Recent AML regulatory developments Asia-wide, key challenges and next steps

1. David Nutman Regional Head of Compliance & Regional MLPO Prudential Corporation Asia Recent AML regulatory developments Asia-wide, key challenges and next steps

2. Managing the 3 letter world in which we live Insurers in Asia • AIA, ING, AXA, ACE, RSA (even Pru)…………… Even the Asian banks • BOC, CCB, DBS, BEA, UOB, SCB, ANZ, UBS …….…………… The Asia financial regulators don’t want to miss out!! • OCI, FSA, FSS, SFC, OIC, MAS, BNM, MoF, FSC, SEC……………… Money Laundering also gets in on the act • AML, CFT, CDD, KYC, STR, FIU, APG…………………… No disrespect meant to HSBC or the HKMA who nearly made it !!!! Anyway keeping on the theme LMS and apologies for using abbreviations….

3. Recent regulatory developments Internationally • FATF proposals to upgrade their 40+9 recommendations to bring up-to-date and make relevant for the new world. (October 2010) • Third EU Directive on ML, IAIS Guidelines still being implemented Asia (largely in response to various evaluations by FATF and APG) - examples • Hong Kong – draft bill to tighten AML laws including random border checks, bringing other industry sectors into regulatory scope and improving record retention. Recent enhancements to CDD requirements. • Japan – strengthening CDD measures • Taiwan – multiple amendments made to Money Laundering Control Act. Counter-Terrorism Action Law still in proposal stage. • India – updated STR legislation beyond financial trigger only • Indonesia – upgraded their KYC requirements for non-banks and revised AML Law to allow KPK (Corruption Eradication Commission) to investigate cases of ML. • Korea – regulatory lowering of threshold to report cash transactions to FIU

4. Key challenges • At least 9 of the 31 worldwide jurisdictions deemed to have strategic AML/CFT deficiencies by FATF are in Asia – Prudential like many MNCs have operations in some (PHP/Indo/THL/VN). • Emerging markets have cash-based businesses & economy, corruption remains a concern. • AML remains largely invisible politically - not an election topic!!! • Co-operation internationally still needs to develop further – crime is global • The law remains weak in some areas particularly regarding CTF • Sanctions adherence seen to be the biggest burden (Logica survey in 9/2010) – managing OFAC and the extra-territorial reach of US (and now UK) legislation • UK FSA fine on RBS Group in August 2010 for failing to have adequate systems and controls in place to prevent breaches of UK financial sanctions. (watershed?) • New Anti Bribery & Corruption Act in UK becomes law in 2011

5. Asian Cultural challenges • Unwillingness to disclose information (banking, professional and personal secrecy). • Cross-border issues – e.g. mainland Chinese cash into Hong Kong, Burmese nationals living in Singapore. • Multi-jurisdictional crime with proceeds of ML often quickly & easily transferred to another territory. • Illegal gambling now a prime source of dirty money alongside the usual suspects (vice, drugs, counterfeiting, financial crime etc.) • Use of alternative remittance systems (ARS) • Charitable connections and indigenous terrorist groups • Low taxation environment can attract the dirty dollar

6. Next steps • Unquestionably further reform at a country level (FATF lead? – some jurisdictions need to complete implementation of action plans within timeframes proposed) • Training and education for all (e-learning platforms for front-line teams and internationally accredited AML programmes for functional staff) • Automation for sanctions checking (protecting at the gate) and increased use of sophisticated tools to flag & track transactions • Improved industry engagement with local FIUs • Globalisation – crime has no borders