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Payments Regulatory Landscape in APAC: 6 Things to Be Aware Of.

In this rapidly evolving area of the law, it can often be difficult to keep track of all the new regulations being issued by the different regulators in the region. To stay competitive and ahead of competitors, payment service providers (PSPs) need to have a sound understanding of the regulatory environment in Asia Pacific. We highlight six important considerations that PSPs should be aware of when operating in these markets:


  1. No one size fits all – While the regulatory frameworks for payment services in APAC are generally founded on some common principles, the laws, rules and regulations may differ materially from one country to the next. Some regulate through specific payment services laws, others do so through funds transfer or money remittance business laws, others again do it through existing banking and finance laws and regulations, or a combination of these. Inside knowledge of local market nuances are important.  It’s prudent to seek advice and guidance from advisors with local knowledge, experience and expertise.  This helps to protect your business against the downside risks of being non-compliant or over-regulated.


  1. Complexity and uncertainty of regulatory regimes - When operating in or entering a new market in APAC, don’t expect for all the applicable laws, rules and regulations to be clearly drafted and neatly captured in a single main piece of legislation and supplementary legislation (e.g. regulations) … or to be in English for that matter. In some countries, in addition to the main statute, there are a myriad of subordinate rules, regulations, circulars, decrees, notifications, guidelines, etc. that can be difficult to find and fully understand. Poor translations, limited to no guidance notes on implementation, or the confusion arising from the unclear relationship between different rules and regulations, all compound the uncertainty and complexity.  Again, inside knowledge here becomes key to accessing the regulatory framework for each jurisdiction.  Understanding how the relevant central banks and authorities interpret and approach payment services is vital.


  1. Audit your business and products/services against applicable laws/regulations - Undertake a thorough review/audit of your business model, products, services and operations against the applicable laws and regulations in relevant markets to understand if your business or products/services are subject to any licensing, registration, permit or authorisation requirements. Just because your business has not been regulated in the past does not mean that that situation would remain unchanged. Due to the emergence of new technologies, regulators are taking a more aggressive and proactive approach, so there’s a need to keep up to date with the latest developments in the payments regulatory landscape.  Missing a change can be a very costly mistake.  Services such as Payments Compliance, assist PSPs to stay up-to-date with some regulatory changes and developments, as well as guidance from your payment expert advisors.


  1. AML/CTF compliance considerations - In the payments space, it’s more than likely that your business and products/services may be subject to applicable Anti-Money Laundering/Counter-Terrorism Financing (AML/CTF) laws and related laws and regulations (e.g. requirements around customer due diligence (KYC), transactions monitoring, PEP screening, etc). In recent years we have seen large fines and penalties (often in the $100’s of millions of dollars) being meted out to banks and other financial services institutions for compliance failures. Having in place a robust compliance and risk management programme is a must. As your business grows, having in place effective compliance and risk management controls becomes even more critical. Indeed, the bedrock of any well-run payments company is a well-constructed and thoughtfully created compliance programme, with an effective and appropriately resourced compliance function tasked with overseeing it.


  1. Exemptions and exceptions - Even if your business or products/services are subject to licensing requirements, check to determine if you can benefit from any exemptions or exclusions that may be available under applicable laws or regulations or through market practice as determined by the local regulators. You may have to make some adjustments to your business model or operations or processes but being able to take advantage of any exemptions can save your business a lot of time, effort, resources and money. The compliance and administrative burdens of having to maintain a licensed entity can be rather onerous and should not be underestimated. In addition, there’s also the legal, financial and reputational risks if you don’t manage to comply with your licence conditions and/or the regulatory requirements that apply to your licensed


  1. Effective government relations engagement strategy - In markets where the regulatory environment can be challenging for foreign companies to operate in (e.g. most countries in the SEA region), it’s important for PSPs wanting to operate in these markets to develop and have in place an effective public affairs and government relations engagement plan and strategy. Such a strategy can help the company to develop productive relationships with the local authorities and position the company for success down the track if it decides to apply for certain licences or permits in the country. In this part of the world, don’t underestimate the power of relationships and of the need to engage in constructive dialogue with the regulators.


Related content: Payments Tech in EMEA - The challenges of regulating a new emerging innovation market


Danh Nguyen