Industry group issues AML best practices in bid to boost regional standards

A set of best practices for anti-money laundering (AML) and know-your-client (KYC) procedures has been launched by The Asia Securities Industry and Financial Markets Association (ASIFMA), the financial industry trade association, and law firm Herbert Smith Freehills. In a report released on June 7, the two organisations outlined a number of developments that were needed to improve and
harmonise standards across the region.

“Differing guidelines and regulations among jurisdictions in Asia as well as divergent interpretation of these guidelines and regulations among financial institutions have led to fragmentation, inconsistencies and varying practices among firms,” said Mark Austen, the
chief executive of ASIFMA. “We have developed this report to help guide the region’s response to these issues and institute a more consistent set of best practices.”

The report includes a range of best practices to help financial institutions benchmark their own procedures and practices and ensure they comply with international standards. The best practices cover how and when to conduct customer due diligence in relation to various types of customer, determining beneficial ownership and situations where enhanced or simplified due diligence should be adopted.

Adopting the best practices would allow firms to better manage challenges in resourcing and dealing with regulatory changes, the report said. It cited research showing that the number of employees working on KYC compliance in financial institutions had risen from an average of 68 in 2016 to 307 in 2017. However, one third of financial institutions still found resources to be the biggest challenge in conducting KYC and CDD processes, with another third considering the volume of regulatory change to be the key challenge in the KYC process, the report said.
“In a region with more AML laws, more active enforcement and more regulatory attention than ever before, harmonisation is no longer desirable but critical, said Will Hallatt, partner at Herbert Smith Freehills in Hong Kong. “Harmonisation could also improve efficiency and potentially open up a competitive advantage for those institutions that can streamline the process for clients and customers alike.”

The best practices set out in the report are based on industry feedback to an ASIFMA workgroup comprising members from both the buy- and sell-side, it said. The initiative followed an earlier survey conducted in 2017 by ASIFMA and PwC. The report also noted that the best practices could also help the adoption of and interoperability between KYC utility providers. “These best practices have been drafted as generally as possible to be jurisdiction-neutral, although reference was largely drawn from industry consensus of best practices currently applied by members in Hong Kong and Singapore,” ASIFMA said.

Produced by Thomson Reuters Accelus Regulatory Intelligence 08-Jun-2018

Published 08-Jun-2018 by Trond Vagen, Regulatory Intelligence

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