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Regulatory reporting requirements are tighter these days in the Asia Pacific (APAC) region since the 2008 financial crisis shattered the world’s markets. Companies are under higher pressure due to constantly evolving regulatory complexities and compliance requirements in the APAC region.

Multinational corporations and small and medium-sized enterprises (SME) are finding it harder to venture into this region, especially those who do not have local knowledge and experiences in dealing with local markets’ regulatory practices. Here are three regulatory trends happening around APAC you should at least know before starting a business in this region.

THREE COMPLIANCE TRENDS IN APAC THAT AFFECT BUSINESSES 

Family businesses in Asia are the main driver of region growth

Family-owned and –run corporations such as Samsung and Tata Group have contributed far more than any other type of business to Asia’s growth over the past few decades. However, it can be difficult for family-run corporations to manage corporate governance measures effectively, such as whistle-blowing policies and increased transparency. 

Cronyism which puts company resources for the family’s own interests rather than shareholders’ interests, may result in inefficiency and jeopardised shareholding value.

In Hong Kong, the adoption of the new Companies Ordinance in 2014 provides the basic regulatory framework, whereas other regulatory bodies also deal with corporate governance, such as the Stock Exchange of Hong Kong (SEHK), and the Hong Kong Monetary Authority (HKMA).

Regulators have been paying more attention to management under the influence of a significant shareholder or family-connected director. The Standing Committee on Company Law Reform (SCCLR) and the Corporate Governance Code, which is a non-statutory document under the Listing Rules of the Hong Kong Exchanges and Clearing Market (HKEX), sets out recommendations and principles of good corporate governance. 

These include directors’ duties, control on approval for significant transactions involving directors, self-dealing by controlling shareholders, and balanced composition of executive and non-executive directors on the board.

Tighter regulatory reporting for business in APAC

Back in 2013, the Organisation for Economic Co-operation and Development (OECD)’s Base Erosion and Profit Shifting (BEPS) Action Plan was launched to provide the framework for multinational corporations to disclose certain information annually, in each tax jurisdiction in which they conduct business, to enhance transparency.

By May 2016, almost two-thirds of APAC countries had introduced, or were planning to introduce, Country by Country (CbC) Reporting (one of the new reporting requirements derived from the BEPS Action Plan). Another major legislative development in the region is the widespread adoption of the OECD’s Common Reporting Standard (CRS).

Some countries impose different regulatory reporting standards to further enhance the financial security. 

• Hong Kong has implemented Hong Kong Financial Reporting Standards to improve alignment with International Financial Reporting Standards (IFRS) 9 and has moved to bring on more liquidity reporting obligations. The territory has also implemented the framework for CbC Reporting under the Inland Revenue (Amendment) (No.6) Bill 2017. Multinational enterprise groups must file a CbC Report in relation to an accounting period where the group has constituent entities or operations in two or more jurisdictions and their revenue meets a certain threshold.
• The Monetary Authority of Singapore (MAS) proposed changes to regulatory reporting requirements in MAS Notice 610 in February 2017, to align with the Basel Committee on Banking Supervision (BCBS) 239 (Risk Data Aggregation and Reporting).
• Regulators in Australia are updating core reporting forms such as ARF 320, 391 and 392.
• Reporting regimes in Indonesia, Malaysia, India, Taiwan and China are likewise undergoing updates or enhancements.

Demand for compliance talent continues to rise

Given the tighter compliance trend and evolving regulatory environment in this region, demand for talents in compliance and legal industry is higher than ever. The standard for ‘Know Your Customer’ (KYC) and due diligence practices has risen to a new level as regulators are more proactive these days. 

Financial institutions must meet these high standards to avoid penalties and minimise reputational risk by improving their KYC procedures, taking action to address historical KYC deficiencies, and ongoing monitoring of the background and activities of clients to ensure that all information is accurate and up to date.

In Singapore, the MAS has pushed for a greater demand for compliance roles in regulation, financial crime, investigations, surveillance and monitoring. More fintech start-ups are hiring compliance officers as they seek to meet regulatory standards, especially within the payments space.

In China, financial services firms seek to further strengthen middle and back office functions by recruiting more risk managers and compliance & auditing professionals.

Many financial institutions in Hong Kong have expressed that they lack the necessary resources and talent to implement KYC-related changes effectively. This shortage of skilled compliance staff has caused rising costs associated with KYC as well as due diligence processes and software. 

LOCAL EXPERTS CAN HELP

TMF group provides a full range of corporate secretarial services including provision of registered agent, provision of registered offices, directorship & domiciliation services, international corporate structuring, corporate administration, SPV management services, and adherence to compliance and reporting standards such as CRS, KYC, CbC, BEPS and AML.

For more information, talk to us.