Among Hong Kong’s eight virtual banks, WeLab Bank stands out for a few reasons. First, it is not simply an offshoot of large tech firms and/or incumbent lenders like most of its competitors. WeLab is a startup that was established a decade ago as an online consumer credit lending platform. It has been operating in mainland China since 2014 and Southeast Asia since 2018. Though the mainland market is and will remain important for WeLab, its interest in Southeast Asia – Indonesia in particular – shows the company has a regional vision for its business that contrasts with that of its competitors focused only on Hong Kong and the mainland.
Cambodia has been on the gray list of the international financial crime watchdog FATF for several years due to its inadequate money laundering and counterterrorism financing (CFT) controls. Gray list designation requires additional levels of compliance for international financial transactions with the kingdom, which while not a dealbreaker for foreign investment in Cambodia, makes it more troublesome than in countries not on the list. As Cambodia emerges from the pandemic, it is eager to be removed from the gray list to help boost its Covid-battered economy, which contracted 3.1% in 2020 and grew just 2.6% in 2021.
Across the Asia-Pacific region, digital banks have sprung up at a rapid rate in recent years. Regulators have ostensibly encouraged the establishment of online-only banks to spur greater competition in the banking sector, which in most markets is dominated by incumbent lenders afflicted with complacency of varying severity.
The Hong Kong financial center lexicon is ever expanding. Depending whom you ask, Hong Kong is an international financial center, Asia’s most important financial center, China’s offshore financial center or some combination of all three. Historically, Hong Kong liked to stay out of politics and thrived on its combination of laissez-faire capitalism, strong, independent legal system and knack for acting as a bridge to the Chinese mainland. Going forward, those factors will remain integral to Hong Kong’s success, but important questions remain about how economic and financial policy choices on the mainland will affect the city’s fortunes.
The Philippines recently experienced a setback in its fight against financial crime: The Financial Action Task Force (FATF) declined to remove the Southeast Asian country from its grey list, on which it was placed in June 2021 for having inadequate money-laundering and counterterrorism financing controls. After a two-day plenary in October, Paris-based FATF decided to keep the Philippines on the list along with 22 other jurisdictions.
The newest digital bank in Singapore stealthily came into existence, flying below the radar in contrast to the high-profile race for digital banking licenses that ended with victories by Grab-Singtel, Sea, Ant Group and a consortium headed by China’s Greenland Holdings. Now competing with these four digital banks is Trust Bank, launched in September by Standard Chartered and NTUC FairPrice, Singapore’s largest supermarket chain.
Thailand has never been in a rush to introduce digital banks. After all, the kingdom is neither a financial center like Hong Kong or Singapore, nor does it have a huge unbanked population likes Indonesia and the Philippines. About 81% of Thais have a bank account. However, it is possible that introducing online banks could improve competition in Thailand’s financial sector – and that appears to be one of the key goals of the Bank of Thailand (BoT) as it moves forward on digital banks.
Being placed under increased monitoring by the Financial Action Task Force’s (FATF) is never welcome news for a country. Besides the reputational damage that comes along with such a designation, there are many practical problems caused by the restrictions that may be put on financial transactions as well as burdensome compliance requirements. Most countries are put on FATF’s gray list due to inadequate money laundering and counterterrorism financing controls. However, occasionally a country is added to the blacklist – reserved for the countries that pose the most serious financial crime risks – including North Korea and Iran – which is what happened to Myanmar last month.
The proof of the tentative state of Australia’s bid to introduce greater competition into its financial services sector is in the pudding: The country’s big four incumbent lenders have increased in size despite the high-profile launches of different neobanks in recent years. Of that crop of upstarts, the last one left standing is Judo Bank. The others have either collapsed or been acquired. Meanwhile, the big four are arguably stronger than ever.
Ever since news of the 1MDB scandal broke, Singapore has been on heightened alert for financial crime. As Southeast Asia’s premier financial hub, it faces certain risks. In the past few years, it has been grappling with a rise in digital financial crime that has dovetailed with the timeline of the coronavirus pandemic. While online scams and phishing remain a vexing problem, the city-state now also has to contend with bad actors in the cryptocurrency sector in which it has invested considerable resources.
In recent years, digital banks have become increasingly common in Asia Pacific, including in the region’s advanced economies. Though these markets are well banked, regulators have sought to introduce greater market competition and promote digital transformation among oft-complacent incumbents.
A commentary in collaboration with Banking Circle.
As Australian banks in recent years have been hit with unprecedentedly high fines for money-laundering violations, they have stepped up de-risking to reduce their exposure to the types of clients they believe could land them in regulatory hot water. In some cases, the banks simply refuse to do business with firms without good reason.
When we talk about countries that have inadequate anti-money laundering (AML) and counterterrorism financing (CFT) controls, we usually mention how those deficiencies can cause a country to be pleased on the Financial Action Task Force’s (FATF) gray list. Asian countries with the gray list designation who are working to be removed from it include the Philippines, Cambodia and Myanmar. But there is a more serious designation for countries seen as dangerous conduits for illicit financial activity: the blacklist. Unfortunately for Myanmar, it may soon end up on the blacklist.