On May 12, 2021, the Monetary Authority of Singapore (MAS) issued its Consultation Paper on Proposed AML Notices for Cross-Border Business Arrangements of Capital Markets Intermediaries under Proposed Exemption Frameworks (Third Consultation Paper).
The Third Consultation Paper follows earlier consultations published by MAS and sets out the proposed draft Notices on Prevention of Money Laundering and Countering the Financing of Terrorism (AML Notices). The draft AML Notices set out the proposed anti-money laundering and countering the financing of terrorism (AML/CFT) requirements applicable to cross-border business arrangements between capital markets intermediaries and their foreign related corporations (FRC) or their foreign head offices or foreign branches under the Singapore Securities and Futures Act (SFA) and Financial Advisers Act (FAA).
This briefing focuses on the key rules to be put in place under the AML Notice as applicable to cross-border business arrangements under the SFA between Singapore fund management companies that hold a capital markets services licence (LFMC) and their FRCs.
MAS published the first consultation, the Consultation Paper on Proposed Revisions to the Exemption Framework for Cross-Border Business Arrangements of Capital Markets Intermediaries (First Consultation Paper), on December 4, 2018. The First Consultation Paper sought to revise the existing prior approval–based exemption framework for cross-border business arrangements between capital markets intermediaries and their FRCs (FRC Framework), commonly known in the industry as the “para 9 exemption” (SFA) or “para 11 exemption” (FAA), to a more streamlined notification framework. MAS issued its response to feedback received on the First Consultation Paper on June 5, 2020, and indicated that it would proceed generally with the majority of the proposals in the First Consultation Paper.
Following the First Consultation Paper, MAS published its Consultation Paper on Proposed Exemption Framework for Cross-Border Business Arrangements of Capital Markets Intermediaries Involving Foreign Offices (Second Consultation Paper) on March 15, 2021, seeking comments on the proposed draft regulations and notices for the revised notified FRC Framework as well as the notification forms to be submitted. The Second Consultation Paper also sets out MAS’s proposals on introducing a new exemption framework to cover cross-border business arrangements of capital markets intermediaries with their foreign head offices or foreign branches (Branch Framework). Please click here to view our client briefing on the second consultation paper issued on April 8, 2021.
The Third Consultation Paper is a follow up to the Second Consultation Paper and sets out the proposed AML/CFT rules to be introduced for the notified FRC Framework and new Branch Framework under the SFA and FAA. The AML Notices for the Branch Framework is substantially similar to the AML Notices for the FRC Framework and is not the focus of this briefing.
Proposed AML/CFT requirements for FRC Framework
The proposed AML Notice for the FRC Framework under the SFA applies to the LFMC in relation to its cross-border arrangement with its FRC.
The table below sets out a high-level summary of the proposed AML/CFT requirements:
The notified FRC Framework, including the AML Notices, is targeted to commence on Saturday, October 9, 2021.
LFMCs and their FRCs currently carrying out regulated activities under existing MAS-approved cross-border arrangements under the current FRC Framework will be provided with a transition time of six months to comply with the new boundary requirements of the revised FRC Framework. These LFMCs will have up to Friday, April 8, 2022, to submit an initial commencement notification to MAS. For such LFMCs, the AML Notice will take effect from the date of lodgement of the commencement notification.
Invitation for Comments
Please refer to the Third Consultation Paper for full details on the proposed AML/CFT requirements under the FRC Framework. The deadline for comments and feedback to be submitted to the MAS is Friday, June 11, 2021.
We are collating comments from clients and industry participants for submission to the MAS. If you have comments on the proposals that you would like us to submit on your behalf, please contact any of the lawyers listed below.
1 For LFMCs, the AML/CFT requirements are set out in SFA04-N02 Notice on Prevention of Money Laundering and Countering the Financing of Terrorism – Capital Markets Intermediaries.
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