APAC Monthly Private Wealth Legal Developments – July 2022

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

HKMA issues circular on two-year plan to embed climate risk in banking supervision

The Hong Kong Monetary Authority (HKMA) has issued a circular to share its two-year plan to integrate climate risk into its banking supervisory processes, following its recent comprehensive review of existing processes. The HKMA’s two-year plan includes key initiatives such as maintaining climate risk management as a standing item in prudential meetings, thematic reviews in the second half of 2022 to assess authorised institutions' (AIs) due diligence processes for green and sustainable products and a further round of climate risk stress tests between 2023 and 2024.

Government gazettes amendments to AMLO to introduce licensing regime for VASPs and other AML/CFT enhancements

The Government has gazetted amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) to enhance Hong Kong's anti-money laundering and counter-terrorist financing (AML/CFT) regulatory regime. The amendments include a new licensing regime for virtual asset service providers (VASPs) to be administered by the Securities and Futures Commission and a new two-tier registration regime for dealers in precious metals and stones (DPMSs) to be administered by the Commissioner for Customs and Excise. It is proposed that the above amendments will come into effect on 1 January 2023, except for the provisions relating to the VASP regime which will come into effect on 1 March 2023.   The amendments will be introduced into the LegCo for first reading on 6 July 2022.

HKMA issues circular to inform AIs of the BCBS' principles for effective management and supervision of climate-related financial risks

The HKMA has issued a circular to AIs regarding the recent publication of the Principles for the effective management and supervision of climate-related financial risks (June 2022) by the Basel Committee on Banking Supervision (BCBS). The HKMA supports the principles and will assess the need for aligning the existing supervisory framework with the principles.  AIs should in the meantime consider the guidance in the principles when strengthening their management of climate-related financial risks and implementing the Supervisory Policy Manual module GS-1 on climate risk management.

The principles are developed to promote a principles-based approach to improving banks' risk management and supervisors' practices related to climate-related financial risks, aimed at achieving a balance in improving risk management practices and providing a common baseline for internationally active banks and supervisors, while maintaining sufficient flexibility, intended to be applied on a proportionate basis depending on the size, complexity and risk profile of the bank.

Singapore

MAS: Thematic review – AI and machine learning

The Monetary Authority of Singapore (MAS) has published a report following its thematic review on selected financial institutions’ (FIs) implementation of Fairness Principles in their use of artificial intelligence (AI) and machine learning. The paper highlights observations from the review of the FIs’ policies and governance frameworks to meet the Fairness objectives under the Fairness Principles, and their implementation effectiveness in actual AI and machine learning use cases. It sets out MAS’s recommendations, good practices and illustrative examples observed from the review.

Malaysia

BNM: JC3 issues TCFD application guide

Bank Negara Malaysia (BNM) has announced that the Joint Committee on Climate Change (JC3) has released the Task Force on Climate-related Financial Disclosures (TCFD) Application Guide for Malaysian Financial Institutions. The guide outlines key recommendations supplemented by the relevant descriptions, guidance notes, considerations and examples that could be utilised as practical resources to facilitate the adoption of TCFD Recommendations by the Malaysian financial industry. BNM has published the opening remarks delivered by the Assistant Governor at the Sustainability Leadership Programme for Financial Institutions.  The Assistant Governor offered some perspectives on the role for financial institutions in the transition to a sustainable economy, focusing on sector agility in the face of rapid technological change and climate change, and the importance of coordination by financial institutions (such as through mainstreaming Value-Based Intermediation and Open Data) to solve real world issues.

Thailand

SECT announces collaboration with CDP

The Securities and Exchange Commission, Thailand (SECT) has announced that it is collaborating with international non-profit CDP (formerly the Carbon Disclosure Project) to raise awareness of, and drive higher levels of, environmental disclosures in Thailand, in line with TCFD recommendations.  The collaboration between CDP and the SECT will run throughout 2022 and is part of the SECT’s ambition to raise awareness and encourage business sectors to incorporate climate-related risks into their policy, strategic planning and risk management, and follow international standard disclosure guidelines.

Philippines

BSP urges adoption of measures to mitigate cyber attacks

The Bangko Sentral ng Pilipinas (BSP) has issued a press release highlighting the importance of BSP-supervised financial institutions (BSFIs) adopting robust control measures against cyber fraud and attacks on retail electronic payments and financial services. The BSP refers to its Memorandum No. M-2022-015 of 22 March 2022 which reads: 'BSFIs should regularly conduct risk assessments of their product features, business rules, as well as application controls, and enforce appropriate enhancements and mitigation measures.' In addition, the BSP advises that BSFIs are advised to remove clickable links in communications sent to customers via email and short message service (SMS) or text messages, and to send notifications through registered mobile numbers or email addresses when requesting changes to customer information. BSFIs should also implement mandatory notifications for fund transfers exceeding a predefined amount, delays in activating new soft tokens or new device registrations, and a cooling-off period for key account changes.

The contents of this document are for reference purposes only. Some of the information comes from public sources and this may not be comprehensive, accurate or up to date; where we have relied on third party information and sources, this has not been verified by us. The document does not constitute legal advice, and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication, and any facts in this document should be checked for your specific circumstances at the time you wish to use or refer to them.