The following posts provide a snapshot of selected UK, EU and global wholesale financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
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Court of Justice of the European Union Annuls Sanctions Measures
04/11/2024
The Court of Justice of the European Union has decided that the reasons for the EU sanctions measures designating Mr Fridman and Mr Aven (two of the shareholders of LetterOne) were not sufficiently substantiated and their inclusion on EU sanctions lists was not justified (Judgments T-301/22 and T-304/22). The ECJ has annulled the acts that subjected Mr Fridman and Mr Aven to sanctions for the period from February 28, 2022 to March 15, 2023.
Despite this judgment, these two individuals remain subject to EU sanctions. This is because they have also been sanctioned under Council Decision (CFSP) 2023/572 and Council Implementing Regulation (EU) 2023/571, which are more recent and so were not at issue in these proceedings. The two individuals have now separately challenged their designations under that legislation, but those cases remain to be heard (pending cases, Aven v Council, T-283/23, and Fridman v Council, T-296/23).
This ECJ judgment does not impact the U.K. sanctions regime, under which the two individuals remain sanctioned. -
HM Treasury Consults on Amending the Money Laundering Regulations
04/04/2024
HM Treasury has launched a consultation with proposals to improve the effectiveness of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (known as the MLRs). The consultation is wide-ranging, covering proposals to:- Ensure customer due diligence is more proportionate and effective.
- Strengthen system coordination to ensure continued coordination in the face of new and emerging threats, technological change and legislative changes.
- Clarify the scope of the MLRs, including as regards changing thresholds from Euro to Pound Sterling.
- Revise registration requirements for the Trust Registration Service to enhance transparency of higher risk trusts.
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UK Legislates on Differentiating Risk of Domestic Politically Exposed Persons
12/22/2023
The Money Laundering and Terrorist Financing (Amendment) Regulations 2023, which amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (known as the MLRs), come into force on January 10, 2024. The Financial Services and Markets Act 2023 imposed on HM Treasury a duty to use its powers under the Sanctions and Anti-Money Laundering Act 2018 to amend the MLR customer due diligence measures required where a customer is a domestic (U.K.) politically exposed person (i.e., a PEP entrusted with prominent public functions by the U.K. government, as opposed to a foreign government). The Amendment Regulations fulfil that obligation, providing that unless there are other enhanced risk factors, the due diligence measures applicable to a domestic PEP are reduced compared to those applicable to a non-domestic PEP. The change follows concerns by many members of Parliament that banks and other financial institutions were imposing overly burdensome requirements for information and, in some instances, denying accounts to U.K. politicians and their family members, and also follows the furore over the de-banking by NatWest Bank of the prominent U.K. politician Nigel Farage, which led to the resignation of its CEO.
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Draft UK Legislation on Revised Payment Service Contract Termination Rules Expected Before 2024
10/13/2023
HM Treasury has published a further policy statement on payment service contract termination rule changes, setting out its approach to implementation, timing and next steps. This latest policy statement follows the government's July policy statement in which it confirmed that it would bring forward legislation to enhance the requirements governing payment account terminations. This issue has become topical in light of the "de-banking" of higher risk or less profitable clients by several institutions and recent scandals in the U.K. involving account terminations of some politicians. The main changes being brought forward are:- A requirement for payment account providers to provide clear and tailored explanatory reasons to an account user for the termination. The requirement would not apply where it would be unlawful to provide such information, for example, under U.K. financial crime and anti-money laundering legislation.
- A 90-day notice period before a payment account is terminated by a provider, subject to situations where there is a serious and uncorrected breach by the payment user of the terms applying to the account. It would also be clarified that reasons such as brand protection would not be sufficient justification for a shorter notice period.
Read more.ATTORNEYS: Thomas Donegan, Sandy Collins
TOPICS : AML/CTF, Insider Trading and Sanctions, Consumer Protection, Payment Services -
UK Joint Money Laundering Steering Group Publishes Guidance on Travel Rule for Cryptoasset Exchange Providers and Custodian Wallet Providers
09/14/2023
The Joint Money Laundering Steering Group has published revisions to its Sector 22 Guidance on Cryptoasset exchange providers and custodian wallet providers along with a new Annex I, setting out guidance on the U.K. Travel Rule for cryptoassets. The Travel Rule was introduced under the Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022, amending the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and requires certain identification information on the sender and recipient to accompany a transfer of a cryptoasset. The Travel Rule requirements have applied since September 1, 2023.
Read more.ATTORNEYS: Thomas Donegan, Chloe Barrowman
TOPICS : AML/CTF, Insider Trading and Sanctions, Financial Market Infrastructure, FinTech -
FCA Reviews Treatment of Politically Exposed Persons
09/14/2023
The U.K. Financial Conduct Authority has launched a review of the treatment by regulated financial services firms of Politically Exposed Persons based in the U.K. Firms are currently obliged, under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations, to conduct enhanced due diligence when dealing with PEPs. The FCA has existing Guidance on the treatment of PEPs for these purposes, which makes clear (amongst other things) that firms should adopt a proportionate and risk-based approach to the application of the MLRs. The FCA has been mandated to review this guidance under the Financial Services and Markets Act 2023, including an investigation into how firms are applying the guidance and consideration as to whether any amendments are needed. We discuss this mandate and the FSMA 2023 more generally in our client note, A Boost for UK Financial Services: The UK Financial Services and Markets Act 2023.
Read more.ATTORNEYS: Thomas Donegan, Chloe Barrowman
TOPICS : AML/CTF, Insider Trading and Sanctions, Conduct & Culture, Consumer Protection -
UK Joint Money Laundering Steering Group Proposed Cryptoasset Travel Rule Guidance
08/14/2023
The U.K. Joint Money Laundering Steering Group opened a consultation on July 28, 2023 on guidance on the U.K. travel rule for cryptoasset transfers. The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 introduced the cryptoasset travel rule by amending the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, and firms will need to comply with the requirements from September 1, 2023. The travel rule requires certain identification information on the sender (originator) and recipient (beneficiary) to accompany a transfer of a cryptoasset. The JMLSG is proposing to add a new annex setting out guidance on the U.K. travel rule for cryptoassets, covering scope, information requirements, batch transfers, returns, unhosted wallet transfers, wallet attribution, linked transactions and use of a layer-2 solution such as the Lightning Network. The guidance also states that firms should consider communications from the Financial Conduct Authority on the sunrise issue, which refers to the impact of jurisdictions implementing the travel rule at different times. Firms may encounter issues when dealing with counterparties in jurisdictions that have not implemented the travel rule for cryptoassets, for example, when dealing with EU counterparties for which the EU travel rules for cryptoasset transfers will only apply from December 30, 2024. Responses to the JMLSG consultation may be submitted until August 25, 2023.ATTORNEYS: Barnabas W.B. Reynolds, Sandy Collins
TOPICS : AML/CTF, Insider Trading and Sanctions, FinTech, Payment Services -
UK Publishes Insider Dealing Offence Legislation
06/05/2023
On May 25, 2023, the final Insider Dealing (Securities and Regulated Markets) Order 2023 and its related explanatory memorandum were published. The Order will enter into force on June 15, 2023.
The legislation aligns the scope of trading venues covered by the U.K.'s criminal insider dealing regime under the Criminal Justice Act 1993 with the civil regime under the U.K.'s Market Abuse Regulation, and updates the criminal regime. Details of the amendments are discussed in our separate blog. -
UK Criminal Insider Dealing Offence Legislation to be Updated
05/10/2023
On April 20, 2023, the draft Insider Dealing (Securities and Regulated Markets) Order 2023 was published (the draft Order). The draft Order will generally align the scope of the U.K.'s criminal insider dealing regime under the Criminal Justice Act 1993 with that of the civil regime under the U.K.'s Market Abuse Regulation and update the criminal regime. The draft Order, which will come into effect 21 days after it is made, will revoke the outdated Insider Dealing (Securities and Regulated Markets) Order 1994 (the 1994 Order).
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EU Travel Rule for Crypto-Assets Set to Apply from January 2025
05/02/2023
On April 20, 2023, the European Parliament announced that it had formally endorsed the draft Regulation on information accompanying transfers of funds and crypto assets (referred to here as the EU Travel Rule Regulation). The draft Markets in Crypto-Assets (MiCA) Regulation has also been adopted.
The existing EU Wire Transfer Regulation (EU WTR) requires EU Payment Service Provider to ensure that information on the payer and the payee accompanies a transfer of funds. The funds can be in any currency, and comprise banknotes and coins, scriptural money and electronic money.
The EU Travel Rule Regulation will extend the requirements to crypto assets and crypto-asset services providers (CASPs), (both as defined under the draft MiCA Regulation) with information on the originator and the beneficiary being required to accompany any transfers in crypto assets, regardless of whether they are domestic or cross-border. The requirements will not apply to person-to-person transfers of crypto assets where a CASP is not involved, or when both the originator and the beneficiary are providers of crypto-asset transfers acting on their own behalf.
The EU Travel Rule Regulation must still be published in the Official Journal of the European Union before it comes into effect. This is likely to be around July this year. At that time, the EU Travel Rule Regulation will repeal the EU WTR, however, the existing requirements on information accompanying transfers of funds will carry over to the new Regulation. The EU Travel Rule Regulation will apply from the same date that the MiCA Regulation applies, which is expected to be January 2025.ATTORNEYS: Thomas Donegan, Sandy Collins
TOPICS : AML/CTF, Insider Trading and Sanctions, FinTech, Payment Services -
UK Money Laundering Regulation Changes Announced for September 2022
06/15/2022
Following its 2021 consultation on targeted amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs), the U.K. government has published a consultation response which summarises the feedback to the consultation and sets out the government's approach to making changes to the statutory instrument. The amendments will be made in the draft Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022, which are intended, for the most part, to take effect from September 1, 2022. A summary of the changes is set out below. The government will also soon publish its response to the call for evidence on the U.K.'s anti-money laundering and counter terrorist financing regulatory and supervisory regime, which covered the overall effectiveness and extent of the regime, whether key elements operate as intended, and the structure of the supervisory regime.
Read more.ATTORNEYS: Thomas Donegan, Sandy Collins
TOPICS : AML/CTF, Insider Trading and Sanctions, FinTech, Payment Services -
Government Details Proposed Financial Services and Markets Bill
05/10/2022
Following the Queen's speech yesterday, the government has published a briefing pack setting out details of the bills that it intends to introduce, including the so-called Brexit Freedoms Bill as well as key legislation relevant to financial services. The government will introduce a Financial Services and Markets Bill, which will, among other things:- Introduce new statutory objectives for the financial services regulators to support growth and international competitiveness.
- Implement the changes to the wholesale markets arising out of the Wholesale Markets Review. HM Treasury confirmed in March of this year that the changes that will be made by legislation and where powers will be delegated to the financial services regulators for rules to be made. Among the changes are the removal of the share trading obligation and the double volume cap, changes to the derivatives trading obligation, taking OTC derivatives that are economically equivalent to exchange traded commodity derivatives out of the position limits regime, and the establishment of a consolidated tape.
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Queen’s Speech Confirms Government Will Proceed with Brexit Freedoms Bill
05/10/2022
Prince Charles, Prince of Wales, delivered the Queen’s speech in which he announced that the government will be introducing the so-called Brexit Freedoms Bill, which was first announced by Prime Minister Boris Johnson on January 31, 2022, and is intended to make it easier to amend or remove retained EU laws to better suit the U.K.’s circumstances and policies. The Brexit Freedoms Bill will work in tandem with a government drive to reform, repeal and replace EU laws that are seen as outdated, cumbersome or otherwise not in the U.K.’s national interest.
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European Banking Authority Publishes Report on Non-Bank Lending Sector
05/04/2022
The European Banking Authority has published a report on the EU non-bank lending sector i.e., the growing number of financial intermediaries operating outside the EU financial services regulatory perimeter, including BigTech firms (e..g, Meta, Amazon and Google) and FinTech firms, which develop innovative technology for financial services.
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UK Financial Conduct Authority Acts to Improve Financial Crime Issues at Challenger Banks
04/22/2022
The U.K. Financial Conduct Authority has published the findings of its multi-firm review into financial crime controls at challenger banks. The FCA undertook the review in 2021 in response to the 2020 National Risk Assessment of money laundering and terrorist financing, which highlighted the risk that quick onboarding processes advertised by challenger banks could appeal to criminals. The FCA's review revealed that technology is being used well to identify and verify customers quickly and that there are not many differences between the financial crime risks facing challenger banks and those posed to traditional retail banks. However, there are several areas where improvements can be made, at the onboarding stage and beyond. The FCA has requested all challenger banks to review its findings and implement the changes necessary to mitigate the risk of financial crime. As firms grow, their financial crime control resources, processes and technology should be appropriately adapted.
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Financial Action Task Force Publishes Report on Effectiveness of FATF Standards
04/19/2022
The Financial Action Task Force has published a report on the effectiveness of FATF member states' efforts to tackle money laundering and counter terrorism financing. The report is part of the FATF's 2019 Strategic Review which aims to improve the FATF's processes to make FATF mutual evaluations more effective. Mutual evaluations assess the extent to which FATF member countries have implemented the FATF's 40 Recommendations.
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UK Financial Regulators' Statement on Suspension of Nickel Trading on London Metal Exchange
04/04/2022
The U.K. Financial Conduct Authority, Prudential Regulation Authority and Bank of England have published a joint statement on the London Metal Exchange's suspension of nickel trading between March 8-16, 2022. Trading was suspended due to challenging commodity market conditions following Russia's invasion of Ukraine.
Read more.ATTORNEYS: Chloe Barrowman, Thomas Donegan
TOPICS : AML/CTF, Insider Trading and Sanctions, Financial Market Infrastructure -
UK Regulators Publish Statement on Sberbank CIB (UK) Limited Administration
04/01/2022
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Economic Crime (Transparency and Enforcement) Act 2022
03/15/2022
The Economic Crime (Transparency and Enforcement) Act 2022 has received Royal Assent. The Act is designed to increase transparency and enhance the U.K.'s mitigation of money laundering and sanctions evasion. The Act will establish a register for overseas entities and their beneficial owners who own land in the U.K., enhance the sanctions regime and reform measures on unexplained wealth orders. The government has also published a white paper, "Corporate Transparency and Register Reform", setting out its proposals for enhancing the Registrar's powers with a view to improving the transparency and accuracy of the Companies House Register.
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UK Amends License for 30-Day Wind Down of VTB Bank Positions
03/07/2022
The U.K. Office of Financial Sanctions Implementation has published a revised General License under the Russia (Sanctions) (EU Exit) Regulations 2019. The License was first published on February 25, 2022, and allows individuals and entities to wind down transactions involving VTB Bank, including by closing out any positions. In addition, the License permits regulated financial institutions (authorized banks and investment firms, authorized or registered payment services firms and e-money institutions) and financial market infrastructure (recognized U.K. CCPs and CSDs and U.K.-recognized overseas CCPs and CSDs) to take reasonably necessary steps to effect such wind-downs. The revised license expands the definition of "subsidiary of VTB Bank" from VTB Capital plc (and any entity owned or controlled by VTB Capital plc incorporated in the U.K.) to include "an entity owned or controlled by" VTB Bank.
The License took effect from February 25, 2022, and expires on March 27, 2022. HM Treasury has power to amend, vary or revoke the License. OFSI has the power to issue General Licenses for country sanctions regimes under the Sanctions and Anti-Money Laundering Act 2018. -
UK Economic Crime Bill Introduced to Parliament
03/01/2022
The Economic Crime (Transparency and Enforcement) Bill has been introduced into Parliament, following the initial publication yesterday. The Bill is designed to increase transparency and enhance the U.K.'s mitigation of money laundering and sanctions evasion. The Bill will establish a register for overseas entities and their beneficial owners who own land in the U.K., enhance the sanctions regime and reform measures on unexplained wealth orders. On the same day, the government published a white paper, "Corporate Transparency and Register Reform", setting out its proposals for enhancing the Registrar's powers with a view to improving the transparency and accuracy of the Companies House Register.
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European Supervisory Authorities Publish Report on Digital Finance
02/07/2022
The European Supervisory Authorities (the European Securities and Markets Authority, the European Insurance and Occupational Pensions Authority and the European Banking Authority) have published a joint report on digital finance and related issues, in response to the European Commission's Call for Advice on digital finance, which was published in February 2021. The Call for Advice sought input to advance the EU Digital Finance Strategy, which was launched in September 2020 and set out the EU's plan to review the EU financial services legislative framework in light of developments in digital finance in order to safeguard financial stability and protect consumers.
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European Securities and Markets Authority Publishes Final Report on Guidelines for Disclosure of Inside Information and Interactions with Supervisors
01/05/2022
The European Securities and Markets Authority has published its final Market Abuse Guidelines on the disclosure of inside information and interactions with national prudential regulators under the EU Market Abuse Regulation. The final guidelines implement the changes to the existing guidelines as proposed in ESMA's July 2021 consultation, with minor amendments.
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European Banking Authority Publishes Opinion on Detrimental Impact of De-Risking by Financial Institutions
01/05/2022
The European Banking Authority has published an Opinion and related report on the detrimental impact of financial institutions' "de-risking" decisions under the EU Fourth Money Laundering Directive. De-risking involves financial institutions refusing to enter into, or terminating, business relationships with counterparties who are associated with higher money laundering or terrorist financing risk, in order to comply with requirements under MLD4. MLD4 mandates that financial institutions should establish policies and procedures to manage the risks to which they are exposed, including ML/TF risks. However, the EBA has found evidence of de-risking of entire categories of customers, without considering individual risk profiles. This can have detrimental effects, including on the EU's objectives on fighting financial crime and the stability of financial systems of EU Member States, as well as reducing financial inclusion.
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European Securities and Markets Authority Issues Statement on Investment Recommendations on Social Media
10/28/2021
The European Securities and Markets Authority has issued a statement on the requirements under the EU Market Abuse Regulation for firms and individuals that make investment recommendations on social media. ESMA is concerned about the potential harm to retail investors who may base their investment decisions on information made available on social media sites, in particular in situations such as the Gamestop case. The EU rules, which are designed to prevent the misleading of investors, apply to anyone based in or outside the EU that distributes information proposing an investment decision about EU financial instruments listed in the EU or financial instruments that depend on or effect the price or value of a listed financial instrument.
Read more.ATTORNEYS: Sandy Collins, Thomas Donegan
TOPICS : AML/CTF, Insider Trading and Sanctions, Consumer Protection, Securities -
UK Government Launches Review of UK’s Anti-Money Laundering and Counter Terrorist Financing Regime
07/22/2021
The U.K. government has launched a review of the U.K.’s anti-money laundering and counter terrorist financing regulatory and supervisory regime with the publication of a call for evidence. The government is assessing the overall effectiveness and extent of the regime, whether key elements operate as intended, and the structure of the supervisory regime. On the same day, the government also published a consultation on proposed targeted changes to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, referred to as the MLRs. That consultation is focused on the changes needed to ensure the U.K. regime meets international standards. Responses to the call for evidence may be submitted until October 14, 2021. A final report on the findings of the review and, where relevant, possible reform will be published no later than June 26, 2022, in line with the review requirement in the MLRs.
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UK Government Consults on Targeted Amendments to the Money Laundering Regulations
07/22/2021
The U.K. government has opened a consultation on proposed targeted changes to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, referred to as the MLRs. The consultation focuses on the time-sensitive changes that are needed to ensure that the U.K. requirements meet international standards set by the Financial Action Task Force and to strengthen the overall requirements. The government has also opened a call for evidence on the U.K.’s anti-money laundering and counter terrorist financing regulatory and supervisory regime, which is considering the overall effectiveness and extent of the regime, whether key elements operate as intended, and the structure of the supervisory regime. Responses to the MLRs’ consultation may be submitted until October 14, 2021. These MLR amendments will be implemented through secondary legislation due to be laid in Spring 2022.
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European Securities and Markets Authority Launches Consultation on Revised Guidelines for Disclosure of Inside Information Under EU Market Abuse Regulation
07/08/2021
The European Securities and Markets Authority has launched a consultation on proposed revisions to the Guidelines for when issuers can delay the disclosure of inside information in accordance with the EU Market Abuse Regulation. Responses to the consultation should be submitted by August 27, 2021. ESMA intends to publish a final report including its amended Guidelines at the end of 2021.
Issuers of financial instruments that fall within the scope of the EU MAR must publicly disclose, as soon as possible, inside information that directly concerns them. "Inside information" is information that: (i) is not public; (ii) directly or indirectly relates to one or more issuers of financial instruments; (iii) is of a precise nature; and (iv) is likely, if made public, to have a significant effect on the relevant prices of those financial instruments or related derivative financial instruments.
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UK Financial Services Act 2021 Published
04/29/2021
The U.K. Financial Services Bill has received Royal Assent from Her Majesty the Queen and has become an Act of Parliament, the Financial Services Act 2021. Some provisions of the Act came into force on the date of Royal Assent, with a limited number following on June 29, 2021. The majority of the Act will come into force on a date specified in regulations yet to be made by HM Treasury.
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European Banking Authority Publishes Opinion on Money Laundering Risks
03/03/2021
The European Banking Authority has published its latest biennial opinion on money laundering and terrorist financing risks affecting the EU financial sector. Key risks relate to: (i) virtual currencies; (ii) the provision of financial products and services through FinTech firms; (iii) weaknesses in counter-terrorism financing systems and controls; (iv) "de-risking" by firms which leads to riskier customers resorting to alternative payment channels; (v) supervisory divergence; (vi) crowdfunding platforms; (vii) divergent approaches to tackling tax-related crimes; and (viii) the COVID-19 pandemic.
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European Securities and Markets Authority Proposes Improvements to Transparency Directive
03/03/2021
The European Securities and Markets Authority has written to the European Commission proposing a series of improvements to the EU Transparency Directive, taking account of lessons learned in the Wirecard case. Wirecard, a German payments group, collapsed in 2018 when it was revealed that €1.9bn was missing from its public accounts. Several of its senior managers remain under police investigation for alleged crimes including fraud and market manipulation. In ESMA's view, the case has highlighted the need for timely and effective enforcement of financial information and proposes the following amendments to the EU Transparency Directive to help achieve this.
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European Banking Authority Publishes Revised Guidelines on Risk Factors for Money Laundering and Terrorist Financing
03/01/2021
The European Banking Authority has published revised Guidelines on money laundering and terrorist financing risk factors for credit and financial institutions to consider when conducting business relationships and occasional transactions. The Guidelines will enter into force three months after their publication in all official EU languages and will replace the EBA's existing ML/TF Guidelines.
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Financial Action Task Force Launches Consultation on Guidance on Proliferation Financing Risk Assessment and Mitigation
03/01/2021
The Financial Action Task Force has launched a consultation on its proposed non-binding Guidance on proliferation financing risk assessment mitigation. The FATF updated its Guidance for proliferation financing risks under Recommendation 1 and its Interpretive Note of the FATF Recommendations in October 2020. The new proposed Guidance is intended to provide a common understanding about how countries and firms can implement the new requirements.
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UK Conduct Regulator Sets Out Supervision Strategy of Retail Banks
02/05/2021
The U.K. Financial Conduct Authority has published a letter addressed to the CEOs of retail banks setting out the FCA's approach to retail bank supervision in light of the COVID-19 pandemic.
In the letter, the FCA identifies the key risks of harm that retail banks' activities may pose over the next two years, sets out its expectations of the actions retail banks need to take to mitigate the risks and discusses the work that the FCA will undertake to ensure firms are meeting the expectations. The risks are grouped into the following four priority supervisory areas:
- ensuring fair treatment of borrowers, including those in financial difficulties;
- ensuring good governance and oversight of customer treatment and outcomes during business change over the next two years;
- ensuring operational resilience over the next two years and beyond; and
- minimizing fraud and other financial crime.
View the FCA's letter. -
UK Financial Conduct Authority Establishes Temporary AML Registration Regime for Crypto-Asset Businesses
12/16/2020
The U.K. Financial Conduct Authority has established a temporary registration regime for crypto-asset businesses that were operating in the U.K. prior to January 10, 2020. The regime will allow crypto-asset firms to continue providing services in the U.K., notwithstanding that they have not yet been registered with the FCA.
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Final Draft EU Technical Standards for SME Growth Markets Under Market Abuse Regulation
11/05/2020
The European Securities and Markets Authority has published its final report and final draft Technical Standards on the amendments to the Market Abuse Regulation for the promotion of SME Growth Markets. SME Growth Markets were a new sub-category of multilateral trading facility introduced by the revised Markets in Financial Instruments package in January 2018 to facilitate access to capital for SMEs. ESMA is mandated to prepare: (i) Regulatory Technical Standards on liquidity contracts; and (ii) Implementing Technical Standards on insider lists and to submit those to the European Commission by September 1, 2020. Due to the impact of the COVID-19 pandemic, the delivery of the final draft RTS and ITS have been delayed and ESMA acknowledges that it is unlikely that they will be adopted in time for the application of the amendments to MAR, which is January 1, 2021. The final report outlines ESMA's proposals and provides the final draft RTS and ITS that ESMA has submitted to the European Commission for consideration.
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Financial Action Task Force Updates Guidance for Proliferation Financing Risks
10/23/2020
Following its consultation earlier this year, the Financial Action Task Force has finalized amendments to Recommendation 1 and its Interpretive Note. Recommendation 1 provides guidance on assessing risks and applying a risk-based approach to money laundering and terrorist financing risks. The FATF has updated the Recommendation to require countries and the private sector to identify and assess risks of potential breaches, non-implementation or evasion of the targeted financial sanctions obligations referred to in Recommendation 7 linked to proliferation financing risks.
View the FATF's statement.
View the updated FATF Recommendations. -
UK Parliament Publishes Financial Services Bill for Post-Brexit Regulatory Framework
10/21/2020
The U.K. Government has published a Financial Services Bill setting out a proposed regulatory framework for the financial services industry following the U.K.'s exit from the EU. The Bill is part of the U.K.'s wider initiative under the Future Regulatory Framework Review to re-frame its regulatory framework. Although Brexit has brought challenges to the financial sector, there may also be post-Brexit opportunities for the U.K. to seize. The aim of these reforms is to cement the U.K.'s position as a global financial centre of excellence. A core piece of that will be to set conditions that continue attracting business to the U.K. and to look for opportunities to cut "red tape" whilst at the same time maintaining the U.K.'s globally recognized high regulatory standards.
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Financial Stability Board Publishes Final Recommendations on Global Stablecoins
10/13/2020
Following its consultation earlier this year, the Financial Stability Board has published a final report on the regulation, supervision and oversight of global stablecoin arrangements. In the report, the FSB discusses the characteristics of GSCs, the risks posed by GSCs, existing approaches to regulating and supervising GSCs and issues with cross-border supervision of GSCs. Alongside the report, the FSB has published a summary of the responses to its consultation.
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EU Securities Authority Recommends Changes to EU Market Abuse Regulation
09/24/2020
The European Securities and Markets Authority has published a final report on the review of the Market Abuse Regulation. MAR requires the European Commission to report on certain aspects of the operation of MAR, including where appropriate, making recommendations for legislative change. ESMA's final report and recommendations will support the work by the Commission on producing that report. The proposals will mostly affect issuers of financial instruments admitted to trading or trading on a trading venue, investment firms and asset management firms.
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UK Treasury Committee Seeks Answers from UK Bodies on FinCen Papers and Economic Crime
09/22/2020
The U.K. Treasury Committee has written to the U.K. Financial Conduct Authority, HM Revenue and Customs and the U.K. Department for Business, Energy and Industrial Strategy, seeking answers to a series of questions on the actions each of the bodies are taking to combat economic crime and the significance of the "FinCen files" leak. The FinCen files are essentially a series of leaked suspicious transaction reports originally sent by banks to the US Financial Crimes Enforcement Network between 2000-2017 notifying FinCen of suspicious transactions.
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Financial Action Task Force Highlights Red Flag Indicators Associated With Virtual Assets
09/14/2020
The Financial Action Task Force has published a report on red flag indicators of money laundering and terrorist financing in virtual assets. The FATF highlights that although virtual assets have the potential to create efficiencies and enhance innovation, they can also be used by money launderers and terrorist financers to launder proceeds or finance illicit activities. The FATF recognizes that virtual assets may be used outside of the regulated financial system and to hide the origins or destination of funds. These factors make it harder for financial entities and regulators to identify suspicious activities. The report is therefore intended to assist financial institutions, virtual asset service providers, regulators and authorities to overcome these challenges.
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European Banking Authority Publishes Advice on Steps to Strengthen the EU's AML/CTF Legislation
09/10/2020
The European Banking Authority has published an Opinion recommending that the European Commission establish a single rulebook on anti-money laundering and counterterrorist financing. The EBA’s Opinion, and report annexed to the Opinion, are in response to the Commission’s call for advice on defining the scope of application and the enacting terms of an AML/CTF regulation that is to be adopted. The EBA sets out how to address the gaps and vulnerabilities in the EU framework, mostly due to divergent national approaches across the EU. The EBA is proposing that in the areas where national differences and practices disadvantage the EU’s fight against AML/CTF, directly applicable rules should be introduced in a new EU regulation. According to the EBA, this would cover customer due diligence, AML/CTF systems and controls and certain key supervisory processes such as risk assessments, cooperation and enforcement.
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UK Conduct Regulator Proposes to Extend Financial Crime Reporting Obligation
08/24/2020
The U.K. Financial Conduct Authority has launched a consultation proposing to extend the annual financial crime reporting obligation to regulated firms undertaking regulated activities that the FCA views to be potentially posing as a higher money laundering risk. Responses may be submitted until November 23, 2020. The FCA intends to publish its final policy and amended rules by Q1 2021.
The FCA introduced the annual financial crime reporting obligations in 2016 for banks, investment firms, building societies, mortgage lenders, large electronic money institutions, certain large consumer credit firms, life insurers and retail investment and mortgage intermediaries. Relevant firms must provide details annually on, among other things, the jurisdictions and types of customers as well as the number of suspicious activity reports to the FCA. The obligation only captures certain firms subject to FCA supervision under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations of 2017.
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European Banking Authority Seeks to Promote RegTech Use
08/12/2020
The European Banking Authority has opened a consultation on RegTech and supporting the use of RegTech across the EU. Responses may be submitted until September 30, 2020. The EBA intends to report on the use of RegTech in the first half of 2021. The survey is focused on financial institutions and ICT third party providers. The EBA is seeking to understand the extent and impact of RegTech for regulatory, compliance and reporting requirements of regulated firms. In particular, the EBA is looking at mapping and understanding existing RegTech solutions, identifying barriers and risks relating to the use of RegTech and analyzing how to facilitate the application of RegTech across the EU. The consultation covers ongoing monitoring of business relationships and transactions for anti-money laundering obligations, creditworthiness assessments, compliance with security standards, including information security, cybersecurity and payment services and supervisory reporting.
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Wolfsberg Group Statement on Developing an Effective Anti-Money Laundering and Counter Terrorist Financing Program
08/12/2020
The Wolfsberg Group has published a statement on how financial institutions can develop an effective anti-money laundering and counter terrorist financing program. The Wolfsberg Group was established in 2002 and comprises thirteen banks. Its objective is to develop frameworks and guidance for the management of financial crime risks, providing an industry perspective to effective financial crime risk management.
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European Banking Authority Call for Input on De-Risking
08/04/2020
The European Banking Authority has launched a call for input on 'de-risking', whereby financial institutions avoid, rather than manage, the risks associated with money laundering or terrorist financing by terminating business relations with entire regions or classes of customers. The EBA is aiming to establish why financial institutions choose to de-risk instead of managing the related risks and to better understand the impact on access to financial services. Responses to the call for input can be provided until September 11, 2020. The feedback received will assist the EBA in preparing its next Opinion on the money laundering or terrorist financing risks impacting the EU which is due in Q1 2021.
View the call for input on de-risking. -
Financial Action Task Force Publishes 12-Month Review on Revised FATF Standards for Virtual Assets
07/07/2020
The FATF has published the results of its 12-month review into the revised FATF standards published in June 2019, designed to help tackle money laundering and terrorist financing risks connected with virtual assets and virtual asset service providers. The FATF's revised standards introduced a new Interpretive Note to Recommendation 15 on New Technologies, which clarified how countries should apply the FATF standards to virtual assets and VASPs, as well as updated guidance on a risk-based approach for virtual assets and VASPs. When the revisions were published, the FATF undertook to conduct a 12-month review of the changes.
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Financial Action Task Force Report on Stablecoins
07/07/2020
The Financial Action Task Force has published a report on issues of anti-money laundering and counter-terrorism financing in relation to global stablecoins and stablecoins. The report was mandated by the G20 in October 2019, when it also published its own report on the impact of global stablecoins. The FATF uses the term "so-called stablecoins" in its report to avoid endorsing the use of the phrase "stablecoins", which it views as a marketing term used by promoters of such coins. The term "so-called stablecoins with the potential for mass production" refers to global stablecoins. The FATF has, in parallel, published a 12-month review of its revised FATF standards on virtual assets and virtual asset service providers setting out areas in which the FATF intends to provide updated guidance to cover newly identified risks and provide clarifications.
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UK Government Publishes Global Human Rights Sanctions Regulations 2020
07/06/2020
HM Treasury has published the Global Human Rights Sanctions Regulations 2020, a new piece of U.K. legislation designed to target those involved in serious violations of human rights. The Regulations come into force on July 6, 2020. They apply to relevant conduct by any person across the whole of the U.K. but also have extra-territorial effect, additionally applying to conduct by U.K. persons (including U.K. incorporated companies and overseas branches of such companies) outside the U.K. and by any person in the territorial sea adjacent to the U.K.
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