How much do APAC’s regulators earn?

Regulators’ salaries across Asia Pacific vary enormously:some supervisors earn fortunes and others hit the pay scale at the average to low end.APAC REGULATORs - SALARIES

Some governments believe that paying politicians and civil servants high salaries should reduce the likelihood of them accepting a bribe, offered in cash or disguised as a gift. Others argue that financial regulators will be less likely to jump ship and work for a bank if they are paid competitively by the government. Some countries pay their banking regulators on the same modest scale as other government employees , pitting them against some of the highest paid people in the country – bankers.

Last April, we found out how much the head of the Hong Kong Monetary Authority brings home; Norman Chan Tak-lam was set to earn HKD$9.41m(USD1.2m), making him the highest paid central bank chief in the world.  As the HKMA is also the banking regulator, this makes Chan Tak-lam the biggest earning regulator in the world. Chan Tak-lam’s counterpart in Beijing, Shang Fulin, the head of China Banking Regulatory Commission, earns an estimated  CNY11,271 (USD1,800) per month.

The accompanying infographic details more of APAC banking regulators’ earnings.

Comparing regulators salaries with those of bankers reveals a stark difference. Since the global financial crisis took hold in 2008, we have seen a distinct change of attitude towards financial institutions. Blatant rule breaking by banks – whether money laundering, sanctions busting or tax evasion – is being punished in high-profile cases as regulators finally start to show their teeth. However, the impact on the individuals responsible have been unremarkable; a move to a less high-profile role in the bank, or early retirement as opposed to job loss or, as some have called for, criminal prosecution.

Rather than going after the bankers who allowed criminality to go unchecked at banks, or those who made good from the financial crisis, there is an element of maintaining the status quo vis a vis bankers’ salaries that is out of step with the movement to make change for the better in the financial sector.

In the post global financial crisis and post public bailout economy, can banks justify paying million dollar bonuses?

In February 2015, Ross McEwen, the head of RBS, went on record to defend bonuses for bankers in spite of government bailouts and losses:

“I need to be fair paying for our people so I can actually keep them onboard.”

Although McEwen has opted to hand back his personal GBP1m (USD1.5m) share award to the bank he will still take home an expected GBP2.7m (USD4m) in 2015. Peter Sands, the outgoing boss of Standard Chartered also waived his bonus in 2015.

Looking at Asia Pacific, four of China’s largest five banks made the Banker’s Almanac list of top ten biggest financial institutions. This includes Industrial and Commercial Bank of China, China Construction Bank Corporation, Agricultural Bank of China Limited and Bank of China. China Development Bank Corporation languished at no. 21 on the list.

“According to the half-year annual reports of the listed commercial banks, the average annual payment before deductions for the chairmen of the five biggest Chinese commercial banks was around 2 million yuan ($325,600).”Source:The Global Times 2014.

Piyush Gupta, CEO of DBS bank, Singapore’s largest, made SGD9.2m (USD 6.6m)
The CEOs of United Overseas Bank and Oversea Chinese Banking Corporation were not far behind.

Chief regulators salaries fall far short of those earned by their peers at regulated entities.
It’s unlikely they will ever be measured on the same scale. Regulators, in an ideal world, would be motivated by doing the right thing for the right reasons. That is certainly the message that some regulators are putting across. But banking is all about money, and the more you earn, the higher your status.

First published on the International Compliance Association blog in March 2015. 


Singapore beefs up AML laws

Singapore‘s parliament has announced a series of amendments to anti-money laundering legislation in the city state with the aim of increasing FCA - Singaporeconvictions.

The government raised the maximum sentence for money laundering convictions from seven to ten years and gave prosecutors the power to seize assets worth the equivalent of the proceeds of crime gained. This could mean that if a guilty party has disposed of the criminal gains, the courts could take the same amount from his or her other, perhaps non-criminally acquired, assets.

Source – Straits Times

Insider trading: MAS takes action against former Maybank employee for insider trading

SINGAPORE — The Monetary Authority of Singapore (MAS) has taken civil penalty action against a man for insider trading.

Koh Huat Heng was a relationship manager and a team head in the Affluent Banking Unit of Malayan Banking Singapore branch (Maybank).

On June 18 last year, Koh purchased 140,000 shares in SGX-listed Sin Heng Machinery, while he was holding on to non-public and price-sensitive information concerning Sin Heng’s planned rights issue.

The company subsequently announced a rights issue of up to 114.8 million shares at 16 cents each on June 23 last year.

Koh has paid MAS a civil penalty of S$50,000 for contravening the Securities & Futures Act.

He is also prohibited from providing any financial advisory service or becoming a substantial shareholder of a licensed financial advisor for three years.

MAS Assistant Managing Director (Capital Markets), Mr Lee Boon Ngiap said: “MAS expects a person who has been appointed as a representative of a financial advisor to act honestly and with integrity, especially in relation to the information that he obtains in the course of his work. To maintain the public’s confidence in our financial services sector, we will take firm action against any representative who fails to do so.”

A civil penalty action is not a criminal action and does not attract criminal sanctions. The regime, which became operational in 2004, aims to provide a nuanced approach to combat market misconduct. CHANNEL NEWSASIA



Source: TodayOnline

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Asia banks turn to ‘diplomats’ as regulatory burden bites

SINGAPORE (Reuters) – Banks have a new buzzword to describe their strategy in Asia: diplomacy.FCA - Singapore

Stung by regulatory probes into allegations ranging from the hiring of the offspring of senior state officials in China to rate manipulation in Singapore, and grappling with reams of new rules brought in after the global financial crisis, firms are going on a charm offensive with the region’s regulators and governments.

Executives brought in to head banks’ businesses in major Asian financial centers are now expected – by management and regulators themselves – to devote more time to building their relationships with financial watchdogs.

“Regulators have become major stakeholders – as important as big corporate clients – so firms are recognizing how key they are for business,” said Judy Vas, regulatory leader for Ernst & Young’s financial services business in Asia.

Barclays recently promoted its Asia head of tax, Li Li Kuan, to become country head for Singapore, stressing one of her primary duties was to manage “regulatory relationships” in the city-state.

Her appointment was relatively unusual, given country head roles are more often filled by “rainmakers” – corporate or investment bankers there to close deals and look after major clients. But priorities are starting to shift.

JPMorgan brought in former DBS Vickers boss Edmund Lee as its Singapore head last year, replacing Philip Lee, who had been more focused on investment banking clients, noting one of his key duties would be to manage relationships with the government and regulators.

Thomson Reuters Cost of Compliance survey found compliance teams at finance firms in Asia saw the biggest rise in 2013, compared with other regions, in the amount of time they spend preparing reports for their management boards. More than a third of teams in Asia spent at least one day a week on this work, compared with around 20 percent in 2012.

Banks are also building up their regulatory or government affairs’ offices, an area they’ve previously put less focus on in Asia.

“Although many firms have established regulatory policy and strategy functions in the U.S. and Europe, most firms have a very nascent function or none at all in the Asia Pacific region,” said Chris Cook, a head-hunter for Executive Access in Hong Kong.


That presents a tall order for head-hunters such as Cook, who says his firm is currently trying to fill several such positions, since there’s not an established pool of talent in the region to tap from.

JPMorgan in January turned to former Asia IMF head Anoop Singh to become its Asia head of regulatory affairs, while Goldman Sachs brought in former U.S. ambassador to Singapore David Adelman as head of government relations.

UBS in January 2012 hired former Wall Street Journal journalist Peter Stein as its head of group governmental affairs for Asia Pacific.

“You will see front office staff made redundant in order to ramp up these areas,” said Marc Baloch, the Asia Pacific head of Harvey Nash Executive Search.

He notes how HSBC, which increased its number of compliance staff by 54 percent between 2012 and 2013, is looking to hire people into this function with a “diplomatic” skill set.

The challenge for these roles in Asia is the sheer number of regulators that banks in the fragmented and diverse region must handle. JPMorgan interacts almost daily with more than 30 Asian banking regulators, a spokeswoman for the firm in Hong Kong said.

The bank, in common with its global peers in Asia, reports to more than 100 regulators in the region across the full range of its businesses including banking, insurance and commodities.

However the payback for banks from investing in this area is becoming clearer.

Many Asian regulators took a back seat when the United States and European governments drew up a slew of new regulations on bank capital and derivatives trading in the wake of the 2008-09 financial crisis.

That left the region facing a set of rules that regulators and firms felt did not work for them, such as regulations on derivatives trading that were tailored towards more liquid markets like the United States rather than Asian ones.

That has prompted regulators from financial centers such as Singapore, Hong Kong and Australia to become more vocal in international forums such as the International Organization of Securities Commissions and the Financial Stability Board.

“The Asian voices are asking for more workable solutions while following the global principles,” said Ernst & Young’s Vas. “So it makes it a more worthwhile investment for the Asian business heads to have a dialogue with the regulators locally so they can help drive the shaping of solutions globally.”

(Reporting by Rachel Armstrong; Additional reporting by Lawrence White in HONG KONG; Editing by Alex Richardson)

Source: Reuters

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Pakistan identifies 26 tax crimes as ML predicate offences

FCA - Pakistan flagThe government of Pakistan is preparing a list of serious tax crimes to be declared as predicate offences under the Anti-Money Laundering Act 2010. A total of 26 offences have been outlined so far, connected to sales tax, income tax and federal excise duty. Making tax crimes predicate offences to money laundering is one of the Financial Action Task Force‘s 40 Recommendations as of 2012.

As of July 1 2013, tax crimes are predicate offences to money laundering in Singapore. The Monetary Authority of Singapore guided financial institutions to  ‘develop, implement and enforce internal policies, controls and procedures that effectively detect, and deter the laundering of proceeds from wilful or fraudulent tax evasion through the financial system.’

The new guidance placed enhanced due diligence requirements on all ‘clients assessed to present high risk of wilful or fraudulent tax evasion.’

In March 2013, the Private Banking Industry Group’s issued the Industry Sound Practices (see Addendum 1, p 29), to ‘safeguard the industry from being used as a platform to harbour proceeds from serious tax crimes, or as a conduit to disguise the flow of such funds.’

Among the firm’s responsibilities is to communicate that clients are responsible for their own tax obligations and assess the bona fides of clients, carefully evaluating the tax-related risks both when taking on a client and via continuous monitoring

Red flags for when to apply EDD to a client and account include:

  • Client requests for holdmail services without satisfactory reasons. Clients can ask a bank to receive correspondence relating to their account. The mail is held for them until they return to the jurisdiction. The service allows a level of privacy or secrecy which the Singapore governmnet n
  • Use of complex structures
  • Non-face-to-face business relationships
  • Negative tax-related reports from media or other credible information sources on the client or on client’s jurisdiction of domicile or tax residence
  • Any additional parameters that a Covered Entity considers pertinent for conducting its risk assessments and due diligence checks.

The Industry Sound Practices also includes a ‘non-exhaustive’ five step process for EDD, including screening adverse or negative news, questioning the source of funds, using information from other financial institutions where legally possible, identifying the beneficial owners.

This guidance was targeted to the private banking sector, some of whose clients have been used to evading taxes and may be less inclined to reveal more details about the source of their wealth as private banking is notoriously discreet and protective of its wealthy benefactors. There was some concern that clients who had traditionally banking in Singapore may begin to move funds to jurisdictions with less rigorous counter-tax crime regimes.

If any readers have seen changes within Singapore, or heard of a client exodus, do please drop me a line.



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How to use a 500 euro note

While anti-money laundering professionals chuckled when the European Central Bank announced the highest denomination Euro note back in 1999,  organised criminals rubbed their hands together with glee.FCA - Hiding 500euronotes

The EUR500 is one of the world’s highest value single denomination notes in circulation. Notoriously to difficult to spend – shops do not like them – or to find – although there were 594m in circulation in 2011, most European citizens have never seen one – they provide criminals with a fantastic conduit for moving large amounts of dirty cash in a relative small vessel.

High value notes

The EUR500 note is not the highest value note in circulation globally. That honour goes to two tied Asian currencies: Singapore‘s and Brunei’s. The SGD10,000 and BND10,000 (USD7,900) are in circulation in both countries. Their enormous value, compared to their next most valuable note in circulation – CHF1,000 (USD1,128), makes them very appealing to anyone who usually spends this much on a handbag, for example, or a watch. But these notes are used in limited territories.

FCA - SGD10k

Another factor which makes the EUR500 so useful and vulnerable to misuse its geographical reach. It is the national currency of 18 European Union member states and it is traded in neighbouring non-Euro zone countries. As the world’s second largest reserve currency after the US dollar and the second most traded currency, it has a thriving black market for euros reflects this. The currency is accepted under the counter in Argentina, Nicaragua and  Venezuela, that I have read about, so it is probably used all over South America. Photographs taken of a raid on a raid on a drug trafficking operation in Mexico showed Eeuro notes, albeit in a far smaller amount, piled up next to the Benjamins. It is used in Nigeria and Algeria and the rest of Africa. Although euros are not widely used for savings in Russia, the recent round of sanctions has raised interest in the currency.

Bulk cash smuggling

Woman carrying cereal box contained EUR500 notes

Woman carrying cereal box contained EUR500 notes

Bulk cash smuggling is a method of illegally moving large amount of cash across borders. In Europe, criminals used to employ people to walk across frontiers between countries carrying large amounts of undeclared francs, Deutsch marks or pesetas, for example. Travellers and students were often employed to  smuggle cash in bulk.  A backpack can carry quite a bit of cash, and if you replace the GBP50 notes – the largest denomination note in the UK – for the EUR500 and you can shift eight times more much moolah. Incidentally, UK wholesalers stopped buying and selling EUR500 in 2010. The image on the right shows a woman in London caught by a UK law enforcement surveillance operation carrying EUR300,000 in 500 notes stuffed into a cereal box. Read the BBC’s full story here.

This info graphicFCA - how big are 500Euros shows the physical space and weight of GBP1m in EUR500s compared to GBP20s; there is a huge difference.

Unfamiliarity breeds contempt

Despite the large, and at one point disproportionate, amount of EUR500 notes in circulation there is still some difficulty in spending them at retailers. European retailers have been known to refuse EUR500 and EU200 notes. Known incongruously as Bin Ladens – because everyone has heard of them but few have ever seen one and the notes cause suspicion when they do appear. Advice for travellers is to exchange a EUR500 for EUR50s. Visitors to Russia are advised to bring euros for exchange into Russian roubles upon arrival.

Numbered days?

During a speech given in 2013, the ECB chariman made a passing2 mention of phasing out the EUR500 note, but there have been no further announcements. This may be because the idea is not on the table for discussion, or it may have a more strategic purpose. If the ECB announces plans to withdraw the note, mountains of untaxed and illegal EUR500s will slowly start to drift back into circulation and the owners of the funds may never be identified. However, a sudden crack down on EUR500 notes would force the owners of stockpiled 500s to come forward or risk losing their fortunes. Anyone with a legitimate reason for sitting on a cereal box stuffed with 500s for example – such as not trusting the banks to keep their money safe – would surely come forward, provide their legit reason to the bank and exchange their currency for lower denominations.

Organised criminals and major tax dodgers would think twice about doing this as they might struggle to come up with a plausible reason for sitting on cash. They may also reach for the lawyers and accountants to help them devise slightly more obscure and quick methods of reintegrating their ill-gotten gains.



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Bitcoin: MAS advises caution on transactions involving Bitcoins

SINGAPORE: The Monetary Authority of Singapore (MAS) has advised consumers and businesses to be cautious with transactions involving Bitcoins, as virtual currencies are unregulated and FCA - Bitcoinconsumers may not have legal recourse should there be problems.

The warning comes as Bitcoin changing machines make their debut in Singapore. MAS referred to them as vending machines as they accept cash for Bitcoins but do not allow people to convert their Bitcoins into cash.

“Virtual currencies, including Bitcoin, are not legal tender and are not recognised by MAS as an official medium of exchange or as a form of securities. MAS does not regulate Bitcoin, including its purchase, sale or use, whether online or via other means such as physical vending machines,” the central bank said in a statement.

MAS also warned that the value of a virtual currency such as Bitcoin can fluctuate greatly within a short period of time.

“Consumers and businesses may suffer monetary losses as a result of the volatile prices. They may also be unable to obtain a refund of their monies should such a scheme cease to operate, and may have no legal recourse as Bitcoin is not issued by any identifiable organisation,” MAS said.

MAS added it closely monitors international developments, and it will consider the need to introduce regulations to address risks associated with virtual currencies such as money-laundering and terrorist-financing.

– CNA/nd

Source: Channel News Asia

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The World Federation of Diamond Bourses (WFDB) held a two-day Executive ‎Committee Meeting and Asian Summit in Singapore on February 27 and 28. ‎FCA - Monroe

The Asian Summit, organized by the Diamond Exchange of Singapore, focused on ‎the activities of regional bourses and discussed a range of issues facing the industry ‎in Asia, and their impact on the global diamond trade. ‎

WFDB President Ernest Blom addressed the fight against money laundering and ‎international terrorism. “The WFDB will be introducing stringent compliance regarding ‎KYS/KYC (Know your Supplier/Client)”, said Blom. “The introduction of this policy in ‎all WFDB affiliated bourses will clearly identify the rogue elements attempting to ‎tarnish the high standards of our trade”.

Addressing the synthetics issue, the WFDB is demanding that all affiliated bourse ‎members be required to incorporate a statement on their invoices and memos that ‎clearly define the natural origin of diamonds. The measure requires the buyer to share ‎the responsibly with the seller for this compliance.‎

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Australia – Regulation holding financial services back from exports

Financial Services Council (FSC) chief executive John Brogden has blamed “out-dated” regulation and taxation for Australia’s FCA - hold backfailure to effectively export its financial services business.

In the FSC’s Budget submission, Brogden pointed out that at 8.7% of GDP, financial services is the largest sector in the economy.

“Our financial services industry is diverse, innovative, scalable and well-regulated. We have world-leading capabilities in funds and private pension management.

“However, regulation has held the industry back from developing into an export industry. The industry has been unable to deliver for Australia beyond our shores. A combination of out-dated regulation and taxation settings has prevented Australia from exporting these skills for managing foreign capital,” he said.

The former Liberal Party politician said that in Hong Kong, 60% of the assets managed belong to foreign investors. Whereas in Australia, only 5% of the $2.2 trillion pool of assets is foreign sourced.

“Countries such as Luxembourg, Ireland, Singapore and Hong Kong promote and attract financial services through targeted regulatory and taxation settings,” Brogden continued

Failing to manage large amounts of foreign money means that Australia also fails to receive the flow-on benefits from higher economic activity, employment and tax collection, Brogden said.

“Instead, we are losing this business to Hong Kong, Singapore and others in our time zone. We urge the government to reform our regulatory and taxation settings to enhance our competitiveness and export opportunities.”

At $2.2 trillion, Australia has the third largest pool of assets under management in the world.

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Singapore: Harsh prison sentence for money laundering

SINGAPORE: A hairstylist who thought she was helping an acquaintance will go Imageto jail for 48 months for money-laundering offences.

35-year-old Gee Lee Cheng admitted to dishonestly receiving stolen property amounting to S$497,000 and carrying part of the money to Malaysia to pass to her friend, “Stephen”.

The nine offences were committed in May last year.

Although the prosecutor asked for a 24 month sentence, Judge Liew Thiam Leng sent Gee to jail for four years, which works out at around S$10,000 (US$8,000) for every month behind bars. 

Cheng’s defence lawyer called the sentence ‘manifestly excessive’ and has launched an appeal. 

Singapore’s judiciary is sending out a clear message of zero tolerance to anyone who abuses the financial system.

Source: ChannelNewsAsia