Financial Crime World

Macau’s New Financial System Act: Tightened Compliance Regulations for Credit Institutions

Introduction

Macau’s financial sector is undergoing significant regulatory changes with the introduction of the New Macau Financial System Act (New MFSA). The Monetary Authority of Macau aims to align Macau’s financial regulations with international standards and support the development of a modern financial industry. In this article, we outline the reforms to the administrative and supervisory bodies of credit institutions under the New MFSA.

Administrative Body - More Directors

  • Increased number of directors: The New MFSA has increased the number of administrative body directors for Macau credit institutions from three to five (Article 56, Clause 1).
  • Wider representation: This adjustment promotes a wider representation and distribution of responsibilities among institution leaders.

Supervisory Body - New Qualifications and Term Limits

  • Qualifications: The New MFSA mandates that a local credit institution’s supervisory body must consist of at least three members with appropriate qualifications (Article 56, Clause 3).
  • Accountant requirement: One of the members must be a practicing accountant.
  • Term limits: The revised legislation also limits each supervisory body member to a maximum consecutive term of six years.
  • No concurrent positions: A member cannot hold positions in more than two local credit institutions at the same time (Article 56, Clause 3).
  • International standards: These provisions strengthen the oversight mechanism, bringing Macau’s corporate governance standards in line with international practices.

Application Process - Comprehensive Information Required

  • Additional details: Under the New MFSA, credit institutions applying for approval must provide details about both administrative and supervisory body members (Article 26, Clause 6, and Article 27, Clause 3).
  • International alignment: This additional information is vital for the approval process and aligns Macau’s standards with international practices advocated by the Basel Core Principles.

Penalties

  • Noncompliance penalties: The New MFSA imposes penalties for noncompliance with the administrative and supervisory body provisions of credit institutions (Article 120, Clause 1, Item 11).
  • Fines: Violations of Article 56’s rules will result in administrative offenses with fines ranging from MOP 20,000 to MOP 3,000,000.
  • Repeated offenses: Repeated offenses will lead to harsher consequences.

Conclusion

The New MFSA demonstrates Macau’s dedication to enhancing corporate governance within its financial sector and bringing it in line with international standards. The legislation introduces stricter regulations for administrative and supervisory bodies and key personnel, promoting robustness and integrity. Credit institutions must not only comply with the New MFSA but also adhere to the Internal Control Guidelines for Credit Institutions outlined in Circulation Document No. 169/B/2002-DSB/AMCM for effective governance systems. This regulatory evolution represents a crucial step in fostering a stable and thriving modern financial industry in Macau.