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Switzerland to toughen anti- money laundering rules – Industry roundup: 31 August

Switzerland plans new anti-money laundering regulations

Switzerland has announced new draft regulations aimed at reinforcing its anti- money laundering (AML) measures, making lawyers and consultants responsible for flagging risks and bolstering scrutiny of legal structures such as trusts.

Scheduled for parliamentary review in 2024, after consultations, the draft regulations have been prepared by the Swiss government. 

With its banks serving as the world’s largest custodians of offshore wealth, Switzerland has worked to dispel its historical reputation as a haven for illicit funds. The country currently shares banking information with more than 100 nations as a standard practice.

However, the country has faced global calls to increase transparency surrounding the murky arena of corporate ownership, where trusts and companies frequently conceal the true identity of their ultimate beneficiaries.

If approved, the new framework would extend due diligence and reporting obligations to lawyers, accountants, and other advisers involved in establishing trusts, holding companies, or managing property transactions.

Additionally, the government outlined plans for a central registry that would document the genuine owners of legal entities, aimed at combating money laundering through shell companies. This idea was initially proposed last October.

This central registry would be managed by the Federal Department of Justice and Police (FDJP). It would list the beneficial owners of corporations and other legal entities, with oversight provided by a division within the finance ministry, which would also have the authority to impose sanctions if needed.

The proposed measures would further require banks, firms, and service providers to meticulously assess and manage the risks of sanctions violations among their clients—especially pertinent given the global focus following Russia’s invasion of Ukraine.

The draft rules also indicate that all future property transactions would undergo due diligence checks. Moreover, cash transactions for high-value items like gold and diamonds would fall under AML checks for amounts exceeding 15,000 Swiss francs (US$17,055), a significant reduction from the current threshold of SFr100,000.

Singapore adds new charges against major money laundering ring

Ten foreigners accused of involvement in a major money laundering operation in Singapore have again been remanded in custody, with new charges slapped on eight of them, as the city-state widens the net in one of its highest-profile crime cases.

Authorities seized assets of more than S$1 billion (US$740 million) in simultaneous raids two weeks ago, from gold bars, handbags and jewellery to properties and luxury cars, in a haul that shocked the nation known for low crime rates.

In a raid on 15 August, 10 foreigners aged between 31 and 44 were arrested, from Cyprus, Cambodia, Dominica, China, Turkey and Vanuatu.

Police have tied the seizures to overseas organised crime, including scams, remote gambling in the Philippines and unlicensed moneylending in China.

All 10 who appeared in court via video link were denied bail and remanded until 6 September. The newly added charges included having millions in bank accounts and safe deposit boxes, cryptocurrencies and cars as “benefits from criminal conduct”.

Their lawyers sought bail but gave no indication of how the suspects would answer the money laundering accusations. Prosecutors said the suspects were a flight risk if given bail, as they had overseas connections and assets, and could also collude to contaminate evidence.

In all, 105 properties, bank accounts with S$110 million, 50 vehicles, S$23 million in cash, hundreds of luxury handbags and watches, and jewellery and two gold bars were seized in the recent raids at nine locations. Eight more suspects are wanted and 12 are assisting in investigations, police said.


China’s manufacturing activity shrinks again

China’s factory activity in August shrank for a fifth successive month, while non-manufacturing activity hit a new low for the year, in a further sign that the slowdown in the world’s second-largest economy may not yet have bottomed out.

The official manufacturing purchasing managers’ index (PMI) rose slightly to 49.7 this month from 49.3 in July, according to data from the National Bureau of Statistics. This was better than the median forecast for 49.4 in a Reuters poll.

A PMI reading above 50 indicates expansion in activity, while a reading below that level points to a contraction.

‘’China’s economic weakness has again been exposed in the latest manufacturing data, indicating attempts to stimulate consumption have fallen short,” commented Susannah Streeter , head of money and markets at financial services firm Hargreaves Lansdown. “Factories have been churning out fewer goods again in August as demand wanes, marking the fifth month in a row of contraction.

“Warnings from the Chinese property giant Country Garden that it may default on its mountain of debt isn’t helping sentiment, amid worries problems in real estate will cause contagion in the financial sector. Given the headwinds whipping around the Chinese economy right now in particular the slumping property sector, it’s little surprise consumers are showing less appetite to spend, but there is also less demand for Chinese manufactured goods in key markets abroad.

“As the cost-of-living crisis continues in Western economies due to elevated inflation and high borrowing costs, shoppers have been tightening their belts. The manufacturing data is gloomy, reinforcing a picture of China’s slowing economy; however, there was still a tiny room for optimism as the pace of contraction did ease off a little compared to July.”


Visa and Mastercard plan to hike credit card fees

Global payments processors Visa and Mastercard are planning to increase fees that many merchants pay when they accept customers' credit cards, reports the Wall Street Journal .

The fee increases are scheduled to start in October and April 2024, according to the report, which cited people familiar with the matter and documents viewed by the WSJ. Many of the fee increases are for online purchases, the paper added.

The new charges will mean merchants pay about US$502 million more, on an annual basis, than they currently do, according to consulting firm CMSPI, which tracks such fees on behalf of merchants, the WSJ reported.

About half of the increase will be directed to network fees paid to the card network companies while the other half will constitute interchange, or swipe fees, that go to the banks issuing the cards, according to the publication.

The fee increase comes at a politically fraught moment for the industry in light of the Credit Card Competition Act (CCCA) pending on Capitol Hill. That act, if passed, would attempt to increase competition in the industry by requiring that competing networks, other than Visa and Mastercard, be made available to merchants for processing credit card payments.

The legislation, sponsored by a bipartisan group of lawmakers, has unleashed a battle among special interests in Washington. While merchant trade groups, such as the National Retail Federation and Merchants Payments Coalition, are backing the bill, those that represent the banks and card companies, including the Electronic Payments Coalition, oppose it.

If the card network fee increase stands, it would boost what are already significant fees paid by merchants. The Nilson Report, an industry research firm, estimated fees paid by merchants amounted to US$93 billion last year against US$33 billion in 2012, the WSJ reported.

The card networks argue that the fees pay for their cybersecurity and fraud advances that protect consumers. Benefits to consumers also include frequent-flier and other rewards programmes. Conversely, consumers may also suffer if the fee increases are passed on to them by the merchants, at a time when high inflation is already taking a toll.

The congressional fight over the fees is the latest in a long-running feud between the two sides that reaches back to the enactment of the Durbin Amendment, a bill passed as part of the 2010 Dodd Frank Wall Street Reform and Consumer Protection Act that sought to introduce more competition into the debit card industry and hold down those fees.

More recently, Democrat Senator Dick Durbin criticised the card networks during the COVID-19 pandemic when they moved to increase fees after temporarily pausing the hikes. He has sponsored the CCCA, along with Republican Senator Roger Marshall, at a time when the Biden administration has campaigned to boost croporate competition and increase antitrust regulation.


Vanguard joins BlackRock in rejecting more ESG proposals

The Vanguard Group says it has only approved 2% of the environmental and social resolutions brought by shareholders this year, down from 12% in 2022. The US mutual fund giant joins rival BlackRock in rejecting a significant number of climate and social items amid pushback against the environmental, social and governance (ESG) movement previously promoted by both groups.

Vanguard reported in its Vanguard Investment Stewardship brief for the US region that it received a greater number of environmental and social proposals this proxy season, with shareholders bringing 359 of such resolutions compared to 290 in 2022. It saw a 50% increase in proposals related to environmental matters alone, and the most common subject was “target-setting for greenhouse gas emissions.”

“Across all sectors in the US, we saw companies receive shareholder proposals addressing social topics such as racial equity, reproductive rights, and pay gaps,” the company wrote in its report, adding it also received “several notable proposals” in the consumer sector “concerning unionisation and worker safety.”

Vanguard said it “evaluated each one case by case on its merits and in the context of the specific company,” and stressed that the decline in supporting such measures was “largely attributed to the volume and nature of the proposals” as well as improvements in company disclosures that made many resolutions unnecessary.

Vanguard’s report came a week after BlackRock, the world’s largest asset manager, reported in its 2023 Investment Stewardship report that it turned down 742 of the record 813 proposals it voted on and 373, or 93%, of the social and climate proposals it faced.

Both companies attributed the higher number of proposals largely to guidance published in November 2021 by the Securities and Exchange Commission (SEC) broadening the scope of permissible proposals to include those that address “significant social policy issues.” At the time, SEC Chairman Gary Gensler applauded the guidance, saying it would “provide greater clarity,2 while Republican SEC members and lawmakers attacked it for creating more confusion.


New Zealand card payments “to exceed NZ$100bn in 2023”

New Zealand’s card payments market is expected to grow by 6.5% to reach NZ$102.4 billion (US$65.0 billion) in 2023, supported by an economic rebound and a growing consumer preference for electronic payments, says data analytics firm GlobalData.

According to its Payment Cards Analytics, New Zealand saw a decline of 10.5% in card payments value in 2020, reflecting lockdowns during  the Covid-19 pandemic and subsequently its economy fell into recession. However, the subsequent economic rebound saw New Zealand’s card market recover with 1.0% growth in 2021 followed by 6.6% growth in 2022.

Ravi Sharma, Lead Banking and Payments Analyst at GlobalData, said: “The payment card market in New Zealand is mature, with individuals on average owning more than three cards. The frequency of card payments remains notably high at 92.7 in 2022. The accessibility to formal financial services is seamless, contributing to a populace that is exceedingly at ease with using credit and debit cards for both online and in-store transactions.

“Consistent endeavours by the financial regulators to enhance knowledge about electronic payments and foster the expansion of payment acceptance infrastructure have further bolstered the progression of card payments.”

There has also been a significant change in consumer payment habits post pandemic as large number of consumers are moving away from cash payments, and instead opting for digital payment. The value of ATM cash withdrawals reduced by 20.9% and 5.9% in 2020 and 2021, respectively, a trend that continued in 2022 with a 3.4% decline.

Among the card types, credit and charge cards are favoured over debit cards, accounting for 53.7% in total card payments in 2023. This can be attributed to value added benefits such as reward points, and discounts on purchases at partner retailers. Debit cards account for the remaining 46.3% share. The debit card market in New Zealand is dominated by local scheme provider EFTPOS. The strong adoption of EFTPOS is due to its easy accessibility and higher merchant acceptance.

To further drive card acceptance among the merchants, New Zealand enacted new legislation in November 2022 to regulate interchange fees on card payments. Accordingly, the interchange fees for consumer credit card transactions was capped at 0.8%, which was previously charged up to 2.25%. Similarly, online and contactless debit card transactions were capped at 0.6% and 0.2%, respectively.


Swiss SEBA Bank gets approval-in-principle for Hong Kong crypto services

SEBA Hong Kong, a subsidiary of the Zug, Switzerland-headquartered crypto bank SEBA Bank, has been issued an in-principle approval by the Securities and Futures Commission (SFC) of the Chinese Special Administrative region, the bank announced.

The approval has been granted for the entity’s application for a licence to conduct regulated activities in Hong Kong which will allow it to deal in securities, including crypto-related products such as over-the-counter derivatives and structured products.

Backed by the Swiss banking giant Julius Baer, SEBA Bank provides wealth management, investment, and trading solutions for the digital age. A Hong Kong licence will also enable its subsidiary to manage assets for discretionary accounts in both traditional securities and virtual assets.

Hong Kong has been actively working to revive its status of a global financial hub in the aftermath of the Covid-19 pandemic by creating conditions for crypto business. In June, the city introduced rules for retail crypto trade that require trading platforms and exchanges to obtain special licenses.

“SEBA group wants to service crypto investors in jurisdictions that recognize the value of digital assets. We see enormous potential in Hong Kong’s journey to becoming a global crypto market leader and look forward to contributing to that trajectory,” said SEBA Hong Kong CEO Amy Yu.

When it meets all conditions set by the SFC and gets the license, SEBA Hong Kong will be among the first companies licensed in the Chinese region to offer investment services with crypto capabilities, the Swiss bank pointed out in the announcement.

The group includes firms such as Hashkey Exchange and OSL, Bloomberg noted in a report. Hong Kong is the third jurisdiction where SEBA Bank seeks licencing after Switzerland, where it is supervised by the Swiss Financial Market Supervisory Authority (FINMA), and Abu Dhabi.


AiBANK and Visa partner on digital payments in Egypt

aiBANK, a provider of integrated retail, corporate, and Islamic banking solutions in Egypt, has entered into a long-term partnership agreement with Visa, to provide customers with a new integrated package of e-payment solutions.

The strategic partnership aims to provide customers with a comprehensive range of innovative products and services tailored to modern digital payment preferences.

aiBANK said the collaboration signifies its dedication to promoting financial inclusivity and accelerating the adoption of digital transactions in line with the directives of the Central Bank of Egypt and the Financial Regulatory Authority. By offering cutting-edge solutions aligned with the latest digital payment trends, this partnership aims to encourage customers to embrace electronic payment methods across all segments.

Iman Badr, Senior Director, Consumer & Business Banking at aiBANK, said, “Our aim is to create a seamless banking experience by offering the latest digital payment solutions. In collaboration with Visa, one of the largest and most renowned payment brands worldwide, the bank will be able to provide the best service to customers in Egypt and during their time abroad, benefiting from Visa’s massive global network.”

The collaboration follows aiBANK’s partnership with InstaPay earlier this year, which allows customers to instantly transfer money between bank accounts, cards, and digital wallets using their mobile phones.


India in talks to expand UPI in Africa

India is reported to be in talks with several African countries, including Namibia, Mozambique and Kenya, to help develop its Unified Payment Interface (UPI) and to conclude commercial partnerships between payments platforms, according to persons close to the initiative.

This push comes after Ritesh Shukla, International CEO of the National Payments Corporation of India (NPCI), which developed UPI, stated that the number of countries where UPI is live will double in the next 12-18 months.

“There are many countries in the world which have similar problems we had before the advent of UPI,” he said in a recent interview. “These are financial inclusion, supporting rural economies, fintech incubation, transparency and other things. We are looking at partnering with those countries to help them create their own versions of UPI in a very sovereign manner.”

In recent years, India has marketed its signature UPI platform to various developing countries. And used two strategies to boost UPI’s global footprint. The first is to help build platforms and digital infrastructure for partner nations. The second is to sign commercial partnerships and linkages with existing platforms in foreign countries to make life easier for Indian travellers and migrants.

“We have about 30 million Indians who live outside India,” said Shukla. “They send about US$100 billion every year. Today, this experience is very, very fragmented, depending on which part of the world you live in. We are trying to see how we can standardise this whole user-experience.”

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