FSC Continues to Strengthen Regulations on the Conduct of Wealth Management Specialists of Banks
2021-08-24
Press Release
August 24, 2021
FSC Continues to Strengthen Regulations on the Conduct of Wealth Management Specialists of Banks
The Financial Supervisory Commission (hereinafter referred to as the “FSC”) stated that banks are required to establish an ethical corporate management culture and a code of conduct for employees to maintain the trust of the public in banks. To continue to strengthen the regulations on the conduct of wealth management specialists of banks, the FSC has asked the Bankers Association to revise the “Internal Control Principles for the Prevention of Misappropriation of Client Funds by Wealth Management Specialists” in response to the past patterns of the misappropriation of client funds by wealth management specialists and deficiencies found in financial examinations. The amendment has been registered and banks have been requested to implement management in accordance with the aforementioned Principles.
The FSC stated that the aforementioned Principles include the text and the description table. The amendment was mainly made to strengthen related regulations for “preventing wealth management specialists from producing and providing statements” in Article 11 and “preventing wealth management specialists from engaging in monetary transactions with customers in private” in Article 9 of the aforementioned Principles. The amendment includes the establishment of red flags of suspected misappropriation of customer funds by wealth management specialists to strengthen the banks’ early-warning functions and the practical operation of statements to prevent fraud at the source.
To strengthen the practical operation of statements and the verification of the accuracy and authenticity of customer email address, the amendment includes description for Article 11 of the aforementioned Principles such as requirements for banks to provide the overview of statements and transaction details, requirements for statements to be produced through internal procedures of banks before they may be provided to customers, requirements for banks to implement clean desk inspections (including the keyword inquiries on wealth management specialists’ computers to detect whether wealth management specialists have produced statements by themselves), requirements for adding information and warning on the statement prohibiting wealth management specialists from producing statements by themselves, and methods for verifying the accuracy and authenticity of the email address registered by the customer.
The description in Article 9 of the aforementioned Principles requires banks to set up mechanisms for account monitoring, anomaly reporting, and related management. The Bankers Association drew conclusions from past cases and added the “Red flags of suspected misappropriation of customer funds by wealth management specialists” to strengthen the monitoring mechanisms for related accounts of wealth management specialists of banks and establish red flags of suspicious activities. In addition to specifying the 21 red flags in 4 categories such as monetary transactions, related accounts, operations on behalf of customers, and other conducts as reference, the Principles also require banks to choose or develop red flags that meet their own conditions based on the characteristics and risks of their businesses.
To enhance the early-warning functions of related red flags, the amendment requires banks to designate “head office units or personnel independent of the business performance of the wealth management specialists” to investigate conduct or transactions that meet the reference patterns and establish related investigation procedures. The “head office units or personnel independent of the business performance of the wealth management specialists” refer to head office units or personnel whose performance is not evaluated based on sales performance. Examples include the management unit of the wealth management department of the head office or head office units or personnel placed on the second line of defense. To enhance the responsibilities of the second line of defense, the amendment also requires units responsible for compliance, AML/CFT, or risk management to bear supervisory duties for the planning, management, and execution of the investigation procedures.
As the internal organization, internal regulations, and information system of banks must be adjusted accordingly, and banks are still required to continue to implement existing requirements in the description table, the FSC adopted recommendations of the Bankers Association and required banks to begin the implementation of the amendment on January 1, 2022.
The FSC also stated that the reduction of conduct risks relies on related fraud prevention measures as well as the establishment of a positive corporate culture and formulation of a comprehensive code of ethical conduct. The FSC will continue to encourage the board of directors and the management of financial institutions to advocate a culture of integrity, prioritize the rights and interests of financial consumers, implement fair customer treatment principles, increase the customers’ trust in banks, and create a partnership of common growth between banks and customers.
August 24, 2021
FSC Continues to Strengthen Regulations on the Conduct of Wealth Management Specialists of Banks
The Financial Supervisory Commission (hereinafter referred to as the “FSC”) stated that banks are required to establish an ethical corporate management culture and a code of conduct for employees to maintain the trust of the public in banks. To continue to strengthen the regulations on the conduct of wealth management specialists of banks, the FSC has asked the Bankers Association to revise the “Internal Control Principles for the Prevention of Misappropriation of Client Funds by Wealth Management Specialists” in response to the past patterns of the misappropriation of client funds by wealth management specialists and deficiencies found in financial examinations. The amendment has been registered and banks have been requested to implement management in accordance with the aforementioned Principles.
The FSC stated that the aforementioned Principles include the text and the description table. The amendment was mainly made to strengthen related regulations for “preventing wealth management specialists from producing and providing statements” in Article 11 and “preventing wealth management specialists from engaging in monetary transactions with customers in private” in Article 9 of the aforementioned Principles. The amendment includes the establishment of red flags of suspected misappropriation of customer funds by wealth management specialists to strengthen the banks’ early-warning functions and the practical operation of statements to prevent fraud at the source.
To strengthen the practical operation of statements and the verification of the accuracy and authenticity of customer email address, the amendment includes description for Article 11 of the aforementioned Principles such as requirements for banks to provide the overview of statements and transaction details, requirements for statements to be produced through internal procedures of banks before they may be provided to customers, requirements for banks to implement clean desk inspections (including the keyword inquiries on wealth management specialists’ computers to detect whether wealth management specialists have produced statements by themselves), requirements for adding information and warning on the statement prohibiting wealth management specialists from producing statements by themselves, and methods for verifying the accuracy and authenticity of the email address registered by the customer.
The description in Article 9 of the aforementioned Principles requires banks to set up mechanisms for account monitoring, anomaly reporting, and related management. The Bankers Association drew conclusions from past cases and added the “Red flags of suspected misappropriation of customer funds by wealth management specialists” to strengthen the monitoring mechanisms for related accounts of wealth management specialists of banks and establish red flags of suspicious activities. In addition to specifying the 21 red flags in 4 categories such as monetary transactions, related accounts, operations on behalf of customers, and other conducts as reference, the Principles also require banks to choose or develop red flags that meet their own conditions based on the characteristics and risks of their businesses.
To enhance the early-warning functions of related red flags, the amendment requires banks to designate “head office units or personnel independent of the business performance of the wealth management specialists” to investigate conduct or transactions that meet the reference patterns and establish related investigation procedures. The “head office units or personnel independent of the business performance of the wealth management specialists” refer to head office units or personnel whose performance is not evaluated based on sales performance. Examples include the management unit of the wealth management department of the head office or head office units or personnel placed on the second line of defense. To enhance the responsibilities of the second line of defense, the amendment also requires units responsible for compliance, AML/CFT, or risk management to bear supervisory duties for the planning, management, and execution of the investigation procedures.
As the internal organization, internal regulations, and information system of banks must be adjusted accordingly, and banks are still required to continue to implement existing requirements in the description table, the FSC adopted recommendations of the Bankers Association and required banks to begin the implementation of the amendment on January 1, 2022.
The FSC also stated that the reduction of conduct risks relies on related fraud prevention measures as well as the establishment of a positive corporate culture and formulation of a comprehensive code of ethical conduct. The FSC will continue to encourage the board of directors and the management of financial institutions to advocate a culture of integrity, prioritize the rights and interests of financial consumers, implement fair customer treatment principles, increase the customers’ trust in banks, and create a partnership of common growth between banks and customers.
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Update：
2021-09-27