MAFH Insights on Regulations I November – December 2020

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Amendments to the Financial Intelligence and Anti-Money Laundering laws

[Updated 22 November 2020]

The Financial Services Commission (“FSC”) issued a circular letter on 6 November 2020 following the recent amendments to the Financial Intelligence and Anti-Money Laundering Act 2002 (“FIAMLA”) and enactment of the Financial Intelligence and Anti-Money Laundering Regulations 2018 (‘FIAML Regulations’). The Code on the Prevention of Money Laundering & Terrorist Financing (“Code”) was issued by the FSC on 30 March 2012 and subsequently updated on 25 May 2017. According to the circular letter, the Code is repealed until the issuance of any additional enforceable AML/CFT requirements. We would like to draw your attention to the fact that the repeal of the Code shall neither affect any obligations or liability incurred under the Code nor affect any acts carried out by the FSC under the Code. Furthermore, the FSC reserves its rights to take any regulatory/disciplinary actions for any breach of the Code which occurred on or before 6 November 2020. Lastly, any reference to the Code in the FSC Handbook on AML/CFT (“Handbook”) shall no longer be applicable, notwithstanding that the remaining provisions of the Handbook shall be valid.

Issuance of a Settlement Framework by the FSC

[Updated 18 December 2020]

The Financial Services Commission (“FSC”) issued its Settlement Framework (the “Framework”) on 11 December 2020. It is recommended that the Framework be read alongside the Enforcement Manual issued by the FSC on 12 June 2020. The Enforcement Manual provides an outline of the FSC approach in exercising its enforcement powers under the Financial Services Act 2007 to ensure the sound conduct of business in the financial services sector and the global business sector. The Framework sets out the FSC commitment to adopt settlement as part of its enforcement process. The settlement process provides an avenue to resolve certain cases in which enforcement actions are contemplated by the FSC following breach(es) of any relevant laws by the licensee; the resolution relies on the mutual agreement of the FSC and the licensee. It is important to highlight that selection of settlement as a mean of resolution will be made on a discretionary basis by the FSC to ensure that the enforcement outcomes are consistent, proportionate, effective and in the public interest. These cardinal principles are expressly stated in the FSC Enforcement Manual. The FSC has set up a Settlement Committee to manage settlement discussions. Key features of the Framework include:

  • conduct of settlement discussions on a ‘without prejudice’ basis;
  • settlement discussions are possible at any stage of the enforcement process up to the issue of a Decision Notice issued by the Enforcement Committee;
  • application of a reduction, ranging from 30% to 5%, to an administrative penalty (at the discretion of the FSC) depending on the timing of when settlement is reached;
  • mitigating factors, such as acknowledgment of wrongdoing by the licensee, will be taken into account by the FSC;
  • settlement discussions shall be completed within 60 calendar days; and
  • outcomes achieved from the settlement process will be published as is already the case for enforcement outcomes

It should be noted that the FSC reserves the right to terminate a Settlement Agreement at any time. The Framework provides for the possibility of termination of the Settlement Agreement in numerous cases including cases when the licensee withheld any material information during the settlement discussions.