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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

Companies Registry publishes updated guideline on compliance of AML/CFT requirements for trust or company service providers for implementation on 1 June 2023 

The Companies Registry has published its updated guideline on compliance of anti-money laundering and counter-terrorist financing (AML/CFT) requirements for trust or company service providers. The updated guideline takes into account recent legislative amendments which address a number of miscellaneous and technical issues under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance and will come into effect on 1 June 2023 (see our previous updates here and here). The updated guideline will come into effect on the same day.

HKMA concludes consultation on proposed amendments to AML/CFT Guideline for AIs 

The HKMA has published the conclusions to its consultation (see our previous update) on proposed amendments to the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Authorised Institutions) (AML/CFT Guideline).  The proposed amendments are to provide guidance to authorised institutions (AIs) in light of the recent enhancements to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) (see our previous update).  The revised AML/CFT Guideline (in mark-up) is set out in the annex to the HKMA's conclusions paper and will be published in the Gazette on 25 May 2023, to take effect on 1 June 2023 (at the same time as the amended AMLO).

The key comments in the consultation surround the following areas (among others):

  • Digital identification system– The HKMA clarified what is meant by a "digital identification system that is recognised by the HKMA", and whether technology solutions being used by AIs for remote customer on-boarding would be recognised digital identification systems.
  • Beneficial ownership of a trust– Concerns were expressed over the new definition of "beneficial owner" in the AMLO in relation to trusts and similar legal arrangements, particularly the removal of the 25% threshold for trust beneficiaries resulting in more persons needing to be verified by AIs.  Additional guidance is provided in the AML/CFT Guideline regarding class of beneficiaries and reasonable measures to verify trust beneficiaries.
  • Politically exposed persons (PEPs)– The HKMA has fine-tuned the proposal by removing the regulatory requirement for senior management approval when AIs decide to disapply enhanced due diligence measures to former PEPs.  The HKMA will consult the industry later this year on a new guidance paper relating to PEPs.
  • Virtual assets (VAs) and virtual asset service providers (VASPs) – The HKMA has clarified the requirements to be complied with by AIs (including registered institutions) with regard to VA-related activities, and the application of the updated SFC guideline on AML/CFT requirements for licensed corporations and VASPs, which will be published shortly.
  • Bearer shares and nominee directors– The HKMA provided clarification on the proposed amendments in relation to bearer shares, nominee directors and nominee shareholders, and how the proposed amendments would affect the way customer due diligence is conducted if a business relationship involves bearer shares, nominee directors or nominee shareholders.

AIs are welcome to use existing channels to raise any further AML/CFT questions. The HKMA will consider whether any issue raised is of wider industry interest that may warrant further guidance and, if so, the appropriate channel for providing such guidance.

HKMA publishes report to guide banks in adoption of network analytics in AML and financial crime detection

The HKMA has published its report 'AML Regtech: Network Analytics' to promote the adoption of network analytics capability to strengthen the response of banks' anti-money laundering (AML) systems to financial crimes. The report emphasises the potential of combining intelligence-led analytical tools with rules-based monitoring systems in order to help banks enhance their anti-deception efforts. It also shares the experiences of banks already using this capability, and provides practical insights and expert perspectives to guide banks in their exploration and adoption of network analytics. This capability, together with intelligence shared through the Fraud and Money Laundering Intelligence Taskforce, has resulted in banks increasing the number of intelligence-led suspicious transaction reports by 319% in 2022 compared with 2021, leading to an increase of 113% in criminal proceeds restrained or confiscated.

HKMA issues circular on notification requirements relating to trust business

The HKMA has issued a circular to authorised institutions (AIs) on notification requirements relating to trust business.  Reference is made to an HKMA circular issued on 27 May 2022 (see our previous update), which provides that AIs and subsidiaries of locally incorporated AIs that conduct trust business in Hong Kong as a trustee should comply with the Supervisory Policy Manual module TB-1, "Regulation and Supervision of Trust Business" (SPM TB-1), including the Code of Practice for Trust Business (Code), by 1 June 2023.

The HKMA will maintain and publish a list of trustees and annually declare that they observe the Code. The present circular highlights certain actions or attention required on AIs. Among others:

  • All AIs are required to complete and submit a Form I by 15 May 2023 to report whether they and/or any of their AI subsidiaries carry on trust business in Hong Kong as a trustee, and if so, the particulars of the AI's manager(s) and/or the AI subsidiary(ies).  Changes to the information provided in Form I should be notified using Form III.
  • If an AI subsidiary is reported, the subsidiary should complete and submit a Form II (via the reporting AI) by 15 May 2023, to report information in relation to responsible offices.  It should also report any changes to responsible officers within 14 days of the change.
  • Trust businesses of other entities within AI groups that carry on trust business in Hong Kong as trustee and observe the Code, and that wish to have their particulars included in the HKMA's list, should complete and submit via an associated AI to the HKMA an initial declaration on compliance with the Code via Form A, and subsequently, an annual declaration via Form B.  Changes to information provided in Forms A and B should be provided via Form C.
  • The above forms are available on the HKMA's Supervisory Communication Website (under "Notifications").
  • AIs should observe the reporting requirements set out in SPM TB-1 by completing the Incident reporting form on behalf of itself and/or its AI subsidiary, to report any material non-compliance with any legal or regulatory requirements, major incidents and any other matters that may have material impact on the fitness or propriety of the trustee.

SFC CEO discusses upcoming initiatives to promote Hong Kong REIT market

The SFC has made available a keynote speech delivered by its Chief Executive Officer, Ms Julia Leung, at the Hong Kong REITs Association luncheon regarding initiatives to promote Hong Kong Real Estate Investment Trusts (REITs) market.

Ms Leung highlighted the initiatives implemented in recent years to promote Hong Kong's REIT market, including enhancements to the REIT Code and the launch of the grant scheme for REITs.  Looking ahead, other initiatives are being considered:

  • Mainland REIT (C-REIT) regime and Stock Connect– A key suggestion from the industry is to include Hong Kong REITs as eligible securities under the Stock Connect regime. The SFC will continue to work with Mainland regulators to explore potential regulatory cooperation and connectivity between Hong Kong REITs and C-REITs, to facilitate the long-term development of both markets.
  • Tax incentives– The SFC will continue to explore tax initiatives such as stamp duty exemption and tax transparency with relevant stakeholders.
  • REIT structure– The SFC will explore the possibility of allowing a REIT to be structured in corporate form in addition to the current trust form.  Given that the new Type 13 regulated activity regime will come into effect in October 2024, depositories providing oversight and custody services to Hong Kong REITs will be required to obtain an SFC license and be subject to the SFC's supervision.  This would cover the REIT's trustee, or its custodian if the REIT is structured in a form other than a trust.
  • Privatisation or exit– The SFC is working with the Government on legislative amendments to address the lack of a compulsory acquisition and scheme of arrangements mechanism to facilitate privatisation or exit of Hong Kong REITs.
  • HKD-RMB Dual Counter Model– The Dual Counter Model will be available to REITs in the same manner as other listed companies.  When the scheme is launched (which is expected by the end of June 2023), REITs may apply to add a RMB counter for trading under the model.
  • Promotion and investor education – The SFC will continue to work with the industry and the Investor and Financial Education Council to enhance investors' understanding of REITs and raise public awareness.

HKEX announces launch of HKD-RMB Dual Counter Model and Dual Counter Market Making Programme in securities market on 19 June 2023

The HKEX has announced that it will launch the HKD-RMB Dual Counter Model and the Dual Counter Market Making Programme in its securities market on 19 June 2023, subject to market readiness.  The Hong Kong Securities Clearing Company Limited (HKSCC) and The Stock Exchange of Hong Kong Limited (SEHK) have issued circulars to inform market participants of the launch and the related arrangements. The new model and programme will further support the trading and settlement of RMB-denominated securities in Hong Kong.  Interested participants may now apply to become a Dual Counter Market Maker for eligible securities under the model in accordance with the relevant rules.

The Dual Counter Market Makers will offer buy and sell quotes for the RMB-denominated securities trading, providing liquidity in the RMB counter and minimising price discrepancies between the HKD and RMB counters.  The initial list of Dual Counter Securities and Dual Counter Market Makers will be announced in due course. Under the model, investors will be able to interchange securities listed in both HKD and RMB counters.  Securities under the two counters are of the same class, and holdings of securities in the two counters can be transferred without change of beneficial ownership.

HKEX has arranged a series of testing and practice sessions in May and June 2023 to support market participants on the trading and settlement of securities under the model (see our previous update); it has also published relevant rule amendments for the introduction of the model and the programme, including:

  • Amendments to Rules of the Exchange (cleanand marked-up versions);
  • Amendments to the Operation Procedures for Stamp Duty Collection (cleanand marked-up versions);
  • Amendments to the General Rules of CCASS (cleanand marked-up versions); and (iv) Amendments to the CCASS Operational Procedures (clean and marked-up versions).

Further information about the model and the programme can be found on the HKEX's web corner.


MAS: FAQs on Notice on Technology Risk Management

The Monetary Authority of Singapore (MAS) has published frequently asked questions (FAQs) relating to the Notice on Technology Risk Management. The FAQs concern various topics, including: dealing in capital markets products; product financing; providing custodial services; licensed fund management; venture capital fund management; corporate finance advisory; real estate investment trust (REIT) management; and securities crowdfunding.

MAS: Financial Services and Markets Act 2022

MAS has announced that Parliament passed the Financial Services and Markets Act (FSMA), an omnibus Act for the sector-wide regulation of financial services and markets, on 5 April 2022. The FSMA will be implemented in phases, with the first phase commencing on 28 April 2023. The first phase relates to the porting of the following provisions from the Monetary Authority of Singapore Act 1970:

  • General powers over financial institutions, including inspection powers, offences and other miscellaneous provisions (Parts 2, 10, 11 and 12# of the FSMA);
  • Anti-Money Laundering / Countering the Financing of Terrorism framework (Part 4 of the FSMA); and
  • Financial Dispute Resolution Schemes framework (Part 6 of the FSMA).

The remaining phases are targeted to be implemented between the second half of 2023 and 2024.

MAS: The Network of Central Banks and Supervisors discuss Greening the Financial System

The Monetary Authority of Singapore (MAS) hosted a series of meetings on 25 and 26 April for the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). The NGFS discussed, among other things, climate scenarios, vulnerability assessments of the financial sector and the implications of climate change for monetary policy. The NGFS also discussed Asia's role in the global transition toward net zero and the stewardship role that financial institutions have in their clients' transition plans. Following the plenary session on 25 April, the NGFS hosted a workshop for its members and other participants on 26 April where they discussed: (i) the role of public-private partnerships and broader investor bases to support the transition to net zero; (ii) the macroeconomic effects of climate change, including its effects on inflation and monetary policy; (iii) biodiversity loss and the interconnectedness of climate and nature-related risks; and (iv) the need for central banks to engage with financial institutions to assist the transition towards net zero.

MAS has also published the opening remarks delivered by Mr Ravi Menon, Managing Director of MAS and Chair of NGFS, at the workshop. Mr Menon spoke about how the NGFS is well placed to build capacity and capabilities among central banks and supervisors to tackle climate change.

MAS consults on enhanced safeguards for prospecting and marketing of financial products

MAS has published two consultation papers (CPs) which propose enhanced safeguards for prospecting and marketing of financial products through both physical and digital means, including:

  • for physical prospecting at public places– the mandatory disclosure of the representatives' identities and the financial institutions they represent; prospecting to only be allowed at commercial premises; provision of extra time to customers to allow them to consider whether to make a purchase; and limitation of use of gift offers which may influence decision-making; and
  • for digital marketing– stronger controls over online advertisements to avoid disseminating misleading content; and tightening practices when appointing third party service providers to generate leads online.

Mr Lim Tuang Lee, Assistant Managing Director (Capital Markets) at MAS, said: "We want consumers to receive accurate information, professional advice, and be given sufficient time and space to consider their financial decisions. The proposals to strengthen responsible prospecting and marketing activities by financial institutions will support these goals, and better protect consumers’ interests." Feedback to both CPs is requested by 30 June 2023.


CSRC and SFC hold 14th high-level meeting on enforcement cooperation and exchange views with ICAC and CCB 

The China Securities Regulatory Commission (CSRC) and the SFC have recently held their 14th regular high-level meeting on enforcement cooperation. Favourable outcomes from their cross-boundary enforcement cooperation since 2016 were highlighted at the meeting, including the establishment of regular and multi-level meetings, the adoption of a collaborative approach to resolving enforcement cooperation policy issues, and successful collaboration in providing investigatory assistance. The CSRC and the SFC also exchanged information on enforcement priorities, and reached agreement on the following issues:

  • Coordinated investigation mechanism: To launch coordinated investigations on a case of concern to both regulators as a pilot implementation for the coordinated investigation mechanism;
  • Police collaboration:To continue exploring effective ways to coordinate Hong Kong and Mainland police to combat cross-boundary security crimes;
  • Working-level cooperation: To maintain high-quality cooperation on a working-level to continue to analyse and resolve issues encountered in enforcement cooperation; and
  • Joint training: To resume in-person joint training for SFC and CSRC enforcement officers.

During the meeting, the CSRC and the SFC also exchanged views with Hong Kong's Independent Commission Against Corruption and Commercial Crime Bureau on enforcement cooperation.

Regulators announce launch date of 15 May 2023 for Northbound trading of Swap Connect

The People's Bank of China (PBOC), the SFC and the HKMA have announced that the preparatory work of Swap Connect has progressed smoothly since their joint announcement of 4 July 2022 (see our previous update), and that Swap Connect will be launched on 15 May 2023. Starting initially with a Northbound channel, the Swap Connect will give Hong Kong and international investors access to Mainland China’s interbank financial derivatives market through a connection between financial infrastructure institutions in Hong Kong and Mainland China. To facilitate a smooth launch of Northbound trading on 15 May 2023, the regulators have set out details of the scheme, including the following (among others):

  • Investment products: Eligible products at the initial stage will be interest rate swap contracts, with RMB as the quotation, transaction and settlement currency.
  • Investors: Mainland investors will need to sign an agreement with the China Foreign Exchange Trade System (CFETS) for providing price quotation and be a clearing member of the Shanghai Clearing House (SHCH) or a client of such clearing member.  Overseas investors are required to be institutional investors who meet the PBOC's requirements, have been granted permission for Northbound trading by CFETS, and are a clearing member of OTC Clearing Hong Kong Limited (OTC Clear) or a client of such clearing member.
  • Quotas: At the initial stage, the daily net notional principal amounts of the interest rate swap contracts traded by all overseas investors under Northbound trading should not exceed RMB 20 billion.  The Swap Connect financial resources pool corresponding to the risk exposure of the net positions between SHCH and OTC Clear should not exceed RMB 4 billion.
  • Regulatory capital requirements: The HKMA has published a circularstating that, having considered the nature of participating margins posted by authorised institutions to OTC Clear in the latter's loss-bearing waterfall structure, it believes that authorised institutions should treat such margins in the same manner as default fund contributions under the Banking (Capital) Rules.  Details are set out in the annex to the circular.

Relatedly, for the HK side, Amendments have also been made to the OTC Clear Clearing Rules (clean and marked-up versions) and the OTC Clear Clearing Procedures (clean and marked-up versions) and will come into effect on 15 May 2023.


Taiwan's crypto rules reportedly targeted for implementation in September 2023

The Chairman of Taiwan’s Financial Supervisory Commission (FSC), Huang Tien-mu, has disclosed that the agency plans to roll out the region’s crypto regulatory framework in September 2023.

Mr Huang also expressed confidence that Taiwan’s regulations would prevent FTX-like collapses that leave customers without recourse. Regulators plan to achieve this by requiring centralized entities to separate customer deposits from corporate funds.

Mr Huang's recent statement comes a month after he confirmed that the FSC would assume jurisdiction over Taiwan’s crypto markets. He said he will discuss the details with other government departments as well as "self-discipline norms" with relevant industries.


SCM: Welcome address at the Bond and Sukuk Trustees Forum 2023

The Securities Commission Malaysia (SCM) has published the welcome address delivered by Dato’ Seri Dr. Awang Adek Hussin, SCM Chair at the Bonds and Sukuk Trustee Forum 2023 event. The SCM Chair highlighted the crucial role that trustees play in ensuring compliance and protecting investors' interests in the bond and sukuk markets. The importance of transparency, accountability, and good governance was emphasised as key to maintaining investor confidence.


SEBI consultations

The Securities and Exchange Board of India (SEBI) has published the following consultations (among others):

SEBI: Circular on direct market access to registered FPIs for participating in ETCDs

SEBI has published a circular on direct market access (DMA) to registered foreign portfolio investors (FPIs) for participating in exchange traded commodity derivatives (ETCDs). The circular explains that SEBI has  decided  to  allow  stock  exchanges  to  extend  DMA  facility to FPIs  for participation in ETCDs subject to the following conditions:

  • stock exchanges/brokers shall adhere to the provisions set out in  SEBI Circulars  on the  procedure  for application  for  DMA, operational specifications,  client  authorization  and broker-client agreement, risk management, etc., and
  • the provisions of Circular No. SEBI/HO/MRD/MRD-RAC-1/P/CIR/2022/131 dated 29 September 29 allowing FPIs to participate in ETCDs shall remain applicable.

The provisions of this circular are with immediate effect.

RBI: Amendment to Master Direction on KYC – Instructions on Wire Transfer

The RBI has published an amendment to the Master Direction (MD) on Know Your Customer (KYC) to update the instructions on Wire Transfer (Section 64 of the MD), and align it with the relevant Financial Action Task Force (FATF) Recommendation. The amended instructions of Section 64 of the MD on KYC are set out in an annex. The amended provisions come into force with immediate effect.


OJK amends regulation on collective investment contracts 

The Indonesian Financial Service Authority (OJK) issued OJK Regulation No. 4 of 2023 (OJK Regulation 4/2023), amending OJK Regulation No. 23/POJK.04/2016 on Collective Investment Contracts for Mutual Fund for the second time (both in Indonesian language only). Notable provisions in OJK Regulation 4/2023 are as follows:

  • In-kind redemption is now allowed in the event of liquidation of a collective investment contract-based mutual fund (a Fund) or redemption of participation units by the relevant Fund.
  • Share classes can now be established by open-ended Funds, provided that all share classes share the same investment policies and asset pool.
  • Investors now can pay their units via virtual bank account mechanics.

OJK Regulation 5/2023 enters into full force and effect as of 31 March 2023.


SECP: Rules and Regulations of the Financial Products and Services Consumer Protection Act of 2022

The SECP has issued the Rules and Regulations of The Financial Products and Services Consumer Protection Act of 2022 (SEC FCPA IRR). SEC FCPA IRR aims to support the application of the FCPA and its objectives of ensuring: equitable and fair treatment of consumers; disclosure and transparency of financial products and services; the protection of consumer assets against fraud and misuse; data privacy and protection; and the timely handling and redress of complaints of consumers.

The Memorandum Circular will take effect fifteen days after its publication in the Official Gazette or in at least two national newspapers of general circulation.

SECP issues implementing rules of FCPA

The Securities and Exchange Commission Philippines (SECP) has released the implementing rules and regulations (IRR) of Republic Act No. 11765, or the Financial Products and Services Consumer Protection Act (FCPA). The IRR covers all financial products and services, and financial services providers under the jurisdiction of the SECP, including credit, securities, and investments, including digital finance products or services. The FCPA and the IRR reinforce the SECP's powers to exercise authority over issuers of securities in tokenized or digital forms. The rules expand the enforcement actions which the SECP may conduct, including restricting the ability of financial services providers to collect excessive interests, fees or charges; disqualification of directors, trustees, officers or employees, and disgorgement.

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.

Key contacts

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Richard Norridge

Partner, Head of Private Wealth and Charities, London

Richard Norridge
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Anna Sutherland

Managing Partner, Disputes, Sydney

Anna Sutherland