Are European regulations heading East?

European Regulatory Themes:

Are they heading East?

Bovill Briefing 19 November

Ben Blackett-Ord, Rebecca Thorpe and Billie-Jo Dixon

Agenda

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1. Greater focus on the individual

2. Europe’s borders expanding

3. Financial Crime

4. Questions

Greater focus on the individual

Ben

Drivers for change

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• Increased scrutiny by regulators

• Greater definition of responsibilities

• Pressure from Remuneration Codes

• 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

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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

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• 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

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Europe’s borders expanding

Billie-Jo

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

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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

Macro and Financial Crime

Rebecca

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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

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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

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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

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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

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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

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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

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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

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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

Questions?

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