC in late 2018. We will be holding a seminar in Hong Kong to share our insights on how these developments will impact licensed corporations in Hong Kong and form part of broader conduct and culture-focused reforms across the Asia-Pacific region. Read our full client briefing and register for the seminar here.

SINGAPORE PAYMENTS AND FINTECH UPDATE

In this bulletin we cover the following key developments in the payments and fintech space:

  • Payment Services Bill: On 14 January 2019, the Payment Services Bill (Bill) was passed by the Singapore Parliament. When it comes into force, the Payment Services Act (as the enacted Bill will be known) will introduce two regulatory frameworks: a designation scheme which enables the Monetary Authority of Singapore (MAS) to designate significant payment systems for financial stability reasons, and a licensing regime which allows MAS to regulate a wider range of payment services, including cryptocurrency dealing and exchange services, in a proportionate manner depending on the scope and scale of the provider’s services.
  • Sandbox Express: On 14 November 2018, MAS released a consultation paper on Sandbox Express, which comprises of a set of to pre-defined sandboxes to complement the existing approach of customised sandboxes.
  • Digital Token Offerings: On 3 December 2018, MAS updated its Guide to Digital Token Offerings which provides general guidance on the application of the securities laws administered by MAS to offers or issues of digital tokens in Singapore.

For more information on the key developments in the payments and fintech space and the implications of the Payment Services Bill, Sandbox Express and Guide to Digital Token Offerings, please see our full bulletin here.

SFC publishes findings and guidance on protection of client assets following reviews of brokers’ internal controls and supervision of account executives

Last month, the Securities and Futures Commission (SFC) published a circular, a report and a self-assessment checklist to provide guidance on the standards expected of licensed corporations (LCs) regarding internal controls for the protection of client assets and supervision of account executives (AEs). For our full briefing, please click here.

Hong Kong Insurance Authority prepares for direct regulation of insurance intermediaries in mid-2019 – what is the progress so far?

It is anticipated that in around mid-2019, the Insurance Authority (IA) will take over the regulation of insurance intermediaries from the three self-regulatory organisations (SROs). In preparation for the commencement of the new regime, the IA has launched several public consultations on guidelines and rules. For our full briefing on these developments, please click here.

 

The Rise of the Crypto Hedge Fund: Opportunities and Challenges

The extraordinary returns generated by cryptocurrencies have led to a frenzy of investment activity and interest from investors. Several new crypto hedge funds have emerged, and cryptocurrency is fast establishing itself as a mainstream asset class.

However, numerous operational and regulatory concerns remain. While regulators are increasing oversight, established players and startups are moving to address the current gaps in infrastructure, control and compliance.

Read our latest article for Regulation Asia to learn more about overcoming the challenges to make the most of the opportunities of this new asset class.

 

William Hallatt
William Hallatt
Head of Financial Services Regulatory, Asia, Hong Kong
+852 2101 4036
Hannah Cassidy
Hannah Cassidy
Partner, Hong Kong
+852 2101 4133
Grace Chong
Grace Chong
Senior associate, Hong Kong
+852 2101 4138
Natalie Curtis
Natalie Curtis
Of Counsel, Singapore
+65 6868 9805
Jeremy Birch
Jeremy Birch
Senior Associate, Hong Kong
+852 2101 4195