Below is a snapshot of some of the key local and international regulatory and compliance developments in November 2011 relevant to the Asian wealth management industry.
Date: Dec 9, 2011
Tags: Regulation, Tax, Compliance, Enforcement
Below is a snapshot of some of the key local and international regulatory and compliance developments in November 2011 relevant to the Asian wealth management industry.
Each update includes a brief summary, with a link so you can access further information if you would like to. These are divided by geography to make them quicker to review.
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SUMMARY
For more information – either click on each link or scroll down to the relevant section.
International
Hong Kong
Singapore
China
Taiwan
Indonesia
India
Australia
UPDATES
International
Swiss banks may lose CHF47 billion from latest tax agreements
As much as CHF47 billion – about 2.3% of total offshore assets under management (AUM) in Switzerland – might be lost before the implementation of Switzerland’s new withholding tax agreements with Germany and the UK, due to withdrawals and tax payments, according to a new study.
The agreements may also result in a total loss of more than CHF1 billion in private banking industry revenues – about 4.4% of the total – due to outflow and margin reductions on remaining assets, said Booz & Co.
On the flip side, said the report, these agreements offer a great opportunity for Switzerland and its private banks, as they simplify cross-border private banking and create new strategic options to penetrate some of the largest wealth management markets in Europe, as well as forming an unique multi-shoring value proposition.
More details: http://www.booz.com/media/uploads/BoozCo-Swiss-Offshore-Private-Banking-Abgeltungssteuer-Abkommen.pdf
UK tax authority creates unit to target offshore tax cheats
A team of analysts, tax experts and investigators has come together at the UK’s HM Revenue & Customs (HMRC) as a new unit to crack down on offshore tax cheats.
Named the Offshore Co-Ordination Unit (OCU), the unit will oversee and co-ordinate HMRC’s compliance work to identify and pursue those who hide income and capital in offshore accounts to avoid UK tax and duties. It will also implement the operational aspects of the recently-signed tax agreement between Switzerland and the UK, which is expected to raise billions of pounds for the UK.
In addition, OCU will look to fully exploit the increasing amount of offshore information at HMRC’s disposal, including bank account data, to use this to tackle offshore tax evasion.
More details: http://nds.coi.gov.uk/clientmicrosite/Content/Detail.aspx?ClientId=257&NewsAreaId=2&ReleaseID=422169&SubjectId=36
Credit Suisse shares client names with US tax authorities
In response to a request from the US Internal Revenue Service (IRS), Credit Suisse has confirmed it revealed some of its US clients’ names to the local tax authorities, according to news reports.
The bank did not disclose how many clients it has notified, but in a letter to affected account holders, Credit Suisse acknowledged that the IRS had requested names and other information about US taxpayers who held accounts indirectly through corporations from 2002 through 2010, and that the Swiss government had ordered the bank to furnish the data immediately.
More details:
http://online.wsj.com/article/SB10001424052970204190704577025491046379030.html
http://www.ft.com/intl/cms/s/0/3a00ccd6-09e5-11e1-8d46-00144feabdc0.html?ftcamp=rss#axzz1f5Y7u4u3
Switzerland offers multi-billion dollar deal to settle US tax claims
According to a report by Reuters, the Swiss government has proposed a multi-billion dollar settlement with US authorities over allegations that it helped wealthy Americans avoid US taxes.
The proposed civil settlement could reach US$10 billion or more, which would cover all banks in Switzerland, numbering about 355, including some 11 banks now under criminal investigation by the US Justice Department, sources briefed on the matter said in the news report.
More details: http://www.reuters.com/article/2011/11/03/us-usa-taxes-swiss-idUSTRE7A27RC20111103
UK issues notice on money laundering controls in overseas jurisdictions
The UK’s HM Treasury has issued a Financial Sector Advisory Notice regarding the risks posed by unsatisfactory money-laundering controls in a number of jurisdictions.
The Treasury’s advice follows the Financial Action Task Force’s (FATF’s) October 2011 public statement which identified jurisdictions with ongoing and substantial money laundering and terrorist financing risks; and jurisdictions that have strategic anti-money laundering and combating the financing of terrorism (AML/CFT) deficiencies for which they have developed an action plan with the FATF.
More details: http://www.hm-treasury.gov.uk/d/financial_sector_advisory_oct2011.PDF
Former UBS head of wealth management challenges UK fine
UBS’ former UK head of wealth management has challenged the ability of the country’s watchdog to punish senior executives for insufficient supervision, according to a news report.
John Pottage has appealed against a GBP100,000 fine imposed by the Financial Services Authority (FSA) in 2009 for allegedly not putting adequate controls in place when he took up the role in 2006.
The case marked the first time the FSA had tried to fine a senior manager for inadequate supervision.
More details: http://www.ft.com/intl/cms/s/0/7c9b86be-0eb6-11e1-9dbb-00144feabdc0.html#axzz1dkC9n37Y
UK cuts financial ties with Iranian banks
News reports have said that Britain has severed all ties with Iranian banks as part of a package of sanctions from the US, UK and Canada aimed at confronting Tehran's nuclear programme.
This move followed the International Atomic Energy Agency's report on Iran and concerns about its nuclear programme. From November 21, UK credit and financial institutions were required to cease all transactions with Iranian banks, including the Central Bank of Iran.
This is the first time the UK has used powers created under the 2008 Counter-Terrorism Act to cut off a country's banking sector in this way.
More details:
http://www.guardian.co.uk/world/2011/nov/21/uk-severs-ties-iranian-banks-sanctions?newsfeed=true
http://www.bbc.co.uk/news/uk-politics-15823622
Report reveals findings of Swiss bank’s dealings with PEPs
After investigating the way in which its banks have dealt with “politically exposed persons” (PEPs), the Swiss Financial Market Supervisory Authority, FINMA, has found that most financial institutions have fulfilled their due diligence obligations satisfactorily.
FINMA audited the approach by 20 Swiss banks when dealing with PEPs. It deemed specific points of the approach adopted at four banks to be inadequate and has initiated enforcement proceedings.
The authority is monitoring the implementation of the measures introduced and is stepping up the intensity of its general anti-money laundering supervision.
More details: http://www.finma.ch/e/aktuell/Pages/mm-pep-abklaerung-20111110.aspx
UK imposes largest individual fines of US$9.6 million for market abuse
The UK’s Financial Services Authority (FSA) has imposed its largest-ever fine on an individual – US$9.6 million for manipulating the closing price of Reliance Industries securities on the London Stock Exchange (LSE).
The regulator said that Rameshkumar Goenka, a Dubai-based private investor, placed orders and executed trades which artificially-inflated the closing price of the Reliance securities on 18 October 2010.
The investor held an over-the-counter structured product which matured on that day, and for which the payout depended on the closing price of Reliance securities. Goenka avoided a loss of US$3,103,640 under the terms of the product. The bank which was the counterparty, overpaid Goenka $3,103,640 as a result of Reliance’s closing price, said the FSA.
More details: http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/094.shtml
US charges UBS for faulty recordkeeping related to short sales
The US Securities and Exchange Commission (SEC) has charged UBS Securities for inaccurate recording practices when providing and recording “locates” to customers seeking to execute short sales.
According to the SEC’s investigation, since at least 2007, UBS’ “locate log”, which records the “locates” it granted, inaccurately portrayed which locates were based on electronic feeds or direct confirmation with specific lenders, said the regulator.
UBS settled the enforcement action by agreeing to pay a US$8 million penalty and retain an independent consultant.
More details: http://sec.gov/news/press/2011/2011-240.htm
Hong Kong
HKMA issues guidance on remuneration disclosure
The Hong Kong Monetary Authority (HKMA) has issued a circular to authorised institutions (AIs) setting out detailed guidance on remuneration disclosure.
This is intended to help firms comply with the specific requirements and standards contained in the Basel Committee on Banking Supervision’s paper on pillar 3 disclosure requirements for remuneration – which to some extent go beyond the HKMA’s disclosure provisions.
The circular also encourages AIs to make the relevant disclosures at least on an annual basis, with effect from the 2011 financial year.
More details:
http://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2011/20111123e1.pdf
http://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2011/20111123e1a1.pdf
SFC proposals focus on complaints handling
To facilitate the establishment of the Financial Dispute Resolution Centre (FDRC), the Securities and Futures Commission (SFC) has proposed amendments to the Code of Conduct.
One key proposal will require licensed or registered persons regulated by the SFC or the Hong Kong Monetary Authority (HKMA) to comply with the FDRC Scheme and be bound by its process. Other proposals include provisions to oblige licensed or registered persons to enhance the complaint-handling procedures and act in good faith under the FDRC.
Other amendments are proposed to strengthen enforcement against market misconduct and to improve supervisory oversight of financial markets. These include: recording of client orders and upgrading the order recording requirement so that telephone recording of client orders would be more readily available for dispute resolution and investigatory purpose; reporting of suspicious activities – extending the existing reporting obligation, so that licensed or registered persons would have to report to the SFC any suspicious activities of their clients; and providing expert evidence – preventing licensed or registered persons from discouraging their employees from performing expert witness services for the SFC and HKMA.
The SFC is inviting the public to submit comments before 9 January 2012.
More details: http://www.sfc.hk/sfcPressRelease/EN/sfcOpenDocServlet?docno=11PR142
SFC urges investors to watch margin requirements
The Securities and Futures Commission (SFC) has reminded investors who borrow in order to trade securities and futures that they must stay on top of their margin requirements, to maintain their margin positions, especially in times of high volatility.
The regulator pointed out in a statement that margin requirements can change in response to fluctuating market conditions, meaning that brokerages may tighten them without prior notice. For example, they might raise the minimum level of margin deposits or exclude certain securities as accepted collateral.
And investors who fail to fulfill such requirements on time may be subject to forced liquidation and thus suffer significant losses.
More details: http://www.sfc.hk/sfcPressRelease/EN/sfcOpenDocServlet?docno=11PR145
SFC reminds licensed corporations to properly manage risks
The Securities and Futures Commission has issued a circular to ensure the proper management of risks for all licensed corporations if they provide services to clients through overseas counterparties.
Licensed corporations must explain to their clients the risks associated with trading activities that are set out in the Code of Conduct, said the regulator, including the risks of client assets received or held outside Hong Kong, which may not be subject to the same protection as those which are received or held in Hong Kong.
More details: http://www.sfc.hk/sfcPressRelease/EN/sfcOpenDocServlet?docno=11PR146
Singapore
MAS reprimands OCBC for failures in banking systems
The Monetary Authority of Singapore (MAS) has reprimanded OCBC Bank for the failure of the bank’s online and branch banking systems.
The regulator found that the bank did not implement sufficient measures to address single points of failure in its system and network infrastructure – which means OCBC failed to observe the Security Practices requirement set out in the MAS IBTRM Guidelines.
The MAS has directed the bank to conduct a thorough review of all critical host and network architectures as well as configurations to determine if there are any single points of failure, or operational and functional fragilities.
MAS responds to feedback on maintenance of insurance assets
The Monetary Authority of Singapore (MAS) has issued a response to the feedback from the consultation on the review of section 21 of the Insurance Act (IA) on the maintenance of assets in Singapore, which was conducted in September 2010.
The MAS clarified some issues with the new asset maintenance requirements, which will apply to all insurers, including Singapore insurance funds and offshore insurance funds, life and non-life, without pre-conditions.
More details: http://www.mas.gov.sg/resource/publications/consult_papers/2011/
Asset_Maintenance_Consult_Paper_S21_response_20111101.pdf
China
China launches RMB business for FX options
China’s State Administration of Foreign Exchange recently released a notice launching two types of foreign exchange risk-reversal put and call options as of 1 December 2011.
According to the notice, any bank that is eligible to conduct RMB interbank foreign exchange business can directly offer a combination of options.
More details:
http://www.safe.gov.cn/model_safe/news/new_detail.jsp?ID=90000000000000000,936&id=2
http://www.safe.gov.cn/model_safe/laws/law_detail.jsp?ID=80600000000000000,33&id=4
Taiwan
Taiwan gives green-light to buying securities in Mainland China
Taiwan’s regulator recently announced that overseas branches of commercial banks are now allowed to invest in securities issued by government or corporations in Mainland China.
The revision is related to the type of investment products, while the investment quota still complies with the current regulation.
More details: http://www.fscey.gov.tw/Layout/main_ch/News_NewsContent.aspx?NewsID=43708&path=1736&LanguageType=1
Indonesia
Former Citi banker indicted for stealing client funds
Inong Malinda Dee, a former relationship manager at Citibank’s Indonesia unit, was formally indicted at the South Jakarta District Court in early November, charged with two counts of banking crimes and one count of money laundering.
According to news sources, Dee stole more than US$5 million from clients between January 2007 to February 2011 by getting them to sign blank transfer forms or forging their signatures.
In May 2011, Indonesia’s central bank banned Citigroup from adding new wealth management clients for one year, opening new branches for 12 months and using third-party debt collectors for two years, after local police accused Dee of stealing from clients and a separate probe into the death of a credit card customer at one of its Jakarta offices.
More details: http://www.bloomberg.com/news/2011-11-09/ex-citigroup-indonesia-manager-stole-5-million-from-clients-court-told.html
India
India starts receiving banking data from Switzerland
More than a year after India and Switzerland signed a revised Double Tax Avoidance Agreement (DTAA), the Indian finance ministry said it has started receiving banking and tax-related information from Switzerland.
This development is expected to help tackle the problem of black money in India, said local news reports.
More details: http://www.hindustantimes.com/India-news/NewDelhi/India-starts-getting-banking-info-from-Switzerland/Article1-766474.aspx
http://businesstoday.intoday.in/story/swiss-accounts-indians/1/19920.html
Government appoints teams to probe HSBC Swiss accounts
According to local news sources, the Indian government has appointed 12 teams to probe undisclosed offshore accounts allegedly held by almost 700 Indian citizens in the Swiss arm of HSBC.
The reports said that the Indian government has obtained a list with names of prominent corporate and political leaders.
The Indian government recently concluded a tax treaty with Switzerland, although that applies from April 2012.
More details: http://articles.economictimes.indiatimes.com/2011-11-04/news/30359506_1_herve-falciani-tax-treaty-swiss-bank
Australia
Sydney financial adviser jailed for A$600,000 fraud
The Australian Securities and Investments Commission (ASIC) has sentenced former financial adviser Alan Leslie Brown to three years’ imprisonment after he pleaded guilty to charges of obtaining money by deception, using a false instrument and dishonest conduct in relation to financial services.
ASIC found that Brown fraudulently withdrew funds from five clients’ accounts between July 2002 and July 2008 without their knowledge or authority, totalling roughly A$600,000.
In addition, he forged a client’s signature on a falsified withdrawal request to obtain funds from the client’s account for his own purposes.
