PHASE 2 CBDC TESTING BEGINS
The Bank of Japan has completed the first phase of its central bank digital currency (CBDC) testing and commenced the second phase in April 2022. The first phase started in April 2021 and focused on the basic functions of a digital yen including issuance, distribution and redemption. Phase 2 will implement various additional functions of the CBDC in the test environment developed in phase 1 and investigate their feasibility and challenges related to anti-money laundering programmes, users’ privacy, and cyber security. However, the bank said it was not yet close to issuing a digital yen.
AMENDED PRIVACY LAW TAKES EFFECT
Japan’s amended Act on the Protection of Personal Information (APPI) comes into effect in April and covers new categories of personal information, including personal-related information and sensitive personal information. Businesses operating in Japan, or that handle personal information from or located in Japan, should review and update their privacy policies and procedures to comply with the new requirements and obligations. The most recent amendment focused on further regulating cross-border data transfers (requiring opt-in consent) by creating new categories of information that are regulated under the law, such as personal-related information.
REGULATORS MOVE ON SENIOR-FRIENDLY MOBILE BANKING
South Korea’s Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) introduced a set of guidelines that will help make mobile bank applications more senior-friendly, which contains 13 key principles categorised into senior user mode and accessibility, user convenience, providing learning content, and setting up safeguards to prevent financial fraud. Banks are expected to introduce updated versions of their mobile applications by the first half of 2023.
TRAVEL RULES ON VASPS ENFORCED
The Financial Services Commission (FSC) announced that the enforcement of the travel rule on virtual asset service providers (VASPs) went into effect on 25 March, pursuant to the revised Act on Reporting and Using Specified Financial Transaction Information. The travel rule aims to prevent money laundering activities using virtual assets by requiring VASPs to provide relevant information about users sending and receiving virtual assets when they are asked to send them to another VASP. The travel rule applies when a VASP transfers virtual assets worth KRW1 million (USD810) or more to another VASP upon the user’s request.
CRYPTO REGULATIONS TIGHTENED
On 5 April, Singapore lawmakers passed a law requiring virtual asset service providers to be licensed for doing business overseas. The Financial Services and Markets Bill, 2022, is an attempt by the Monetary Authority of Singapore (MAS) to ensure that it has adequate oversight over the service providers regarding anti-money laundering and counter-terrorism financing. The new law also gives greater powers to the MAS to prohibit individuals deemed unfit from performing key roles, activities and functions in the financial industry, including individuals providing payment services and conducting risk management. It also imposes a higher maximum penalty of SGD1 million (USD737,000) on financial institutions if they experience disrupted services.
OJK’S EARLY WARNING SYSTEM FOR FINANCE INDUSTRY
Indonesia’s Financial Services Authority, Otoritas Jasa Keuangan (OJK), recently launched a system for monitoring the financial services industry called OJK suptech integrated data analytics (OSIDA). Using big data, the supervisory technology (suptech) will detect early warning signals from compliance checks as early indications of governance weaknesses in bank business activities, potential fraud, data manipulation, and non-compliance with regulations. OSIDA will help OJK supervisors to intervene and take supervisory actions early as an anticipatory step.
HKMA ISSUES GUIDANCE ON DATA PROTECTION
The Hong Kong Monetary Authority (HKMA) issued new guidance for banks to implement effective data governance frameworks and control measures to protect their customer data. Earlier this year, the regulator undertook thematic examinations to assess banks’ customer data protection adequacy and effectiveness. The result revealed that the banks have generally put in place effective control measures on data protection, but areas for improvement were identified. In the new guidance, the HKMA highlights sound practices grouped into four areas: data governance; customer data inventory management; controls over transmission and storage of customer data; and physical and logical security controls of customer data.
PREMIUM FINANCING PROTECTION ENHANCED
The HKMA and Hong Kong’s Insurance Authority (IA) each issued circulars on 1 April, clarifying the supervisory standards and requirements related to premium financing in taking out life insurance policies. The IA circular was addressed to all authorised life insurers and licensed insurance intermediaries carrying on regulated activities concerning long-term business, while the HKMA circular was addressed to all authorised institutions. The important facts statement, premium financing – a standardised format designed to convey information to customers about risk and implications of buying financial products – will be introduced by the HKMA to promote disclosure and facilitate potential policy-holders’ making informed decisions when they intend to use premium financing. The two circulars also touched upon areas including affordability assessment, additional measures for customers with risk of over-leveraging, sales practice and training.
FINANCE SECTOR LAUNCHES CODE OF CONDUCT
The Association of Banks in Cambodia, the Cambodia Microfinance Association and the Cambodian Association of Finance and Technology have collaborated to launch a sector-wide self-regulation initiative called Banking and Financial Institutions’ Code of Conduct (BFI Code) on 4 March. The code sets up the regulatory standard and minimum principles for banking and financial institutions to provide financial services with transparency, responsibility, professional ethics, fair and free competition – and aims for the banking system to grow strongly and inclusively.
The Bank of Thailand (BoT) announced on 25 March a fresh set of banking initiatives designed to position the financial sector for a sustainable digital economy. Following a public hearing in February, the bank recommended provisions for open and virtual banking that would be implemented by the end of 2022. The three key policy directions include: leveraging technology and data to drive innovation through competition, open infrastructure and data; managing the transition to a digital economy and sustainability; and shifting from stability to resiliency when it comes to the supervisory framework, while safeguarding the financial system from risk.
EPF REINFORCES ESG COMMITMENT
Malaysia’s Employees Provident Fund (EPF) on 31 March launched the EPF sustainable investment policy and two supplementary policies to guide the fund in making better informed investment decisions by integrating environmental, social and governance (ESG) considerations in its investment management processes. The launch marks the EPF’s evolution from an ethical to a sustainable investor in its pursuit to become fully ESG-compliant by 2030, and climate-neutral by 2050.
BURSA PROPOSES AMENDED LISTING REQUIREMENTS
The stock exchange of Malaysia, Bursa Malaysia, issued a public consultation paper on the proposed amendments to the main market listing requirements (main LR) and the access, certainty, efficiency market listing requirements (ACE LR) to elevate the sustainability practices and disclosures of listed issuers. The ACE market is sponsor-driven and designed for companies with growth prospects. The exchange proposes that, where appropriate, the sustainability practices and disclosures of the ACE market-listed corporations be strengthened to be on par with those of the main market. For the main market, the exchange proposed requiring the disclosure of prescribed sustainability matters and indicators deemed material for listed issuers across all sectors.
BILL CRACKS DOWN ON DIGITAL CHEQUE FRAUD
The Bangladesh parliament presented the Payment and Settlement Systems Bill on 28 March with a provision for punishing top bank officials for committing bank fraud through digital cheques. Finance Minister Mustafa Kamal submitted the bill to the parliamentary standing committee for scrutiny. As per the bill, the maximum punishment could be five years of imprisonment or a BDT5 million (USD58,000) fine, or both. A provision has been included in the draft law to remove the owner, director, chief executive, manager, secretary or any other official of a company in the case of offences committed by the bank or the company. The proposed law has mentioned punishment for various crimes, but it would not apply to mobile banking services.
SEC PROPOSES EASING SECURITIES MERGERS
Thailand’s Securities and Exchange Commission (SEC) has proposed to amend regulations to ease the process for mergers among securities and derivatives businesses to preemptively apply for a permit for new entities formed post-transaction to begin operating more quickly. The SEC said mergers provided securities and derivatives business operators with greater stability, strength and competitiveness while also lowering operating costs, benefiting investors.
SEC PLANS SPECIAL REGULATOR FOR LENDING FIRMS
The Philippines Securities and Exchange Commission (SEC) plans to create a financing and lending division to regulate lenders exclusively. The SEC’s crackdown on abusive and illegal lending has led to the conviction of 76 individuals based on eight cases of violations of the Lending Company Regulation Act, and the revocation of 2,081 firms. The SEC has been rolling out a campaign on abusive lending companies after the commission received complaints from consumers about the firms’ collecting practices that included threats against borrowers.
BSP APPROVES FRAUD MANAGEMENT RULES
The Philippines central bank, Bangko Sentral ng Pilipinas (BSP), has approved new rules on banks and non-banks’ robust fraud management systems to build its cybersecurity resiliency. BSP circular No. 1140, which the BSP governor, Benjamin Diokno, signed on 24 March, amended the existing IT risk management regulation to reinforce consumer education and awareness of cyber threats, and strengthen cybersecurity and minimise losses due to fraud and cybercriminal activities. The revised circular instructed BSP-supervised financial institutions (BSFIs) to beef up customer protection against fraudulent schemes.
CENTRAL BANK TO REGULATE OFFSHORE LOANS
Economic institutions in Vietnam would be licensed to make offshore loans and provide guarantees to non-residents, according to a draft decision prepared by the central bank, the State Bank of Vietnam (SBV). Under the draft, the central bank requires several basic principles for economic organisations implementing foreign loans and guarantees for non-residents. For example, foreign lending activities should not affect macro safety or socio-political security, and not be contrary to defence, foreign policy and orientations for macroeconomic stability. The organisation must have operated for at least five years with profitable business operations, without bad debts and no overdue foreign debts.
BLUEPRINT ON CRYPTO REGULATION
Vietnam’s deputy prime minister Le Minh Khai has instructed finance, justice, information and communications, the central bank, and relevant agencies in the country to build a legal framework for virtual assets and currency. The blueprint will be created according to the details laid out in Decision 1255, issued by the Vietnamese prime minister in August 2017, approving a plan to develop a legal framework for the management of “virtual assets, digital currencies and virtual currencies”. The new framework comes years after the regulators failed to reach an agreement on how to regulate cryptocurrencies in 2018.