Financial Crime World

Macao’s New Financial System Act Brings Significant Changes for Financial Institutions

Overview of the New Legislation

The Macanese government has introduced a new Financial System Act (FSA), which came into effect on November 1st, 2023. This legislation replaces the 30-year-old Decree-Law No. 32/93/M and brings about significant changes to financial services regulation in Macao.

Key Changes

Financial Intermediaries No Longer Regulated by FSA

  • Financial intermediaries are no longer within the scope of the new FSA.
  • Instead, they will likely be regulated by the upcoming Securities Law.
  • This means that Macanese licensed intermediaries can continue to provide investment services, including brokerage, investment advisory, and discretionary asset management in Macao.

Transitional Period for Foreign Financial Institutions

  • Foreign financial institutions and financial services providers with no local presence in Macao (i.e., unlicensed in Macao) may continue to follow the guidance provided by the previous regime during the transitional period as prescribed by the new FSA.
  • This is until after further legislative development, including the issue of the new Securities Law, and/or further notice from the authorities.

Sanction Regime Adapted

  • The sanction regime has been adapted to the new FSA, reflecting changes in the legislation.

Requirements for Branch Establishment and Operation

  • Foreign financial institutions that have been authorized to operate business in Macao on the effective date of the new FSA (November 1st, 2023) must make relevant adjustments within one year from the effective date of the new FSA (i.e., until November 1st, 2024) to comply with provisions regarding operating capital and administrative management and supervision of credit institutions.
  • This includes:
    • Operating capital requirements
    • Administrative management and supervision of credit institutions

New License for Restricted License Banks

  • The new FSA introduced a new license for restricted license banks. Based on Article 21 of the new FSA, a restricted license bank is permitted to carry out a restricted range of banking businesses and services with less strict requirements than for a full-service bank.
  • However, it remains unclear whether foreign financial institutions are allowed to apply for such a license.

Implications for Business Relations with Third Parties

  • The removal of the license for financial intermediaries means that foreign banks should follow the legislative development of the upcoming Securities Law to understand its impact on cooperation with local third parties.
  • Until further notice from the authorities, foreign banks with no local presence in Macao cooperating with local third parties may continue to follow the guidance provided by the previous regime during the transitional period.

Country Manual Update

  • This document reflects the changes contained in the updated legal basis and provides a user-friendly layout for financial institutions operating in Macao.
  • The Country Manual has been updated to reflect non-material changes throughout, including reworded comments and conditions.