AIAM Compliance Workshop Presentation 17 May 2018

Transcription

1 AIAM Compliance Workshop Presentation 17 May 2018

2 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 2 of 32

3 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 3 of 32

4 1. Customer monies & assets Consultation - Enhancements To Regulatory Requirements On Protection Of Customer s Moneys And Assets July 2016 MAS Response To Feedback Received On Enhancements To Regulatory Requirements On Protection Of Customer s Moneys And Assets May 2017 The existing requirements under the LCB Regulations and the proposals in [the MAS Consultation Paper On Enhancements To Regulatory Requirements On Protection Of Customer s Moneys And Assets] would apply in a situation where a customer s trust or custody account is maintained by the FMC on behalf of a fund or fund management customer. These requirements/proposals are not applicable to the FMC if the customer s moneys or assets are held directly in an account in the customer s name with a bank or custodian (e.g. in the case of SMA). Duff & Phelps 4 of 32

5 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 5 of 32

6 2. Best execution Consultation - Execution of Customers Orders Nov 2017 Have, implement written policy to place (and/or execute), comparable customers orders based on (1) time of receiving orders (2) best available terms Applies when placing orders with another Singapore or foreign FI for execution Board to approve policy, which must periodically reviewed & disclosed clearly to customers electronic ok if customer agrees If LFMC places order where AI/II/EI specifies venue / price = best execution satisfied for part of the order that customer instructed on If client designates broker/custodian & gives specific order price, EAM s obligation is to execute the order in a timely fashion. Duff & Phelps 6 of 32

7 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 7 of 32

8 3. Liquidity risk management Consultation - Liquidity Risk Management Framework for Fund Management Companies Oct 2017 Proposed to be applicable to LFMCs, RFMCs managing open-ended CIS N/A to FMCs without discretionary authority for the fund/sub-fund e.g. FMCs providing research or non-discretionary advice to another FMC Board oversight of LRM, senior staff to be designated, evaluate LR in product design, subscription/redemption, stress test, gating, disclosure LRM framework focused on CIS; unlikely to apply to segregated accounts Duff & Phelps 8 of 32

9 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 9 of 32

10 4.1 AML - Key MAS supervision, enforcement focus "We will take stronger regulatory actions against those financial institutions whose AML/CFT practices fall short of the expected standards. And we will make public our sanctions against persistently or egregiously errant financial institutions. MAS Managing Director Ravi Menon (July 2016) Duff & Phelps 10 of 32

11 4.1 AML - key MAS supervision, enforcement focus Direct financial institutions to cease operations e.g. BSI, Falcon Bank. Prohibition orders e.g. a total of 6 persons involved in 1MDB-related breaches were issued POs, ranging from 6 years to lifetime bans. Appoint an independent party to confirm that rectification measures have been effectively implemented and to report its findings to MAS e.g. DBS, UBS. Supervisory warning or reprimand letter to the financial institution. Sharing of recent cases Duff & Phelps 11 of 32

12 4.1 AML - key MAS supervision, enforcement focus A CMI s board of directors and senior management are responsible for ensuring strong governance and sound AML/CFT risk management and controls at the CMI. While certain responsibilities can be delegated to senior AML/CFT employees, final accountability rests with the CMI s board of directors and senior management. AML Guidelines para Duff & Phelps 12 of 32

13 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 13 of 32

14 4.2 Why are EAMs being singled out? Not the case rather that EAMs have fallen through the hole Understand that the environment we operate in is getting more political & complex FATF mutual evaluation findings of Singapore Duff & Phelps 14 of 32

15 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 15 of 32

16 4.3 What do EAMs need to do? Let s go through some things that need to change OM practices Full-review of polices & procedures, mock regulatory inspection Have an adviser to guide you if you get an MAS AML inspection May consider adopting Private Bank Code of Conduct Industry Sound Practices on tax offences: 2.7 Where an External Asset Manager is involved in the management of the account, Covered Entities should assess and obtain confirmation that the External Asset Manager is adhering to standards that are equivalent to those set out in this framework. Likewise, the Covered Entities should subject clients of External Asset Managers to due diligence and know your client standards that are equivalent to those they apply to their own direct clients. AIAM suggested more AML training maybe MAS can subsidise Duff & Phelps 16 of 32

17 Consolidated Feedback from informal poll taken by EAMs

18 AIAM EAMs Clientele profile Not all respondents provided a breakdown by percentages. So we counted the number of respondents who listed CIS, FO and Endowments as clients besides HNWIs. 20% of respondents said their client base included CIS and another 20% said they dealt with FOs and Endowments 100% said their client base included HNWIs who either opened accounts in their own names or through PIHCs Family Office/Endowments 20% HNWI includes Accounts opened in:- Middle- East 10% Others 5% Collective Investment Schemes 20% HNWI only 60% Europe 35% Asia 50% Own Names Private Investment Holding Companies Through Trusts Asia Europe Middle-East Others

19 HOW EAMs CONDUCT CDD? Client Due Diligence All EAMs have their own compliance teams CDD for every client directly onboarded by the EAM is done independently from the Bank where the client account will be opened (two layers of CDD since the Bank also has to do its own CDD) For EAMs that have CIS where subscriptions to their Funds comes through Institutional Investors, the CDD is conducted by those regulated II FIs. In that case, EAMs may not have full transparency to the end investor, but will rely on the Banks to carry out their CDD. The EAM will however conduct CDD on the II/FI. All EAMs follow strictly the MAS AML/CFT Notice requirements for CMSLs (SFA04-N02) and because clients have to establish bank accounts, CDD will also comply with MAS626 EAMs will not work with clients that refuse to provide documentation to meet CDD requirements Based on the information provided during the initial onboarding, EAMs will Risk Rate their clients Risk levels are not determined simply with a tick-thebox criteria, but rather, analysing the reason on the indicators presented If there are any high risk indicators, all EAMs will carry out both enhanced CDD and increase the frequency of reviews Usual frequency for reviews is 6 months for high risk and every other year for low/standard risk clients (following the Custodian Bank s frequency in most cases) Several EAMs conduct enhanced CDD even for standard risk clients Most EAMs conduct annual reviews even for standard clients Client Due Diligence EAMs do not act as Nominees for their Clients Clients establish accounts in their own names EAMs are given Limited Power of Attorney to manage the assets in the client accounts Common providers used for due diligence check and Name Screening include:- World Check Factiva Thomson Reuters Regular Monitoring and STRs All EAMs monitor the transactions which occur in client accounts and will investigate any suspicious activity All EAMs have policies and procedures in place to both identify and then act on activity that warrants the need to file a Suspicious Transaction Report (STRs)

20 CHALLENGES FACING EAMs on ML/TF/CDD related issues Challenges EAMs face in administering AML Programmes 1) Encounter auditors with tick-the-box mentality, causing EAMs to be marked down on the quality of AML procedures rather than focusing at the overall quality of the AML assessment 2) Deterring of tax crimes as EAMs are not tax advisors/experts. 3) Cost Issues:- Increasing price of Risk Management Tools (i.e. Screening Systems such as Dow Jones). As EAMs are not well versed in tax regulations in client s country of domicile, seeking to outsource for assistance of AML programmes can lead to significant cost increase. Most EAMs are monitoring transactions and client details manually. Automating it may also lead to significant cost increase. 4) Custodian Banks have significant variance on CDD requirements which led to confusion on clients and EAM to fulfil respective expectation Measure EAMs are taking to deter and detect proceeds of ML/TF risks and tax crimes Name Screening, Internet Searches, etc. conducted for tax allegations and crimes Determining Source of Wealth corroborated with evidence (usually provided by client) Monitoring transactions The implementation of CRS should also assist to deter against tax crimes as CRS requires clients to sign self certifications. Signing of declarations which have legal implication lead to client s having to provide total transparency to collaborate information submitted. (e.g. FATCA, CRS, Tax compliance forms, etc.) 5) Providing documents on client s SOW during preinternet era (e.g. early 1900s) 6) Private Banks asking for more information than required (usually to analyze business potential of account rather than obtaining information strictly for Due Diligence purposes)

21 4.3 What do EAMs need to do? Let s go through some things that need to change OM practices Full-review of polices & procedures, mock regulatory inspection Have an adviser to guide you if you get an MAS AML inspection May consider adopting Private Bank Code of Conduct Industry Sound Practices on tax offences: 2.7 Where an External Asset Manager is involved in the management of the account, Covered Entities should assess and obtain confirmation that the External Asset Manager is adhering to standards that are equivalent to those set out in this framework. Likewise, the Covered Entities should subject clients of External Asset Managers to due diligence and know your client standards that are equivalent to those they apply to their own direct clients. AIAM suggested more AML training maybe MAS can subsidise Duff & Phelps 21 of 32

22 4.3 What do EAMs need to do? Let s go through some things that need to change OM practices Full-review of polices & procedures, mock regulatory inspection Have an adviser to guide you if you get an MAS AML inspection May consider adopting Private Bank Code of Conduct Industry Sound Practices on tax offences: 2.7 Where an External Asset Manager is involved in the management of the account, Covered Entities should assess and obtain confirmation that the External Asset Manager is adhering to standards that are equivalent to those set out in this framework. Likewise, the Covered Entities should subject clients of External Asset Managers to due diligence and know your client standards that are equivalent to those they apply to their own direct clients. AIAM suggested more AML training maybe MAS can subsidise Duff & Phelps 22 of 32

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28 4.3 What do EAMs need to do? Let s go through some things that need to change OM practices Full-review of polices & procedures, mock regulatory inspection Have an adviser to guide you if you get an MAS AML inspection May consider adopting Private Bank Code of Conduct Industry Sound Practices on tax offences: 2.7 Where an External Asset Manager is involved in the management of the account, Covered Entities should assess and obtain confirmation that the External Asset Manager is adhering to standards that are equivalent to those set out in this framework. Likewise, the Covered Entities should subject clients of External Asset Managers to due diligence and know your client standards that are equivalent to those they apply to their own direct clients. AIAM suggested more AML training maybe MAS can subsidise Duff & Phelps 28 of 32

29 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 29 of 32

30 4.4 Suspicious Transactions Reporting (STR) Section 39 Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act: Must file STR if a person knows or has reasonable grounds to suspect that any property may be connected to a criminal activity Sections 8, 10 Terrorism (Suppression of Terrorism) Act: Every person in Singapore and every Singapore citizen outside Singapore has a duty to provide information on property and financial transactions belonging to terrorist and acts of terrorism financing to the police PBIG Industry Sound Practice 3.8 Where there are reasonable grounds to suspect that the assets are proceeds from serious tax crimes, the Covered Entity should file a STR and where appropriate, discontinue the relationship MAS/CAD using data analytics: Network analysis to identify groups of related STRs across FI, primarily banks for now to detect potential illicit activities.. In MAS AML inspections to identify higher-risk accounts or transactions for targeted reviews Duff & Phelps 30 of 32

31 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 31 of 32

32 5. MiFID II impact on Singapore EAMs Singapore EAM without EU place of business or licence no direct obligations unless: 1. connected with an EU licensed person by reason of: 1.1 sharing research with them e.g. part of a group 1.2 sub-advising an EU licensed person 2. Trade commodities products on EU venue 3. Use algorithms and have direct market access on a EU venue Indirect impact because trading counterparties may be EU licensed Action items for now: Get a Legal Entity Identifier (LEI) so you can provide this to any counter parties that may ask you for this for their MiFID II compliance. LEIs are available for a fee from various providers. Contact prime brokers and counter parties and clarify changes they are making as a result of their MiFID II compliance Duff & Phelps 32 of 32

33 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 33 of 32

34 6. EU General Data Protection Regulation D-Day 25 May 2018 Fines up to 4% of global turnover or EUR20 million Catches EAMs who may not expect they are caught by EU law if they handle information by serving/targeting individuals in EEA Are these situations in scope EU investor invests via a EAM in Singapore? Singapore EAM, investor has Indian ID & EU Passport and lives in Singapore? 3 rd party holds the information of an EU citizen and sends this to Singapore EAM? All firms must understand data and data flows (internally and to third parties) as well as IT infrastructure Duff & Phelps 34 of 32

35 6. EU General Data Protection Regulation Duff & Phelps 35 of 32

36 NETWORKING LUNCH 17 May

37 MAS Industry Outreach Key Takeaways 3 7

38 NETWORKING LUNCH 17 May

39 MAS Industry Outreach Key Takeaways 39

40 MAS Industry Outreach May 2018 Takeaways MAS is giving clear signals that it is serious about standards in the financial industry Protect reputation as international financial centre, good for all Not just form fillings or checking the box, need to implement process correctly & adequately Focus on EAMs & their risk culture, CDD/KYC/AML Bucket 1 (deemed to be of higher risk than private banks) More inspections & audits, more detailed, focused on CDD/KYC/AML Singapore standards should not be lower than major IFCs New MAS Best Practice Paper will be rolled out MAS is supportive for training, grants/subsidies, dialogues & feedback Asian Presence. Global Reach. 40

41 MAS Industry Outreach May 2018 Takeaways 3 Pillars Governance, Risk Awareness, Control Execution Source of Wealth & Source of Fund Need to know UBOs Documentation, Process & Implementation Risk Awareness Level from Top to Bottom Suspicious Transaction Reporting take a risk based approach, file if there is reasonable grounds, let MAS collect data & dothe analysis Need to consider practically what are the AML risks If FIs not willing toopen account or transact, those might be signals Asian Presence. Global Reach. 41

42 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 42 of 32

43 4.1 AML - Key MAS supervision, enforcement focus "We will take stronger regulatory actions against those financial institutions whose AML/CFT practices fall short of the expected standards. And we will make public our sanctions against persistently or egregiously errant financial institutions. MAS Managing Director Ravi Menon (July 2016) Duff & Phelps 43 of 32

44 4.1 AML - key MAS supervision, enforcement focus Direct financial institutions to cease operations e.g. BSI, Falcon Bank. Prohibition orders e.g. a total of 6 persons involved in 1MDB-related breaches were issued POs, ranging from 6 years to lifetime bans. Appoint an independent party to confirm that rectification measures have been effectively implemented and to report its findings to MAS e.g. DBS, UBS. Supervisory warning or reprimand letter to the financial institution. Sharing of recent cases Duff & Phelps 44 of 32

45 4.1 AML - key MAS supervision, enforcement focus A CMI s board of directors and senior management are responsible for ensuring strong governance and sound AML/CFT risk management and controls at the CMI. While certain responsibilities can be delegated to senior AML/CFT employees, final accountability rests with the CMI s board of directors and senior management. AML Guidelines para Duff & Phelps 45 of 32

46 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 46 of 32

47 4.2 Why are EAMs being singled out? Not the case rather that EAMs have fallen through the hole Understand that the environment we operate in is getting more political & complex FATF mutual evaluation findings of Singapore Duff & Phelps 47 of 32

48 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 48 of 32

49 4.3 What do EAMs need to do? Let s go through some things that need to change OM practices Full-review of polices & procedures, mock regulatory inspection Have an adviser to guide you if you get an MAS AML inspection May consider adopting Private Bank Code of Conduct Industry Sound Practices on tax offences: 2.7 Where an External Asset Manager is involved in the management of the account, Covered Entities should assess and obtain confirmation that the External Asset Manager is adhering to standards that are equivalent to those set out in this framework. Likewise, the Covered Entities should subject clients of External Asset Managers to due diligence and know your client standards that are equivalent to those they apply to their own direct clients. AIAM suggested more AML training maybe MAS can subsidise Duff & Phelps 49 of 32

50 Consolidated Feedback from informal poll taken by EAMs

51 AIAM EAMs Clientele profile Not all respondents provided a breakdown by percentages. So we counted the number of respondents who listed CIS, FO and Endowments as clients besides HNWIs. 20% of respondents said their client base included CIS and another 20% said they dealt with FOs and Endowments 100% said their client base included HNWIs who either opened accounts in their own names or through PIHCs Family Office/Endowments 20% HNWI includes Accounts opened in:- Middle- East 10% Others 5% Collective Investment Schemes 20% HNWI only 60% Europe 35% Asia 50% Own Names Private Investment Holding Companies Through Trusts Asia Europe Middle-East Others

52 HOW EAMs CONDUCT CDD? Client Due Diligence All EAMs have their own compliance teams CDD for every client directly onboarded by the EAM is done independently from the Bank where the client account will be opened (two layers of CDD since the Bank also has to do its own CDD) For EAMs that have CIS where subscriptions to their Funds comes through Institutional Investors, the CDD is conducted by those regulated II FIs. In that case, EAMs may not have full transparency to the end investor, but will rely on the Banks to carry out their CDD. The EAM will however conduct CDD on the II/FI. All EAMs follow strictly the MAS AML/CFT Notice requirements for CMSLs (SFA04-N02) and because clients have to establish bank accounts, CDD will also comply with MAS626 EAMs will not work with clients that refuse to provide documentation to meet CDD requirements Based on the information provided during the initial onboarding, EAMs will Risk Rate their clients Risk levels are not determined simply with a tick-thebox criteria, but rather, analysing the reason on the indicators presented If there are any high risk indicators, all EAMs will carry out both enhanced CDD and increase the frequency of reviews Usual frequency for reviews is 6 months for high risk and every other year for low/standard risk clients (following the Custodian Bank s frequency in most cases) Several EAMs conduct enhanced CDD even for standard risk clients Most EAMs conduct annual reviews even for standard clients Client Due Diligence EAMs do not act as Nominees for their Clients Clients establish accounts in their own names EAMs are given Limited Power of Attorney to manage the assets in the client accounts Common providers used for due diligence check and Name Screening include:- World Check Factiva Thomson Reuters Regular Monitoring and STRs All EAMs monitor the transactions which occur in client accounts and will investigate any suspicious activity All EAMs have policies and procedures in place to both identify and then act on activity that warrants the need to file a Suspicious Transaction Report (STRs)

53 CHALLENGES FACING EAMs on ML/TF/CDD related issues Challenges EAMs face in administering AML Programmes 1) Encounter auditors with tick-the-box mentality, causing EAMs to be marked down on the quality of AML procedures rather than focusing at the overall quality of the AML assessment 2) Deterring of tax crimes as EAMs are not tax advisors/experts. 3) Cost Issues:- Increasing price of Risk Management Tools (i.e. Screening Systems such as Dow Jones). As EAMs are not well versed in tax regulations in client s country of domicile, seeking to outsource for assistance of AML programmes can lead to significant cost increase. Most EAMs are monitoring transactions and client details manually. Automating it may also lead to significant cost increase. 4) Custodian Banks have significant variance on CDD requirements which led to confusion on clients and EAM to fulfil respective expectation Measure EAMs are taking to deter and detect proceeds of ML/TF risks and tax crimes Name Screening, Internet Searches, etc. conducted for tax allegations and crimes Determining Source of Wealth corroborated with evidence (usually provided by client) Monitoring transactions The implementation of CRS should also assist to deter against tax crimes as CRS requires clients to sign self certifications. Signing of declarations which have legal implication lead to client s having to provide total transparency to collaborate information submitted. (e.g. FATCA, CRS, Tax compliance forms, etc.) 5) Providing documents on client s SOW during preinternet era (e.g. early 1900s) 6) Private Banks asking for more information than required (usually to analyze business potential of account rather than obtaining information strictly for Due Diligence purposes)

54 4.3 What do EAMs need to do? Let s go through some things that need to change OM practices Full-review of polices & procedures, mock regulatory inspection Have an adviser to guide you if you get an MAS AML inspection May consider adopting Private Bank Code of Conduct Industry Sound Practices on tax offences: 2.7 Where an External Asset Manager is involved in the management of the account, Covered Entities should assess and obtain confirmation that the External Asset Manager is adhering to standards that are equivalent to those set out in this framework. Likewise, the Covered Entities should subject clients of External Asset Managers to due diligence and know your client standards that are equivalent to those they apply to their own direct clients. AIAM suggested more AML training maybe MAS can subsidise Duff & Phelps 54 of 32

55 4.3 What do EAMs need to do? Let s go through some things that need to change OM practices Full-review of polices & procedures, mock regulatory inspection Have an adviser to guide you if you get an MAS AML inspection May consider adopting Private Bank Code of Conduct Industry Sound Practices on tax offences: 2.7 Where an External Asset Manager is involved in the management of the account, Covered Entities should assess and obtain confirmation that the External Asset Manager is adhering to standards that are equivalent to those set out in this framework. Likewise, the Covered Entities should subject clients of External Asset Managers to due diligence and know your client standards that are equivalent to those they apply to their own direct clients. AIAM suggested more AML training maybe MAS can subsidise Duff & Phelps 55 of 32

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61 4.3 What do EAMs need to do? Let s go through some things that need to change OM practices Full-review of polices & procedures, mock regulatory inspection Have an adviser to guide you if you get an MAS AML inspection May consider adopting Private Bank Code of Conduct Industry Sound Practices on tax offences: 2.7 Where an External Asset Manager is involved in the management of the account, Covered Entities should assess and obtain confirmation that the External Asset Manager is adhering to standards that are equivalent to those set out in this framework. Likewise, the Covered Entities should subject clients of External Asset Managers to due diligence and know your client standards that are equivalent to those they apply to their own direct clients. AIAM suggested more AML training maybe MAS can subsidise Duff & Phelps 61 of 32

62 Topics covered 1. Customer monies & assets 2. Best execution 3. Liquidity risk management 4. MAS AML expectations for EAMs 4.1 AML Key MAS supervision & enforcement focus 4.2 Why are EAMs singled out 4.3 What do EAMs need to do 4.4 Suspicious Transaction Reporting (STR) 5. MiFID II - impact on Singapore EAMs 6. EU General Data Protection Regulation Duff & Phelps 62 of 32

63 4.4 Suspicious Transactions Reporting (STR) Section 39 Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act: Must file STR if a person knows or has reasonable grounds to suspect that any property may be connected to a criminal activity Sections 8, 10 Terrorism (Suppression of Terrorism) Act: Every person in Singapore and every Singapore citizen outside Singapore has a duty to provide information on property and financial transactions belonging to terrorist and acts of terrorism financing to the police PBIG Industry Sound Practice 3.8 Where there are reasonable grounds to suspect that the assets are proceeds from serious tax crimes, the Covered Entity should file a STR and where appropriate, discontinue the relationship MAS/CAD using data analytics: Network analysis to identify groups of related STRs across FI, primarily banks for now to detect potential illicit activities.. In MAS AML inspections to identify higher-risk accounts or transactions for targeted reviews Duff & Phelps 63 of 32

64 Q&A 64

65 Thank You Presentation prepared by AIAM/AH Date: 15 May 2018