The emergence of substantial markets in forward, futures, options swaps and other derivative instruments has significantly altered the conduct of borrowing, investment and risk management activities. The significant economic benefits of financial derivatives include: (i) permitting the unbundling and trading in risks, (ii) the ability to hedge price risks and to synthesise investments with greater efficiency and lower costs, (iii) and an increasing liquidity of and trading in financial assets. I would expect this process of constant innovation to continue in the decade ahead. First, because innovation is a natural feature of modern financial markets. The expansion of the credit derivatives in the last five years illustrates how fast new instruments cans develop and expand. And, second, because markets are still incomplete, in the sense that some risks cannot be efficiently hedged or transferred in the current environment. B  Incomplete markets and intergenerational risks  One interesting example is demographic risk, and more generally, the efficient transfer of risk between different generations. Currently, markets may not be well equipped to deal with intergenerational risk that simultaneously affects different generations living at the same time. Many developed countries are going through a demographic transition, sometimes called the old age crisis. According to the World Bank’s 1994 report for instance, by 2030 there will be 1.4 billion people in the world aged over sixty, versus 500 million in 1990. So, we are experiencing a transition to an economy with many more aged dependents relative to the active workforce.

For example: AML/CFT regulators, such as Bangladesh, Hong Kong, India and Malaysia, have started introducing guidelines and policies on e-KYC; and Governments have also started exploring the establishment of digital ID platforms to facilitate e-KYC, as seen in Singapore and Thailand among others. 1/3  BIS central bankers' speeches  A conversation on this subject is also timely in view of the recent issuance of the Financial Action Task Force’s (FATF) Guidance on Digital Identity in March 2020. Participants should seize the occasion to share experience in facilitating the adoption of e-KYC while ensuring compliance with the relevant FATF Standards. As technology enhances the efficiency of the financial sector, I have no doubt that the shift towards digitalisation will continue to accelerate. We as regulators should strive to facilitate this transformation while being cognisant and vigilant of the risks that this can pose to the stability and integrity of the financial system, including ML/TF risks. In this respect, authorities could play our part by ensuring that all AML/CFT measures remain relevant and appropriate as well as assisting the financial institutions in complying with AML/CFT requirements. As regulators, it is imperative for us to strike a fine balance between facilitating innovation and safeguarding our financial system from any form of abuse. Financing and Facilitation of Foreign Terrorists Fighters As approved in the APG 2019 Annual Meeting, APG has collaborated with the Global Centre on Cooperative Security, towards producing a typology report on financial profiles of foreign fighters and returnees in Southeast Asia.