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Financial Regulatory Developments Focus
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The following posts provide a snapshot of the principal U.S., European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.

  • Basel Committee on Banking Supervision Publishes Consultation on Coordination of Prudential and AML/CFT Supervision
    11/08/2019

    The Basel Committee on Banking Supervision has published a consultation paper on the “Introduction of guidelines on interaction and cooperation between prudential and anti-money laundering/counter-terrorism financing supervision”. Under the consultation paper, the Basel Committee proposes to amend its guidelines on the “Sound management of risks related to money laundering and financing of terrorism” to include guidance on the interaction between prudential and AML/CFT supervision in a bid to enhance the effectiveness of the supervision of banks’ AML/CFT regimes. Responses to the consultation should be submitted by February 6, 2020.

    Read more.
  • Financial Action Task Force Consults on Digital Identity in Customer Due Diligence Guidance
    10/31/2019

    The Financial Action Task Force is seeking feedback from private sector stakeholders on its draft guidance on the use of digital identity systems in customer due diligence. The guidance will supplement Recommendation 10 of the FATF's Recommendations regarding customer due diligence and demonstrates how authentication of customer identities in the digital finance and digital ID context supports broader anti-money laundering/counter-terrorism financing efforts. Stakeholders should submit responses to the consultation by November 29, 2019. The FATF intends to make further amendments to its draft guidance at its February 2020 meetings.

    Read more.
  • Basel Committee on Banking Supervision Considers Key Supervisory and Policy Initiatives
    10/31/2019

    The Basel Committee on Banking Supervision met on October 30-31, 2019 to discuss key policy and supervisory issues, including: (i) a proposed consultation on adjustments to the credit valuation adjustment risk framework; (ii) a proposed consultation on revised market risk and sovereign exposure disclosure requirements; (iii) a proposed discussion paper on the prudential treatment of cryptoassets; (iv) a proposed consultation on guidelines for enhanced cooperation between prudential regulatory authorities and anti-money laundering/counter-terrorism financing authorities; and (v) its reports into the implementation of the Net Stable Funding Ratio and large exposures standards in Argentina and China. All of the proposed consultation papers, as well as the NSFR/large exposures reports, are expected to be published in November 2019.

    Other topics under discussion included benchmark rate reforms, the implementation of the Basel Committee's guidance on managing foreign exchange settlement risk and the usability of capital buffers. On the latter subject, the Basel Committee has also published a newsletter reiterating the importance of the capital buffer framework and emphasizing that the buffers are designed to be usable. The Basel Committee has announced that Canada will host the 21 International Conference of Banking Supervisors on October 21-22, 2020.

    View the Basel Committee's press release on its October 30-31 2019 meeting.

    View the Basel Committee's newsletter on capital buffers.

    View details of the 21 International Conference of Banking Supervisors.
  • Financial Action Task Force Publishes Best Practices for Beneficial Ownership Transparency
    10/24/2019

    The Financial Action Task Force has published best practices on beneficial ownership for legal persons. Global standards require authorities to be able to ascertain the ultimate owner of a company or foundation to provide transparency and mitigate against the use of legal persons for financial crime purposes. The FATF's Best Practices document identifies the issues faced in achieving transparency of beneficial ownership and provides recommendations for an effective system that ensures accurate and up-to-date information to authorities in a timely manner. The FATF highlights that using a multi-pronged approach with numerous information sources is considered more effective and the document sets out the key features of an effective multi-pronged system.

    View the FATF best practices on beneficial ownership for legal persons.
  • Final EU Technical Standards on Cooperation Arrangements with Third-Country Regulators on Market Abuse Issues
    10/08/2019

    The European Securities and Markets Authority has published a final report and final draft Regulatory Technical Standards on supervisory cooperation between EU national regulators and third-country national regulators. The Market Abuse Regulation requires national regulators, where necessary, to enter into cooperation arrangements with supervisory authorities in non-EU countries for the exchange of information and enforcement of market abuse obligations. ESMA is charged with preparing draft RTS containing a template for those cooperation arrangements. ESMA's template provides a flexible approach for national regulators by allowing only parts of the template to be used, depending on what is deemed as necessary by a national regulator.

    ESMA's preparation of the draft RTS was delayed so that ESMA could take into account the entry into force of the EU General Data Protection Regulation. The draft RTS requires national regulators to have safeguards in place for the transfer of data from the EU to a third-country where the transfer of data takes place in the usual course of business and practice, and in the absence of an equivalence decision.

    The final draft RTS have been submitted to the European Commission for adoption.

    View the final report and draft RTS.
  • European Supervisory Authorities Publish Opinion on AML/CTF Risks in EU Financial Sector
    10/04/2019

    The European Supervisory Authorities have published a joint opinion on the current anti-money laundering and counter-terrorist financing risks posed to the EU financial sector. The opinion is published in accordance with the requirements of the Fourth Anti-Money Laundering Directive, which requires the ESAs to publish a joint opinion on the AML/CTF risks affecting the EU’s financial sector every two years. The most recent previous opinion was published in February 2017.

    Read more.
  • EU Proposals on Amending the Market Abuse Regulation
    10/03/2019

    The European Securities and Markets Authority has launched a consultation on proposed changes to the EU 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. The proposals will mostly affect issuers of financial instruments admitted to trading or trading on a trading venue, investment firms and asset management firms. ESMA is holding a public hearing on the proposals on November 5, 2019, and the consultation closes on November 29, 2019. ESMA expects to submit its report to the Commission in Spring 2020.

    Read more.
  • Council of the European Union Issues Note on Strategic Priorities for AML and CTF
    09/30/2019

    The Presidency of the Council of the European Union has issued a note inviting Ministers of the Permanent Representatives Committee to consider certain issues regarding the EU anti-money laundering and counter-terrorism financing framework. In July 2019, the European Commission published a Communication and a series of reports assessing the EU implementation of EU AML and CTF requirements and discussing whether further action is needed to improve the EU’s AML/CTF framework. In its Communication, the Commission identified certain issues that were likely to impede the effectiveness of the framework.

    Read more.
  • European Banking Authority Publishes Strategic Focus Areas for 2020
    09/27/2019

    The European Banking Authority has published its 2020 Work Programme. The Programme details six strategic areas of focus for 2020 and these are:
     
    1. Support the development of the risk reduction package and the implementation of the global standards in the EU. The EBA will work on developing level 2 legislation required by the revised Capital Requirements Regulation and Directive, the revised Bank Recovery & Resolution Directive and the new Covered Bonds Directive and Investment Firm Regulation and related Directive (the latter two have not yet entered into force). The EBA will continue to work on the implementation of the market risk requirements, following the finalization of the Basel Committee on Banking Standard's fundamental review of the trading book (FRTB). In particular, in 2020, the EBA anticipates implementing the reporting requirement and certain aspects of the FRTB revisions for the internal model approach and for the treatment of non-trading book positions subject to FX or commodity risk. Another priority will be finalization of the EBA's roadmap for the internal ratings-based approach for calculating minimum capital requirements for credit risk.
    2. Providing efficient methodologies and tools for supervisory convergence and stress testing. The EBA intends to consult on Pillar 2 changes during 2020 and will conduct the 2020 stress test for EU banks.
    Read more.
  • UK Prudential Regulator Writes to Banks on Prudential Supervision of Money Laundering and Terrorist Financing Risks
    09/05/2019

    The Prudential Regulation Authority has published a "Dear CEO" letter sent to all PRA-regulated banks and investment firms (firms that are subject to the Capital Requirements Regulation) on the prudential supervision of money laundering and terrorist financing risks. The PRA reminds firms of the Opinion published by the European Banking Authority on July 24, 2019, which invited national prudential supervisors to (i) make clear to institutions the expectation that prudential supervisors should be aware of AML/CTF risks that may affect the institutions they oversee; and (ii) notify institutions that AML/CTF concerns will be taken into account in determining prudential supervision.

    Read more.
  • UK Regulator Provides Guidance on Regulatory Perimeter and Crypto-Assets
    07/31/2019

    The U.K. Financial Conduct Authority has published a Policy Statement and final Guidance on Crypto-assets. The Policy Statement summarizes the feedback received to the FCA's consultation on draft Guidance and sets out the FCA's response to that feedback. The final Guidance is, for the most part, the same as that on which the FCA consulted, except the FCA has made some drafting changes to provide further clarity and has added some guidance on stablecoins and airdrops. In addition, the FCA has revised the taxonomy by making a distinction between: (i) unregulated tokens, which are exchange tokens and utility tokens; and (ii) regulated tokens, which are security and e-money tokens.

    The Guidance is intended to clarify the FCA's expectations for firms carrying on crypto-asset activities within the U.K. by providing insight for market participants on whether certain crypto-assets are within the FCA's regulatory perimeter or are otherwise regulated. The FCA highlights that the Guidance should be used by firms to understand the regulatory status of their crypto-asset activities, but assessing whether a crypto-asset or related activity is within the regulatory perimeter can only be done on a case-by-case basis. Firms should also refer to the FCA's Perimeter Guidance Manual (PERG) in its Handbook, and where firms need further clarification, they should contact the FCA and/or obtain external legal advice.

    The Guidance provides an overview of the U.K. regulatory perimeter and discusses relevant concepts, such as "by way of business." It also refers to the territorial scope of the regulatory perimeter, referring to the detailed guidance in PERG and highlighting that where part of an activity is carried on outside the U.K., a firm may still be carrying on a regulated activity in the U.K.

    Read more
  • European Commission Assesses Risks to EU of AML and CTF
    07/24/2019

    The European Commission has published a Communication and a series of reports assessing the EU implementation of anti-money laundering and terrorist financing requirements and discussing whether further action is needed to improve the EU's AML/CTF framework. The Communication summarizes the reports and the Commission's conclusions. The Commission notes that some of the shortcomings identified in the reports may have been remedied through the Fourth AML Directive, and that others may still be mitigated through the implementation of the Fifth AML Directive, due to be implemented by member states by January 2020. 

    Read more.
  • European Banking Authority Publishes Opinion on Relation of Prudential Objectives to Anti-Money Laundering and Counter-Terrorism Financing
    07/24/2019

    The European Banking Authority has published an Opinion signaling the importance of money laundering and terrorism financing risks in the prudential supervision of EU Member States. The Opinion invites national prudential supervisors to make clear to institutions in their jurisdictions the expectation that prudential supervisors should be aware of AML/CTF risks that may affect the institutions they oversee. 

    Read more.
  • UK Conduct Regulator Publishes New Measure of Market Cleanliness
    07/09/2019

    The U.K.'s Financial Conduct Authority has published details of its Abnormal Trading Volume ratio, a new metric by which the FCA intends to measure "market cleanliness". Market cleanliness refers to the level of market abuse activities, such as insider dealing or market manipulation, affecting transactions in the market. The FCA currently monitors market abuse using a variety of tools, including the mandatory submission of suspicious transaction and order reports by those involved in executing certain types of financial market transactions.

    Read more.
  • HM Treasury Publishes Report on Activities of Anti-Money Laundering and Counter-Terrorist Financing Supervisory Bodies
    07/08/2019

    HM Treasury has published a report on the activities undertaken by the U.K.'s anti-money laundering and counter-terrorist financing supervisory bodies in 2017-2018. The report follows the publication of the Financial Action Task Force's Mutual Evaluation Report, published in December 2018. The Mutual Evaluation Report found that the U.K.'s AML/CTF regime was the strongest of all the countries assessed by the FATF. However, the report still identified shortcomings in regulated firms' compliance with the Money Laundering Regulations 2017 and the performance of supervisory bodies responsible for overseeing AML/CTF activity.

    Read more.
  • UK Regulator Secures Insider Dealing Conviction
    06/27/2019

    The U.K. Financial Conduct Authority has secured convictions against two individuals accused of insider dealing. Fabiana Abdel-Malek, a former senior compliance officer at the London office of a major European headquartered bank, and Walid Anis Choucair, her family friend, were both sentenced to three years' imprisonment for insider dealing.

    Read more.
  • Financial Action Task Force Publishes Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers
    06/21/2019

    The Financial Action Task Force has published the outcomes of its third and last Plenary meeting under the U.S. Presidency in Orlando on June 19-21, 2019. The FATF considered key issues such as strategic initiatives, mutual evaluations and the upcoming focus areas under the Chinese Presidency.

    Read more.
  • European Commission Publishes Report on Implementation of Wire Transfer Regulation
    06/20/2019

    The European Commission has published a report detailing: (i) the extent to which Member States have implemented the sanctions and monitoring sections of the EU Wire Transfer Regulation; and (ii) the particular sanctioning activities that national regulators have adopted under the Regulation. The Commission was obliged to provide the report to the European Parliament and Council of the European Union under the Wire Transfer Regulation. Although Member States are not obliged to take specific steps in response to the report's findings, the Commission concludes the report by stating its intention to continue to support Member States in their implementation of the Wire Transfer Regulation and reserves the right to take further measures to ensure the Regulation is correctly implemented by all Member States.

    Read more.
  • UK Law Commission Makes Recommendations to Improve Anti-Money Laundering Regime
    06/18/2019

    The U.K.'s Law Commission has published a report, entitled "Anti-money Laundering: the SARS Regime", setting out recommendations to improve the prevention, detection and prosecution of money laundering and terrorism financing in the U.K. The Law Commission began a review in 2017 into the U.K. anti-money laundering regime, focusing on the suspicious activity reporting (SAR) process and taking into account EU and U.K. anti-money laundering legislation and related legislation, such as the General Data Protection Regulation. Following the consultation, the Commission has decided not to recommend amendments to the primary legislation, but instead that more detailed guidance should be issued. As a result, and for example, new exceptions from the reporting regime will not be proposed, as has been argued by some aspects of industry for reports on low-value transactions or reports on issues which are already in the public domain. The Commission is making several recommendations to improve the existing system, including:
    1. The establishment of a new Advisory Board to supervise the development of guidance and to advise the Secretary of State on potential improvements to the regime, including in relation to emerging threats.
    2. A new online SAR report that is easier to use with the aim of ensuring more consistent data is provided to the U.K. Financial Intelligence Unit through these reports.
    3. Creating an obligation for the Government to issue statutory guidance on key legal concepts within the framework so as to improve certainty around the obligation to report suspicious activities.

    View the report.
  • UK Parliamentary Committee Report Criticizes UK's Post-Brexit Sanctions Policy
    06/12/2019

    The U.K. Foreign Affairs Committee has published a critical report on the U.K. government's plans for the future of sanctions policy following Brexit. Currently, the U.K. must comply with economic and financial sanctions agreed at EU-level. Following the U.K.'s exit from the EU, it will regain autonomy over sanctions policy, but the Foreign Affairs Committee report reveals a lack of high-level thought on policy, a muddled position on key issues, including the implementation of EU sanctions into U.K. law following Brexit, the U.K.'s ability to impose "Magnitsky" sanctions (sanctions imposed upon individuals accused of human rights violations), and the extent to which the U.K.'s future sanctions policy should be coordinated with allies' policies, and a lack of cross-departmental government coordination in developing a coherent U.K. sanctions policy.

    Read more.
  • UK Regulator Publishes Thematic Review of Money-Laundering Risks in Capital Markets
    06/10/2019

    The U.K. Financial Conduct Authority has published a report on its thematic review assessing money-laundering risks posed to capital markets. The review involved 19 participants including investment banks, recognised investment exchanges, trade bodies, a custodian bank, clearing and settlement houses, inter-dealer brokers and trading firms. The report sets out what the FCA found in its review, the AML risks that were identified and fictitious case studies identifying different AML scenarios that firms may use to inform their own procedures. The FCA expects firms to review their AML systems, taking this report into account. It is considering its supervisory approach, including the possibility of utilising data supplied under MiFID II to mitigate money-laundering risks.

    Read more.
  • G20 Finance Ministers and Central Bank Governors Meet in Japan
    06/09/2019

    The G20 Finance Ministers and Central Bank Governors have published a Communiqué from the most recent G20 Summit held in Japan.

    Read more.
  • Financial Stability Board Delivers Report on Crypto-Assets
    05/31/2019

    The Financial Stability Board has published a report on crypto-assets outlining the actions being undertaken by various international organizations in response to the challenges posed by crypto-assets and the FSB's own proposed course of action for the year ahead. The report will be delivered to G20 Finance Ministers and Central Bank Governors at the next G20 meeting in Japan on June 8-9, 2019.

    Read more.
  • Financial Stability Board Reports on Progress to Address Correspondent Banking Declines
    05/29/2019

    The Financial Stability Board has published two reports as an update on the work to address correspondent banking declines - the "FSB Action Plan to Assess and Address the Decline in Correspondent Banking - Progress Report" and "Remittance Service Providers' Access to Banking Services: Monitoring of the FSB's Recommendations".

    Read more.
  • European Banking Authority Confirms 2019 Focus
    05/29/2019

    The European Banking Authority has published its annual report for 2018, setting out details of the work it undertook in 2018 and its focus areas in 2019. The EBA will, in 2019, focus on: (i) finalizing the guidelines on loan origination as part of its contribution to tackling non-performing loans in the EU; (ii) implementing the changes arising from the revised Capital Requirements Regulation, which was published in the Official Journal of the European Union on June 7, 2019; (iii) implementing the new Investment Firm Regulation and Directive by preparing various technical standards, guidelines and reports; (iv) preparing technical standards and guidelines, as required under the EU Securitization Regulation, that facilitate the use of internal models for banks investing in securitization positions; (v) assisting with the EU's implementation of Basel IV; (vi) the impact of FinTech, in particular, on payment institutions' and e-money institutions' business models; (vii) identifying regulatory and supervisory areas affected by the use of big data and developing best practices and principles for the application and implementation of data analytics by institutions; (viii) continuing to assess the risks of crypto-assets; (ix) supporting the European Commission's work on sustainable finance; and (x) improving the supervision of anti-money laundering and counter terrorism financing.

    View the EBA's annual report 2018.
  • UK Secondary Legislation Published to Combat Cyber-Attacks
    05/21/2019

    The Cyber-Attacks (Asset-Freezing) Regulations 2019 have been made and will come into force on June 11, 2019.

    The U.K. Regulations put in place measures applicable to U.K. nationals, U.K. incorporated entities and certain regulated institutions that will help enforce the financial sanctions provisions of the EU's new Cyber-Attacks Regulation, which came into force on May 18, 2019. The Cyber-Attacks Regulation is designed to combat cyber-attacks emanating from outside the EU against EU institutions and Member States. Its provisions include granting the Council of the European Union the ability to freeze assets of persons or entities suspected of involvement in such attacks. In order to enforce the sanctions regime throughout the EU, Member States are required to put in place legislation specifying the penalties that will be imposed upon those found to be implicated in a breach of the EU Cyber-Attacks Regulation.

    Read more.
  • EU Council Regulation to Combat Cyber-Attacks Published
    05/17/2019

    The EU Council Regulation concerning restrictive measures against cyber-attacks threatening the European Union or its Member States came into force on May 17, 2019 and will apply directly across the EU from May 18, 2019.

    Read more.
  • European Commission Seeks Advice from European Securities and Markets Authority on Review of the Market Abuse Regulation
    05/15/2019

    The European Commission has issued a formal request for advice to the European Securities and Markets Authority on the appropriateness of certain provisions under the Market Abuse Regulation. The Commission will use ESMA's feedback to inform a report it is mandated to submit to the European Parliament and Council by July 3, 2019. The Commission will also consider proposing further legislative amendments beyond the provisions it is mandated to review and has included these in its formal request for ESMA's advice. The Commission has requested ESMA to submit its contribution by December 31, 2019 to allow time for adoption of the report by the relevant institutions.

    Read more.
  • New EU Regulatory Technical Standards under the Money Laundering Directive
    05/14/2019

    An EU Delegated Regulation under the Fourth Money Laundering Directive has been published in the Official Journal of the European Union.  The Delegated Regulation sets out Regulatory Technical Standards specifying the measures that EU credit and financial institutions subject to the Fourth Money Laundering Directive should take to handle money laundering and terrorist financing risks arising where a majority-owned subsidiary or branch established in a non-EU country is prohibited from implementing policies its EU parent has put in place to comply with EU regulations. 

    Read more.
  • Guidance on Post-Brexit Counter-Terrorism Regulations Issued by UK Government
    05/03/2019

    The Foreign and Commonwealth Office has issued guidance on the Counter-Terrorism (International Sanctions) (EU Exit) Regulations 2019, the proposed U.K. regulations that will govern the U.K.'s application of international sanctions following the U.K.'s withdrawal from the EU. The Regulations will apply within the U.K. and relate to the conduct of U.K. persons (i.e. British nationals and legal entities incorporated in the U.K.), wherever those persons may be situated in the world (including branches of U.K. companies operating overseas).

    Read more.
  • EU Opinion on the Nature of Passports of Payment and Electronic Money Institutions Using Agents and Distributors
    04/24/2019

    The European Banking Authority has published an opinion on the nature of passport notifications for agents and distributors under the revised Payment Services Directive, the Electronic Money Directive and the Fourth Money Laundering Directive. The Opinion is addressed to national regulators in the EU of payment institutions and electronic money institutions but is also useful for PIs and EMIs providing services on a cross-border basis within the EU.

    Read more.
  • UK Government Consults on Implementation of the EU Fifth Money Laundering Directive
    04/15/2019

    HM Treasury launched a consultation on its proposed options for transposing the Fifth Money Laundering Directive into U.K. law. 5MLD makes a number of changes to the European Anti-Money Laundering and Counter-Terrorist Financing regime set out in the Fourth Money Laundering Directive. EU Member States are required to transpose 5MLD into national laws, which must take effect by January 10, 2020. HM Treasury is consulting on how it proposes to effect the transposition, in particular where the U.K. has discretion as to how certain aspects are implemented and where gold plating provisions are proposed. Notably, the U.K. government intends to implement 5MLD irrespective of when the U.K. leaves the EU, and is committed to implementing the Financial Action Task Force's standards, focusing on those areas highlighted in the FATF's mutual evaluation report of the U.K.'s AML/CTF regime. Responses to the consultation were to be submitted by June 10, 2019.

    Read more.
  • Financial Action Task Force Reports to G20
    04/08/2019

    The Financial Action Task Force has published a Report to G20 Finance Ministers and Central Bank Governors on its ongoing work to fight money laundering and terrorist financing. The report summarizes the FATF's work priorities under the U.S. presidency and sets out areas in which the FATF will work in the near future. These include:
    • Work on virtual assets: the FATF continues to closely monitor risks involving virtual assets (the FATF uses this term to cover both virtual currencies and crypto assets). In this area, by June 2019, the FATF intends to address the challenges that arise in investigations and confiscation and update its 2015 Risk-based Approach Guidance on Virtual Currencies. The FATF will also review and consider the scope of the activities and operations that are covered by its Recommendations and Glossary.
    • Improving transparency and availability of beneficial ownership information: the FATF intends to improve transparency and availability of beneficial ownership information through its mutual evaluation framework and will continue its work, initiated in February 2019, on identifying best practices on beneficial ownership to ensure legal entities are not misused for money laundering or terrorist financing and beneficial ownership information is freely available to national authorities. The work in this area is expected to be finalized by October 2019.

    View the report.
  • Financial Action Task Force Publishes Outcomes Of Its February 2019 Plenary Meeting
    02/22/2019

    The Financial Action Task Force has published the outcomes from its Plenary meeting that took place in Paris on February 20-22, 2019. The FATF considered key issues such as the operations and streamlining of the FATF, major and other strategic initiatives and mutual evaluations.

    One of the major strategic initiatives covered by the Plenary was the FATF's work on mitigating money laundering and terrorist financing risks associated with virtual asset activities. The FATF published an amended Recommendation 15 in October 2018, clarifying that its standards apply to exchanges, wallet providers and providers of financial services for Initial Coin Offerings. The FATF has now published a draft Interpretative Note to Recommendation 15 to further clarify how the FATF Standards apply to activities involving virtual assets. The Interpretative Note has been finalized except for one section, which will be the subject of a public consultation in May this year. That section concerns the duty of virtual asset service providers to obtain and hold originator and beneficiary information on virtual asset transfers and submit such information to beneficiary service providers and counterparts (if any) as well as provide it on request to appropriate authorities. Following the consultation, the FATF intends to fully finalize the Interpretative Note and adopt it in June 2019.

    Read more.
  • UK Conduct Regulator Consults on Guidance on Crypto-Assets and the UK Regulatory Perimeter
    01/23/2019

    The U.K. Financial Conduct Authority has launched a consultation on proposed Guidance on whether certain crypto-assets fall within the U.K.'s regulatory perimeter (CP19/3). The FCA's consultation is in response to one of the commitments made by the U.K. Cryptoasset Taskforce last year in its final Cryptoassets Report. The Taskforce was established in March 2018 and comprises representatives from HM Treasury, the FCA and the Bank of England. The FCA's consultation closes on April 5, 2019. The FCA intends to publish the final Guidance on the existing regulatory perimeter in relation to crypto-assets by summer 2019.

    The FCA's proposed Guidance is intended to help firms determine whether certain crypto-assets fall within the FCA's regulatory perimeter. However, the FCA notes that assessing whether a crypto-asset is within the perimeter can only be done on a case-by-case basis and that the responsibility for ensuring that it has the correct permissions lies with the firm undertaking the activity. A firm that undertakes a regulated activity without the requisite permissions will be in breach of the 'general prohibition' in the Financial Services and Markets Act 2000. Any such breach by a person is a criminal offence and the person may be imprisoned or fined, or both. The consultation is relevant to a wide range of consumers, stakeholders and firms, in particular firms that issue or create crypto-assets, firms that market, sell, buy, hold or store crypto-assets, financial advisors, investment managers and investment exchanges.

    Read more.
  • EU Report on Accepted Market Practices in Accordance with the Market Abuse Regulation
    01/16/2019

    The European Securities and Markets Authority has published its annual report to the European Commission on the application of accepted market practices under the EU Market Abuse Regulation. The Market Abuse Regulation provides certain prohibitions against market manipulation. Accepted market practices, which are established by national regulators and notified to ESMA, provide a defense against any allegations of market manipulation. In particular, a dealing on a financial market which was carried out for legitimate reasons and in line with an established AMP, will not be found to constitute market manipulation. In the report, ESMA identifies AMPs which were established before the Market Abuse Regulation came into force, or which became effective after that date. 

    Read more.
  • Basel Committee on Banking Standards Finalizes Basel Market Risk Framework
    01/14/2019

    Following its consultation from March to June last year, the Basel Committee on Banking Standards has announced the final revisions to the Basel III market risk capital framework. At the same time, it has also announced its 2019 priorities.

    The objective of the Basel market risk framework is to ensure that banks hold enough regulatory capital to protect against losses arising from movements in market prices of instruments held in their trading book. Certain changes to the 2016 market risk framework are to:
     
    1. Clarify the scope of application. The Committee has provided further guidance on the regulatory book to which instruments should be assigned in circumstances where instruments could go into more than one book and has revised the treatment of structural foreign currency positions. The revised framework also allows equity investments in funds to be allocated to the trading book, provided that a bank: (i) is able to "look through" to the fund's underlying assets; or (ii) has access both to daily price quotes and to the information contained in the mandate of the fund.
    2. Revise the internal model approach to address implementation challenges, in particular, by amending the profit and loss attribution (PLA) test metric and failure consequence.
    3. Amend the standardized model approach. The approach to measuring risk factor losses was too high in relation to the actual risk and there was unnecessary operational burden. The changes in the standardized approach include widening the scope of currency pairs that are considered liquid in the FX risk class to ensure more currency pairs are subject to lower risk weights and introducing new "index" buckets for equity and credit spread risks so that each underlying position in an index does not need to be identified.
    Read more.
  • New UK Economic Crime Strategic Board
    01/14/2019

    The U.K. Government has announced the establishment of a new government taskforce to fight against financial crime. The new taskforce, the Economic Crime Strategic Board, is part of the Government's Serious and Organised Crime Strategy. It will set priorities, direct resources and scrutinise performance against the economic crime threat. The Board includes chief executives from Barclays, Lloyds and Santander and senior representatives from UK Finance, the National Crime Agency and the Solicitors Regulation Authority, Accountants Affinity Group and National Association of Estate Agents.

    View the announcement.
  • European Securities and Markets Authority Publishes Recommendations on Crypto-Assets and Initial Coin Offerings
    01/09/2019

    The European Securities and Markets Authority has published a report on the application and suitability of the EU securities regulatory framework to crypto-assets, including Initial Coin Offerings. The report is in response to the European Commission's request in its FinTech Action Plan 2018. Like the European Banking Authority, which published a report on the same day in relation to banking sector issues, ESMA found that EU activities related to crypto-assets are fairly low and do not present any financial stability risks.

    ESMA's report focuses on the legal qualification of crypto-assets under EU financial securities laws and highlights that this may differ across EU member states because it will be subject to the national laws implementing EU legislation. ESMA notes that there is currently no legal definition of crypto-assets and that a key consideration is whether a crypto-asset qualifies as a financial instrument under the revised Markets in Financial Instruments package. Where a crypto-asset qualifies as a MiFID financial instrument, the full requirements under various securities legislation may apply, subject to any applicable exemptions.  According to ESMA, the rules in the Prospectus Directive would apply to an issue of crypto-assets offered to the public, including through an ICO, where the instruments are transferable securities. 

    Read more.
  • European Banking Authority Reports on EU Regulatory Perimeter for Crypto-Assets
    01/09/2019

    The European Banking Authority has published a report on the application and suitability of the EU bank regulatory framework for crypto-assets. The report is in response to the European Commission's request in its FinTech Action Plan 2018. The report confirms that EU activities related to crypto-assets are fairly low and do not present any financial stability risks. The European Securities and Markets Authority also published a similar report covering Initial Coin Offerings issues within its remit on the same day.

    The EBA's report sets out the EBA's findings, the issues arising from the results, the EBA's advice to the Commission and the steps that the EBA intends to take in 2019. The EBA mapped the applicability to crypto-assets and crypto-asset activities of the EU Anti-Money Laundering Directive, the Capital Requirements Directive and Regulation, the second Electronic Money Directive and the second Payment Services Directive.

    Read more.
  • UK Sanctions and Anti-Money Laundering Act 2018 Sanctions Provisions Brought Into Force
    11/21/2018

    The Sanctions and Anti-Money Laundering Act 2018 (Commencement No.1) Regulations 2018  were made on November 21, 2018, bringing into force the majority of the sanctions provisions of the Act with effect from November 22, 2018.

    The Act's provisions empower the U.K. Government to make sanctions regulations to be imposed, where appropriate, to comply with United Nations obligations or other international obligations, to further the prevention of terrorism, for the purposes of national security or international peace and security, or to further foreign policy objectives. The Act also empowers the U.K. Government to create, amend and update regulations for the detection, investigation and prevention of money laundering and terrorist financing and for the purposes of implementing standards published by the Financial Action Task Force relating to combating threats to the integrity of the international financial system.

    The Act received Royal Assent and came partly into force on May 23, 2018. Provisions in force from November 22, 2018 are:
    • sections 1 to 31;  
    • sections 33 to 48;  
    • sections 57 and 58;
    • section 59(4) (to the extent that it relates to Schedule 3, paragraphs 1 to 7 and sub-paragraphs 8(1) to 8(3)); and
    • Schedule 1.

    The remaining Provisions of the Act that will be brought into force at a later date include the provisions related to anti-money laundering.

    View the Commencement Regulations (SI 2018/1213).

    View the Sanctions and Anti-Money Laundering Act 2018.
  • Financial Stability Board Progress Report on Addressing Correspondent Banking Decline
    11/16/2018

    The Financial Stability Board has published a progress report addressed to the G20 Finance Ministers and Central Bank Governors on the FSB's four-point action plan to assess and address the decline in correspondent banking relationships. The progress report is accompanied by an update to the Correspondent Banking Data Report published by the FSB March 2018. The updated data report includes additional data from July - December 2017 derived from information provided by SWIFT to the FSB, through the intermediation of the National Bank of Belgium. The data report shows a further decline in active correspondent banking relationships in 2017.

    Read more.
  • UK Legislation Published to Onshore Anti-Money Laundering and Counter-Terrorism Financing Legislation for Brexit
    11/13/2018

    HM Treasury has published a draft of the Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations will primarily be relevant for payment service providers, anti-money laundering/counter-terrorism financing supervisory authorities and firms that are regulated through the U.K.'s AML/CTF regime. The draft Regulations introduce no material policy changes. Their purpose is to correct deficiencies in U.K. law and retained EU law to ensure that the U.K. AML/CTF regime continues to function effectively after the U.K.'s withdrawal from the EU.

    The draft Regulations amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs), which transposed into U.K. law the provisions of the EU Fourth Money Laundering Directive (4MLD). The draft Regulations also amend the Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations 2017 and the revised EU Funds Transfer Regulation (Regulation (EU) 2015/847). This EU Regulation gives legal effect to Financial Action Task Force Recommendation 16, on the information accompanying electronic transfers of funds. Additionally, the draft Regulations revoke Commission Delegated Regulation (EU) 2018/1108, which sets out Regulatory Technical Standards for central contact points under 4MLD.

    Read more.
  • EU Countering Money Laundering By Criminal Law Directive Will Apply From December 2020
    11/12/2018

    The EU Countering Money Laundering by Criminal Law Directive has been published in the Official Journal of the European Union. The Directive will complement the Fifth Money Laundering Directive, which was adopted in May 2018.

    The U.K., Ireland and Denmark have not adopted the new Directive. In the U.K., this mirrors the approach taken by the U.K. in relation to EU criminal sanctions for market manipulation where it has implemented its own national regime.

    The new Directive will enter into force on December 3, 2018. EU member states that have adopted the Directive must transpose the new provisions into national law by December 3, 2020.

    Read more.
  • Draft EU Guidelines on Supervisory Cooperation on Anti-Money Laundering and Countering the Financing of Terrorism
    11/08/2018

    The Joint Committee of the European Supervisory Authorities have launched a consultation on draft joint guidelines on the cooperation and information exchange between national regulators supervising banks and other financial institutions for compliance with Anti-Money Laundering and Countering the Financing of Terrorism rules. The Fourth Money Laundering Directive requires that EU member states allow, without undue restriction, the exchange of information and provision of assistance between national regulators. The ESA's proposed guidelines aim to set out how that can be achieved in practice. The ESAs are proposing that a college of supervisors should be established where a financial institution is supervised in three or more EU member states. The draft guidelines set out rules on the establishment and operation of the colleges. For firms that do not require a college but which operate in two member states, the ESAs propose a process for the bilateral exchange of information between national regulators.

    The consultation closes on February 8, 2019.

    View the consultation paper.
  • Financial Action Task Force Publishes Final Guidance on a Risk-Based Approach for the Securities Sector
    10/25/2018

    The Financial Action Task Force has published the finalized version of its Guidance on a Risk-Based Approach for the Securities Sector. The finalized Guidance was adopted at the FATF's plenary meeting held on October 17—19, 2018. The FATF has developed the Guidance in conjunction with the private sector, to assist governments, regulators, Financial Intelligence Units and participants in the securities sector to adopt a risk-based approach to anti-money laundering and countering the financing of terrorism.

    The final Guidance sets out the key principles involved in applying a risk-based approach to AML and CTF. Separate sections provide specific guidance to securities providers and intermediaries and to securities supervisors on the effective implementation of a risk-based approach. Annexes provide examples of supervisory practices that have been adopted and examples of suspicious activity indicators relevant to securities.

    The Guidance is non-binding. It should be read in conjunction with the International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation and the 2009 Report on Money Laundering and Terrorist Financing.

    View the final Guidance.

    View details of the consultation on draft Guidance.

    View details of further outcomes of the FATF's October 2018 plenary.
  • European Banking Authority Sets Out Its Work Priorities for 2019
    10/23/2018

    The European Banking Authority has published its Work Programme for 2019, setting out details of, and planned main outputs from, 37 separate work streams across the following five key strategic priorities:
     
    1. Leading the Basel III implementation in the EU.
    2. Understanding risks and opportunities arising from financial innovation.
    3. Collecting, disseminating and analyzing banking data.
    4. Ensuring a smooth relocation of the EBA to Paris.
    5. Fostering the increase of the loss-absorbing capacity of the EU banking system.

    The EBA also confirms that work related to Brexit will remain a horizontal priority for the EBA in 2019 and explains that the EBA's other activities may be affected in the future by Brexit-related developments. Should that be the case, any substantial change in the work programme will be communicated in due time, in order to seek steering and approval from its Management Board and Board of Supervisors.

    View the EBA's 2019 Work Programme.
  • UK Serious Fraud Office Charges Former Banker With Conspiracy To Defraud For Manipulation of Euro Interbank Offered Rate
    10/21/2018

    The U.K. Serious Fraud Office has charged a former banker with conspiracy to defraud, as part of its investigation into the manipulation of the Euro Interbank Offered Rate.

    The former banker was arrested in Italy in August 2018 after his trip to the country activated a European Arrest Warrant that had been secured by the SFO in 2016. Italian authorities ruled on October 12, 2018 that he should be extradited to the U.K. and he was charged with conspiracy to defraud at Westminster Magistrates’ court on October 20, 2018.

    The next hearing will take place at Southwark Crown Court on October 24, 2018.

    View the SFO's announcement.
  • EU Supervisory Authority Reports on ICO and Crypto-Asset Risks and Potential Regulation
    10/19/2018

    The European Securities and Markets Authority has published an own-initiative report prepared by its Securities and Markets Stakeholder Group. The purpose of the report is to provide advice to ESMA on steps it might take to contain the risks of Initial Coin Offerings and crypto-assets, on top of existing regulation.

    In the report, the term “crypto-assets” is used to refer to coins, tokens, virtual and cryptocurrencies or other digital or virtual assets collectively. The acronym "ICO" is used to refer to an initial offering of any crypto-asset. The report sets out a taxonomy of crypto-assets, based on the distinction between payment tokens, utility tokens, asset tokens and hybrids used by the Swiss Financial Market Supervisory Authority (FINMA).

    Read more.
  • Financial Action Task Force Clarifies Virtual Asset Regulation
    10/19/2018

    The Financial Action Task Force has published the outcomes of its plenary on October 17-19, 2018. The FATF considered key issues such as the operations and streamlining of the FATF, major and other strategic initiatives and mutual evaluations.

    One of the major initiatives covered by the plenary was the regulation of virtual assets. The G20 Finance Ministers & Central Bank Governors communiqué following their July 2018 Buenos Aires meeting called on the FATF to clarify, by October 2018, how its global anti-money laundering and counter-terrorist financing standards apply to crypto assets.  At its October plenary, the FATF adopted amendments to the FATF Recommendations and Glossary at the plenary and issued a statement on the regulation of virtual assets. The FATF has done this to clarify that its standards apply to exchanges, wallet providers and providers of financial services for Initial Coin Offerings. Jurisdictions should therefore ensure that virtual asset service providers are subject to AML/CTF regulations. However, jurisdictions are able to choose which category of regulated entity virtual asset service providers should fall into. 

    Read more.
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