The month’s key regulatory and compliance-related developments impacting private banks
New EU tax-evasion rules become effective
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New EU rules to combat tax evasion and money laundering have become effective in the bloc’s member states.
The new rules require EU member states to offer tax authorities direct access to data on the beneficial owners of companies, trusts and other entities, and companies’ customer due diligence records.
The EU’s commissioner for economic and financial affairs, taxation and customs, Pierre Moscovici, said: “We want to give tax authorities crucial information on the individuals behind any company or trust. This is essential for them to be able to identify and clamp down on tax evaders. To do this, tax authorities will now have access to anti-money laundering information.”
The EU expects the new rules to help tax authorities combat the types of structure highlighted in the large-scale data leak widely known as the Paradise Papers.
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By GlobalData
Morgan Stanley Wealth slashes high-yield bond allocation
Morgan Stanley Wealth Management is reportedly cutting investments in high-yield or junk bonds amid fears of the impact of forthcoming tax cuts in the US.
The bank said legislative approval for tax cuts in the US may only provide temporary respite, and may prove damaging for companies in the long term.
In December 2017, US President Trump signed the Tax Cuts and Jobs Act, under which tax rules for different entities are set to be impacted.
Morgan Stanley Wealth Management CEO, Mike Wilson, reportedly said: “While the tax cuts just enacted in the US may lead to better growth in the short term, they may also bring forth the excesses we typically see before a recession – which is something credit markets figure out before equities.
“We recently took our remaining high-yield positions to zero as we prepare for deterioration in lower-quality earnings in the US led by lower operating margins.”
Wilson added that investors should prepare for at least one correction in global stocks.
Although the US bank does not anticipate a recession in 2018, it said a high level of risk still persists. The business said tightening monetary policy, weaker earnings and economic data are potential reasons adding to the increased risk of a recession.
Citi fined $70m for AML shortcomings
Citibank has been fined $70m by the US-headquartered Office of the Comptroller of the Currency (OCC) for failing to comply with the agency’s 2012 consent order related to Bank Secrecy Act (BSA) and anti-money laundering (AML) deficiencies.
In its 2012 order, the OCC cited the bank for BSA violations, deficiencies in its compliance programme, failing to file suspicious activity reports, and weaknesses in controls related to correspondent banking.
In assessing this civil money penalty, the agency found that the bank has not achieved compliance with the OCC’s 2012 order, failing to complete corrective actions to address BSA/AML compliance issues as required by the order.
The bank paid the assessed penalty to the U.S. Treasury.
CSRC and SFC sign MoU to improve co-operation on futures markets
Financial regulators the China Securities Regulatory Commission and the Securities and Futures Commission of Hong Kong have signed a memorandum of understanding (MoU) on supervisory and enforcement co-operation on matters concerning futures.
The new agreement, which supersedes the MoU signed between the two parties in 1995, is expected to facilitate regulatory and enforcement co-operation in the mainland China and Hong Kong futures markets.
Both regulators agreed to amend the earlier MoU as a result of growing interaction between the two futures markets and the necessity for closer regulatory co-operation.
The new MoU will improve supervisory assistance and enforcement co-operation, and enable information exchange on multiple issues pertaining the futures market, including cross-boundary derivatives, futures exchanges and futures brokers.
BlackRock secures PFM licence in China
US-based asset management company BlackRock’s Shanghai unit has received a private fund manager (PFM) licence from the Chinese authority.
The registration will enable the company to sell onshore investment products to institutional and HNW investors in the country.
UK-based multinational asset-management company Schroders also received a PFM licence in China. Both companies were registered as PFMs with the Asset Management Association of China.
In 2016, China started offering wholly foreign-owned enterprise (WFOE) licences to foreign asset managers’ subsidiaries in Shanghai’s free-trade zone as a part of a strategy to open up its onshore capital market.
WFOEs could initially provide investment advisory services, but the scope has now been expanded to enable licence-holders to access the onshore private fund business.
Last year, several foreign asset managers including UBS Asset Management (Shanghai), Fidelity International and Fullerton Fund Management received PFM licences
