January 10, 2017

Head of Regulatory Practice Nizam Ismail quoted in a Thomson Reuters article on the showcase of technology at a FinTech festival

RHTLaw Taylor Wessing’s Head of Regulatory Practice Nizam Ismail was featured in an article published in Thomson Reuters titled “Regtech in Singapore set to Shape Risk and Compliance Functions”. The article was first published on Thomson Reuters Accelus Regulatory Intelligence and Compliance Complete. Source: Copyright © Thomson Reuters 2017 Date: 9 January 2017 Author: Patricia Lee Regtech in Singapore set to Shape Risk and Compliance Functions The pace of regulatory change and the burden it places on financial institutions which are still dealing with large-scale remedial programmes is driving the use of regulatory technology to make compliance processes more efficient. Regtech took centre stage at the recent FinTech festival held in Singapore two months ago, and the one-day conference dedicated to this topic underscored the importance the industry accords to this new phenomenon which is set to shape risk and compliance functions. Nizam Ismail, head of Regulatory Practice at RHTLaw Taylor Wessing in Singapore, said the showcase of technology at the FinTech festival demonstrated that there were more creativity and product offerings now which could assist compliance functions. Compliance is complex and onerous Large scale remedial programmes now going on at large global financial institutions are typically being dealt with in a tactical fashion and this often means deploying an army of people to do the task, said Craig Davis, head of financial risk management for KPMG in Singapore. But such a way of undertaking the task was not sustainable, he said, and financial institutions are looking to adopt regtech to make the processes more efficient. The increasingly complex and onerous nature of compliance work has also made it impossible to carry out tasks manually, Ismail said. The case surrounding scandal-hit Malaysian state fund 1MDB, which involved large volumes of transactions carried out at a number of banks, is a good example where technology is essential for tracking transactions and flagging out those that are unusual, suspicious or high risk. "Technology works hand in glove with compliance but most of the time you still need a compliance officer to make a judgment call," he said. Renewed Focus The renewed focus on regtech is largely a result of a proliferation of technology and enablers that has made adoption more viable, such as by allowing processes to be automated. Such technology includes robotic process automation (RPA), artificial intelligence, cloud computing, the blockchain technology, anti-money laundering utility models and robo-advisers. Robotic process automation, for instance, allows much of the manual processes in risk and compliance functions to be automated, Davis said. He cited RPA as an example which can help financial institutions automate processes when they undertake large-scale remediation progammes to deal with regulatory changes. It also adds value to the business while ensuring they remain compliant. Natural language processing is a type of artificial intelligence which reads words and then plugs in to the regulatory requirements. Transaction Monitoring, Trade Surveillance and KYC Transaction monitoring and trade surveillance are two main areas in which financial institutions are seeking to make their systems and processes more efficient through the use of technology while remaining compliant. In his annual report speech last year, Ravi Menon, managing director of the Monetary Authority of Singapore, said the regulator would use trade surveillance tools to track market manipulation. Client onboarding, which can involve considerable amount of manual work, is a key issue for many financial institutions, said Davis. The KYC process, for instance, can involve a number of people, is time consuming and can pose a number of regulatory challenges. That process, Davis said, can now be largely automated using digitization and natural language processing which learns over time and can quickly identify whether financial institutions have the right information about their customers. It then provides an exception report as opposed to a manual process, providing efficiencies and allowing staff to focus on value-adding activities. "If you can automate 80 percent of that [KYC] process, you can onboard clients quicker, which leads to cost savings for financial institutions. At the moment, manual processes take a long time and will always have human errors. To the extent that you can digitise the process, you can get people to focus on the exceptions and provide value as opposed to a manual factory environment where discrepancies can be missed. Organisations should get greater client satisfaction, compliance should be more robust and there will be cost benefits," he said. AML Utility Model MAS announced last year that it is looking to set up an anti-money laundering utility model which will allow financial institutions to share KYC resources on both individuals and companies. The utility model will have a common platform that allows information to be leveraged. According to Davis, the biggest financial institutions typically run the utility with the data shared across participating banks. "It makes a very good case for regulators to have a utility model for the banks to come together. In addition to the systemic benefits, they will have access to a wider range of data. For this utility to work, there should be no competitive advantage to the data to ensure full participation," he said. A utility model provides further benefits from customers' perspective, Davis said. The process of onboarding a new client can be a laborious one and if centralised, banks will not have to continually request customers for the same information, thus increasing the customer experience. A utility model will also make carrying out transactions easier for customers. Cloud Computing Cloud computing, along with artificial intelligence, is expected to bring about some major changes to risk and compliance functions. Cloud computing, which the MAS has acknowledged its use as long as financial institutions follow its guidelines, could potentially help banks avert system legacy issues as a result of having to build bespoke systems which require costly maintenance and upgrading, Davis said. Increasingly, banks are outsourcing the hosting of technology and the running of data on a centralised platform to third parties. "Being able to host on cloud computing, being able to access a larger data set and along with cognitive approaches such as machine learning and artificial intelligence, you really start to build something powerful. By having it centralised on a platform which a number of organisations use, everybody is sharing the costs and receiving the benefits," Davis said. Distinct Change in Business model; Revolutionary While the industry has yet to see massive investments put into the adoption of new regulatory technology, there is growing interest as financial institutions try to figure out how technology can help their risk and compliance functions achieve efficiency and cost savings. Davis said the emergence of new regtech would lead to a distinct change in business models as financial institutions increasingly automate the risk and compliance functions using advanced analytics. There will also be a move to industry-wide utilities, outsourcing some of the systems to third-party providers or entire processes in a managed services approach. "I see it [use of regtech] as an evolution rather than disruptive. The process is still largely the same; you are just making it more efficient, automated and using advanced analytics to take away the manual process. It is not just about reducing headcount, it is using the current headcount to focus on value-added activity," he said. Regulators the Ultimate Beneficiary While the impetus to adopt new regtech approaches is coming from the industry, regulators will be the ultimate beneficiary as they tap into the data and analytics to help them understand the regulatory and systemic impacts, Davis said. "Regulators want to know how to regulate it
December 30, 2016

RHTLaw Taylor Wessing Deputy Managing Partner Azman Jaafar interviewed by Channel NewsAsia

RHTLaw Taylor Wessing Deputy Managing Partner Azman Jaafar was interviewed by Channel NewsAsia and featured in an article titled "Slow start, but future remains bright for ASEAN Economic Community: Analysts". The article makes reference to an interview with Channel NewsAsia on Singapore Tonight segment, where Azman shared his views on the impact of ASEAN Economic Community on local SMEs in Singapore. The article was first published in Channel NewsAsia on 29th December 2016.  Slow start, but future remains bright for ASEAN Economic Community: Analysts Source: Channel NewsAsia Date: 29 December 2016 Author: Calvin Hui SINGAPORE: Saturday (Dec 31) will mark the first year anniversary of the ASEAN Economic Community (AEC). Conceived as a single market and production base, the AEC is part of broader efforts to integrate ASEAN economies. But one year on from its inception, about 74 per cent of Singapore companies polled in a recent Singapore Business Federation (SBF) survey said they do not think the AEC has benefited them. Associate Professor Simon Tay, chairman of the Singapore Institute of International Affairs (SIIA), said bigger companies have the capabilities to take advantage of opportunities from the AEC, but smaller business may not be so well equipped to do so. “So the big test in the longer term will be whether the SMEs (small- and medium-sized enterprises) will be able to also play across the region,” he said. “And not just Singapore SMEs, (but also) Filipino SMEs, Indonesian SMEs. “It will take some time because the integration is not just as deep. (There's) still too much bureaucracy and rules standing in the way. The tariffs, I think are gone, but these non-tariff measures are almost like barriers to deeper integration.” RHTLaw Taylor Wessing’s deputy managing partner Azman Jaafar agreed that the lack of resources is a stumbling block for smaller companies. However, he added that it “just means that you have to be a little more ingenious”. IMPORTANT TO CHANGE MINDSET                              ASEAN’s market of more than 600 million people, and almost US$3 trillion in combined GDP, represents vast opportunities for companies from the city-state of Singapore. But Mr Azman, who is also chairman of the law firm’s ASEAN Plus Group, said local companies could have traditional business models that limits the extent of their expansion outside of Singapore.  “Local SMEs who want to benefit from the AEC must rethink how they are doing their business, and how they should change their mind set, and apply quite different rules of engagement,” he said. Governments can also help to change these attitudes. Said Assoc Prof Tay: “Sometimes, SMEs, not just in Singapore but other countries - they are really on the defensive. Say (they) don't let people in, because I can't compete in my own home market. “I think increasingly, governments have got to reassure SMEs that as the AEC opens up, they will be given assistance by ASEAN, by governments on the whole, to also go out and become more competitive, become more efficient on the whole about boundaries." There is also the cultural diversity of the 10 member countries in ASEAN to consider, said Mr Azman. “When our local businesses are able to appreciate these differences, they are probably better placed to get into these markets,” he said. LONG TERM OUTLOOK BRIGHT Observers agree that it is premature to write off the AEC despite its slow start. "There's a right to get a bit disappointed with the AEC in the first year,” said Assoc Prof Tay. “But what makes me slightly optimistic is that, at the national level, different key economies have already started to see the need for reform." Mr Azman emphasised that the push for the AEC to succeed must not come from just the governments, but other key stakeholders too. “It’s easy to say that the government has got to push this. But at the end of the day, a lot of things happens without government assistance. “Within industries and within countries, if we keep discussing this, we open up the discussion across borders. This creates a level of awareness that’s very different from the level of awareness in a local forum.”  Azman's full feature can be found in the news report: Singapore Tonight - Channel NewsAsia, 29 December 2016
December 22, 2016

RHTLaw Taylor Wessing Head of Regulatory Practice Nizam Ismail featured in Thomson Reuters

RHTLaw Taylor Wessing’s Head of Regulatory Practice Nizam Ismail was featured in an article published in Thomson Reuters titled “MAS's new accredited investor definition will require documentation and system change”. The article was first published on Thomson Reuters Accelus Regulatory Intelligence and Compliance Complete. MAS's new accredited investor definition will require documentation and system change Source: Copyright © Thomson Reuters 2016 Date: 22 December 2016 Author: Patricia Lee Singapore-based financial institutions can expect a degree of change to their documentation, systems, and policy and procedures following recent refinements to the definition of accredited investors at the first reading in parliament last month. The refinements to the definitions of accredited investors (AIs) and institutional investors (IIs) were part of the Monetary Authority of Singapore's proposed changes to its capital markets regulatory framework and followed a consultation paper issued on July 21, 2014. The second reading in parliament is expected to take place sometime this month or January 2017. The Securities and Futures (Amendment) Bill 2016 seeks to better reflect categories of non-retail investors identified based on their wealth or income and financial knowledge. Under MAS's existing capital markets regulatory framework, regulatory safeguards have sought to protect primarily retail investors. Intermediaries have so far been exempted from certain requirements if their customers are non-retail investors considered to be investment-savvy. Shift in regulatory thinking Under the proposed definition of AIs, the wealth criteria has been tightened such that the net equity of the individual’s primary residence can only contribute up to S$1 million of the current S$2 million net personal assets threshold. Alternatively, individuals will be able to qualify as AIs if they have S$1 million of financial assets (net of any related liabilities). Individuals whose wealth is largely based on their primary residence with little liquid assets will no longer qualify as accredited investors. Nizam Ismail, head of regulatory practice at RHTLaw Taylor Wessing in Singapore, said the regulatory thinking is that AIs were previously considered to be able to look after their interests by virtue of their wealth but such thinking has now shifted. Even if an investor meets the net asset or income test, he or she will no longer be automatically treated as an accredited investor unless they actively opt in to be one, in which case, they will lose protection from the regulatory safeguards accorded to retail investors. Reassessing customers, reviewing processes, policy and procedures What is most striking about the new accredited investors opt-out regime is that financial institutions, in particular, private banks, fund managers and wealth managers, can expect a good amount of work to be done, including re-assessing existing customers who are accredited investors and reviewing internal processes, policy and procedures to align them with the new requirements, said Hemali Mehta, senior consultant at Bovill in Singapore. Accredited investor reassessments will cover a number of areas including product suitability, risk profile and financial conditions. "For these financial institutions, they have to re-assess their existing AI clients to find out whether these clients want to be considered AIs and they have to notify them that they have the option to opt out of the accredited investor status. Full disclosure will have to be made to these investors that certain safeguards may not be available to them if they remain accredited investors," she said. Retail investor status as a baseline for new customers Mehta also pointed out that some financial institutions which are only licensed to deal with accredited and institutional investors may face the prospect of having to exit the relationship if some existing customers chose to opt out of becoming accredited investors. New AI-eligible customers whom financial institutions are onboarding for the first time will be treated as retail investors as a baseline unless they want to be treated as accredited investors, in which case they will have to opt in, she said. Mehta said MAS has been considerate and will not expect financial institutions to unwind past transactions involving products previously offered to customers when they were treated as accredited investors. MAS' proposals to introduce the enhanced safeguards under the new AI regime, she said, was a good move and was in line with similar regimes adopted in Europe and Hong Kong. AIs investing in Singapore dollar bonds MAS' proposed changes to the definition of accredited investors also took into consideration past instances where Singapore dollar bonds were sold to such accredited investors, said Lim Sin Teck, director, Morgan Lewis Stamford LLC in Singapore. While there have been no major issues so far, a number of bond issuers from the shipping and oil and gas sectors were known, in recent months, to be having difficulty making principal and interest repayments to their bondholders or otherwise in breach of certain covenants. "A substantial number of the accredited investor bondholders in the Singapore dollar bond market are individuals who find themselves stuck with defaulted bonds and are having difficulty recouping their investment. Accredited investors are meant to be investors with the ability to understand and, if acceptable to them, withstand and take on the investment risk, but in many cases, their investment evaluation process is at the level of retail investors and so they may not have the investment appetite nor investment sophistication that expected of such high-risk bonds," he said. Lim said some retirees, who may not necessarily be wealthy but own high value property, may seek high returns from their investment, but they may not be able to appreciate the risk in such bonds. MAS has therefore proposed to refine the definition of accredited investors and to limit the value of the primary residence of investors when financial institutions determine whether the former falls within the scope of accredited investors. ·  Patricia Lee is South-East Asia editor at Thomson Reuters Regulatory Intelligence in Singapore. She also has responsibility for covering wider G20 regulatory policy initiatives as they affect Asia.
December 22, 2016

RHTLaw Taylor Wessing Partner Eugene Quah featured in Singapore Business Review

RHTLaw Taylor Wessing’s Partner Eugene Quah was quoted in an article published in Singapore Business Review titled “Third-party funding for arbitrations”. The article was first published in the December 2016-January 2017 edition of Singapore Business Review. Third-party funding for arbitrations New legislation is seen to raise Singapore’s profile as an international arbitration hub. Source: Singapore Business Review © 2016 Charlton Media Group Date: December 2016-January 2017 Edition The Ministry of Law has submitted for its First Reading in the Parliament the Civil Law (Amendment) Bill 2016 and Civil Law (Third Party Funding) regulation. The bill states that third-party funding (TPF), which had previously been restricted for disputes, will be permitted for international commercial arbitration proceedings. TPF gives the means for a party to litigate or arbitrate without having to spend money for it. The Ministry of Law says introducing TPF in Singapore, which the body notes is a leading centre for international commercial arbitration, will enable international businesses to use funding tools available to them in other centres. It also says this will promote Singapore’s growth as a leading international arbitration venue. The legal experts interviewed for this article also note how TPF can prove to be beneficial to Singapore’s standing in the world as an arbitration hub. What are your thoughts on the proposed changes under the Civil Law (Amendment) Bill 2016 enacting a framework for third-party funding in Singapore, which will give businesses an additional financing option for international commercial arbitration? Eugene Quah, litigation & dispute resolution partner, RHTLaw Taylor Wessing LLP, welcomes the development. “Litigation or arbitration costs are big ticket extraordinary expenses that many businesses are not sufficiently well-resourced to bear,” says Quah. “The changes will open up access to a source of capital previously unavailable in this jurisdiction.” Quah also notes that third-party funding can inject a greater degree of objectivity into the assessment of the merits of a party’s claim: “The claimant may have unrealistic expectations of his chances of success, but the third-party funder is a calculated risk-taker and will not fund an unmeritorious claim.” The proposed changes can be seen as a positive development for businesses, says Deborah Barker, managing partner, Withers KhattarWong. “For end users of the arbitration process, the changes will reduce (or even eliminate) the risk that third-party funding arrangements will be relied on as a basis for judicial intervention on the ground of public policy, or as a premise for an application to set aside the award.” Marina Chin, joint managing partner, Tan Kok Quan Partnership, says the bill is part of Singapore’s natural progression as a dispute resolution hub alongside others. It is said that law firms and lawyers will benefit from the increase in international dispute resolution activity in Singapore. What is your reaction to this? Opening the door to third-party funding is likely to benefit law firms and lawyers in Singapore, according to Barker. “Third-party funding is already permitted in the United Kingdom and the United States, and being considered in Hong Kong. Singapore law firms which have alliances with foreign law firms in these jurisdictions will be able to tap into the experience acquired by colleagues and overseas offices in relation to third-party funding arrangements.” Chin agrees: “That this would be a boon to the legal industry cannot be overstated. Cases which may not otherwise see the light of day can now have a real chance of being heard. That such cases are typically for fairly significant claims underscores the impact that funding can have.” For Quah, however, the development will be a challenge Singapore’s local firms will have to rise up to: “Whilst an increase in international dispute resolution activity in Singapore will certainly enlarge the overall pie, domestic law firms will stand to benefit only if they are perceived to be able to fight a case on an equal footing with the large Western offshore firms.” The Ministry of Law says, “Singapore has excelled in the area of arbitration and ranks among the world’s top seats for international arbitration, alongside London, Paris, Geneva, and Hong Kong.” How will the changes, if enacted, impact Singapore’s role in arbitration? The new legislation will make Singapore even more attractive as a seat for international arbitration, notes Barker, whilst allowing it to compete for a larger share of the growing volume of international arbitration cases. Singapore should go ahead with third-party funding for international commercial arbitration or lose parties that choose it for arbitration, says Quah. “If Singapore does not, parties relying on third-party funding may shy away from using Singapore as the seat of arbitration, as funders do not want to be exposed to the risks of not being able to enforce funding agreements.” “The liberalisation demonstrates that Singapore is open to new and novel ideas and willing to introduce and embrace what is progressive to keep up with an evolving business landscape,” says Chin. “Such dynamism is key to what makes a successful dispute resolution hub in the international arena.” Further, Chin notes: “This is not about Singapore alone: strengthening Singapore’s position increases the attractiveness of doing business in this region.”