Regulatory Compliance Update for Fund Managers in Asia

Licensing and Business Conduct Developments:

• Singapore: The phase-out of the registered fund manager regime (RFMC) has streamlined licensing. New guidelines clarify conflict of interest, management activities, and fee disclosures for fund managers.
• Hong Kong: Efforts to establish more than 200 family offices by 2025, and increased focus on risk management and conflict of interest.

Anti-Money Laundering (AML) and Know Your Customer (KYC) Developments:

• Singapore’s response to a major money laundering case resulted in stricter AML practices, including independent AML audits.
• Hong Kong has ramped up enforcement for failing to implement robust KYC procedures. The Cayman Islands also introduced AML requirements, affecting cross-jurisdiction compliance.

ESG and Sustainability:

• Singapore and Hong Kong introduced stricter ESG reporting requirements to prevent greenwashing. Fund managers must disclose sustainability-related information and manage climate risks accurately.

Outsourcing and Third-Party Risk Management:

• Both MAS and SFC emphasised the need for enhanced due diligence on service providers and vendors.

In summary, APAC regulatory trends include Singapore phasing out RFMC and introducing new fund manager guidelines, Hong Kong focusing on family office growth and risk management. Stricter AML and KYC practices are being enforced, with enhanced ESG reporting to prevent greenwashing.

AML and Proliferation Financing Focus:

• Dubai Financial Services Authority (DFSA) will continue to monitor AML returns, focusing on targeted financial sanctions compliance and suspicious activity reporting.
• The UAE has come off the FATF grey list in 2024, and authorities are working to meet FATF standards.
• The National Risk Assessment is ongoing to identify and mitigate risks related to proliferation financing.

Cybersecurity and Data Protection:

• The DFSA has requested firms to submit responses to a cybersecurity questionnaire, comparing the results to the 2020 review. This emphasises the importance of managing cyber risks and adopting best practices.
• A recent hack of a crypto exchange in the UAE has heightened regulatory attention on cybersecurity.

Digital Asset Ecosystem:

• The Central Bank is expected to release a digital dirham framework to improve cross-border payments efficiency, while free zones like Dubai Internet City (DIC) and Abu Dhabi Global Market (ADGM) have expanded the scope of digital assets that can be traded, held, and issued.
• The Securities and Commodities Authority (SCA) is now accepting applications for virtual asset service providers in mainland UAE, with a strong focus on technology, systems, and AML compliance for fintech companies.

Licensing Trends:

• UAE regulators are streamlining licensing processes and increasing staff to help speed up the market entry of firms, particularly hedge funds.
• The UAE is open to outsourcing key control functions, enabling firms to leverage third-party expertise to get to market faster.

Foreign Fund Promotion Rules:

• SCA’s New Rules: From April 2024, foreign funds cannot be promoted to retail investors in mainland UAE. To distribute funds to retail investors, firms will need to use either a free zone fund or a UAE-domiciled investment fund.
• For professional investors, the exemption from fund registration and local promoter requirements is removed, meaning funds will now need to register with the SCA and use a local promoter for distribution.
• A penalty regime for violating these distribution rules is forthcoming, with commercial risks for firms not complying with the new framework.

In summary, key regulatory areas in the UAE focus on AML compliance, cybersecurity, the growth of the digital asset ecosystem, the regulation of foreign fund promotions, and evolving licensing trends. The UAE is making significant efforts to strengthen its regulatory frameworks.

Securities and Exchange Commission (SEC) Examination Priorities for 2025:

• The SEC will focus on newly registered investment advisors and those that have never been examined before.
• Core areas of focus will include marketing, valuation, trading, custody, fiduciary duties, and compliance with recent regulations (e.g., AI, cybersecurity, crypto assets).

AML and CFT Compliance Enhancements:

• The Corporate Transparency Act, effective March 2025, requires entities to report beneficial ownership details (owners with 25% or more control) to the Financial Crimes Enforcement Network (FinCEN).
• A new FinCEN rule, effective in January 2026, will require certain registered investment advisors to establish AML programs and report suspicious activities.

Cybersecurity and Incident Response:

• The SEC’s newly established Cyber and Emerging Technologies unit (C2) will focus on cyber-related misconduct, particularly in areas like AI, social media fraud, hacking, crypto assets, and cybersecurity compliance.

Third-Party Risk Management:

• There is an increasing emphasis on managing risks associated with outsourcing and third-party relationships. Ensuring compliance with regulations and addressing risks in this area will be crucial in upcoming SEC examinations.

The US trends highlight the importance of strengthening compliance frameworks, especially for new or foreign investment advisors, focusing on cybersecurity preparedness, and staying aligned with evolving AML regulations.

In summary, UAE, US, and APAC regulatory trends highlight key sectoral developments. In APAC, Singapore phases out RFMC, introducing clearer fund manager guidelines, while Hong Kong focuses on family office growth and risk management. Both regions tighten AML/KYC enforcement and enhance ESG reporting.

In the UAE, the DFSA emphasises AML, cybersecurity, and new rules for digital assets and foreign fund promotions, refining its digital asset framework and streamlining licensing.
The SEC in the US prioritises newly registered advisors, compliance with marketing and AI regulations, and strengthens AML/cybersecurity measures. Both regions emphasise third-party risk management in outsourcing arrangements.