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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.

  • 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.

    Read more.
  • 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.

    View the EBA's survey.
  • 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.

    Read more.
  • 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.

    Read more.
  • Financial Action Task Force Report on Stablecoins
    07/07/2020

    The Financial Action Taskforce 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.

    Read more.
  • 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.

    Read more.
  • Basel Committee on Banking Supervision Publishes Final Updated AML Guidelines
    07/02/2020

    The Basel Committee on Banking Supervision has published final updated guidelines on the "Sound management of risks related to money laundering and financing of terrorism". The updated guidelines apply to all banks, banking groups and relevant regulators.

    The updated guidelines include detailed guidance on the interaction between prudential and AML/CFT supervision to enhance the effectiveness of the supervision of banks' AML/CFT regimes. The updated guidelines also merge and replace two other Basel Committee documents, namely Customer due diligence for banks (October 2001) and Consolidated KYC risk management (October 2004). The guidelines should be read in conjunction with other Basel Committee papers, such as the Core principles for effective bank supervision, as well as relevant guidance published by the Financial Action Task Force.

    View the updated guidelines.
  • Financial Action Task Force Consults on Updating Guidance for Proliferation Financing Risks
    06/30/2020

    The Financial Action Task Force has opened a consultation on 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 is proposing to update 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. Responses to the consultation may be submitted until August 31, 2020. The FATF intends to consider the feedback at its plenary session in October 2020.

    View the consultation paper.
  • European Banking Authority Call for Input on Impact of De-Risking on Financial Institutions and Consumers
    06/15/2020
    The European Banking Authority has launched a call for input to understand why financial institutions choose to “de-risk” (meaning they elect not to service a particular customer or category of customers on the basis of higher money laundering and terrorist financing risks) instead of managing the risks of working with those customers. Responses are sought from financial institutions and end users by September 11, 2020. The call for input will inform the EBA’s Opinion on the risks of money laundering and terrorist financing affecting the EU’s financial sector.
     
    View the EBA's call for input.
  • UK Government Amends Sanctions Legislation
    06/13/2020

    HM Treasury has published the Sanctions (EU Exit) (Miscellaneous Amendments) Regulations and the Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations, amending certain aspects of the U.K. sanctions regime. The legislation is made under the Sanctions and Anti-Money Laundering Act 2018, which was introduced to enable the U.K. Government to implement international sanctions following its departure from the EU. The majority of the SAMLA provisions entered into force on November 22, 2018.

    Read more.
  • UK Joint Money Laundering Steering Group Publishes Revised Guidance
    06/01/2020

    The Joint Money Laundering Steering Group has published amendments to its Guidance following its consultation launched on February 3, 2020. The revisions to the Guidance account for changes introduced by The Money Laundering and Terrorist Financing (Amendment) Regulations 2019, which came into force on January 10, 2020. The 2019 Regulations amend the existing Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to incorporate changes arising from the EU's Fifth Anti-Money Laundering Directive.

    The JMLSG's consultation on proposed new Guidance on how the U.K. Money Laundering Regulations apply to crypto-asset exchange providers and custodian wallet providers closed on May 18, 2020. The final new Guidance is still to be published.

    The JMLSG is currently consulting on draft guidance on Pooled Client Accounts, with comments due by June 10, 2020.

    View the June 2020 JMLSG Guidance.

    View details of the JMLSG's consultation on pooled client accounts.

    View details of the JMLSG's consultation on crypto-asset exchange provider and custodian wallet provider guidance.
  • UK Joint Money Laundering Steering Group Consults on Pooled Client Accounts Guidance
    05/14/2020

    The U.K. Joint Money Laundering Steering Group has launched a consultation on draft guidance on Pooled Client Accounts. The JMLSG Guidance is provided for firms in the financial sector. A PCA is a bank account opened with a financial institution by a customer, to administer funds that belong to the customer's clients. The customers clients' money will be co-mingled but the customer's clients will not be able to directly instruct the financial institution to carry out transactions. The JMLSG is proposing guidance on the risks, risk assessments, written agreements and due diligence that might be needed when a financial institution opens and administers a PCA for a customer. The consultation closes on June 10, 2020.

    View the consultation paper.
  • Bank for International Settlements Reports on Financial Crime During COVID-19
    05/14/2020

    The Bank for International Settlements has published a report on financial crime during the COVID-19 pandemic. The Report provides an overview of the increase in financial crime observed since the COVID-19 outbreak, which includes an increase in cyber threats, greater misuse of online financial services and virtual assets to move illicit funds and possible corruption associated with government stimulus funds. The Report also describes the cyber resilience measures proposed by national and international agencies and the AML actions taken by supervisory bodies, including the issuance of public statements to raise awareness of COVID-19-related AML risks, provision of guidance on the application of existing AML/CTF frameworks and coordination with the financial sector for the reporting of COVID-19-related fraud.

    Read more.
  • European Banking Authority to Act on Dividend Arbitrage Trading Schemes
    05/12/2020

    In response to the November 2018 request of the European Parliament to conduct an enquiry into dividend arbitrage trading schemes, the European Banking Authority has published a report (dated April 28, 2020) on the approach of national regulators across the EU to tackle market integrity risks associated with dividend arbitrage trading schemes. The EBA has also published a ten-point Action Plan to address the risks arising from such schemes. Both the report and Action Plan accompanied the EBA's letter to the European Parliament that describes its actions and the steps it intends to take in the future on this issue.

    The report sets out the findings arising from the enquiry, which consisted of surveys of national authorities responsible for anti-money laundering and counter terrorist financing and of national prudential regulators. The EBA found that dividend arbitrage trading schemes are not possible in all EU member states and that, where they are possible, they are not always regarded as a tax crime. The EBA concluded that AML and prudential authorities approach dividend arbitrage trading schemes in different ways and there are variations in the extent to which the handling of the proceeds from these schemes by financial institutions constitutes money laundering.

    Read more.
  • UK Conduct Regulator Issues Guidance on Financial Crime Controls and Information Security During COVID-19
    05/06/2020

    The U.K. Financial Conduct Authority has issued guidance on financial crime controls and information security for financial services firms during COVID-19. The FCA notes the increase in cyber-crime during the COVID-19 pandemic, the risks of which may be magnified by operational disruptions arising from working from home arrangements. Firms are expected to be proactive in managing the increased risks during this period, including being vigilant about the potential increase in cyber risks, ensuring they maintain appropriate governance and oversight arrangements, reviewing the impact of COVID-19 on their information security defenses and ensuring that general notification requirements are followed and significant cyber incidents are reported.

    Read more.
  • EU Consultation on SME Growth Markets
    05/06/2020

    The European Securities and Markets Authority has launched a consultation on the functioning of the small and medium-sized Growth Markets regime under the Markets in Financial Instruments Directive II and on draft technical standards for the promotion of the use of SME Growth Markets to be developed under the Market Abuse Regulation. SME Growth Markets were a new sub-category of multilateral trading facility introduced by MiFID II in January 2018 to facilitate access to capital for SMEs. The consultation closes on July 15, 2020.

    Read more.
  • Financial Action Task Force Reports on Financial Crime During COVID-19
    05/04/2020

    The Financial Action Task Force has published a report on financial crime (including money laundering and terrorism financing activities) during COVID-19, identifying challenges, good practices and policy responses to the emerging threats and vulnerabilities.

    The increased threats identified include fraud from criminals attempting to profit from the pandemic, a spike in cyber crime, particularly phishing emails and spam campaigns and a corresponding impact on other predicate crimes including human trafficking, exploitation of workers, online child exploitation and organized property crime. In conjunction, confinement and social distancing measures designed to combat COVID-19 are impacting government and private sector capacity to implement AML and CTF obligations.

    Read more.
  • Financial Stability Board Consults on Global Stablecoins
    04/14/2020

    The Financial Stability Board has launched a consultation on global stablecoin arrangements. The consultation is in response to the G20 mandating the FSB to analyze potential regulatory issues posed by global stablecoins and to advise on multilateral responses. Responses to the consultation should be submitted by July 15, 2020. The FSB's final report is expected to be published in October 2020.

    Read more.
  • Financial Action Task Force Issues Statement on Remaining Vigilant to AML and CFT Risks During the COVID-19 Pandemic
    04/01/2020

    The Financial Action Task Force has published a statement on measures to combat illicit financing during the coronavirus pandemic. The key messages are that the FATF supports the use of the flexibility built into the risk-based approach to anti-money laundering and counter-financing terrorism. However, it warns financial institutions to remain vigilant to new and emerging finance risks arising due to COVID-19, such as frauds arising due to difficulties in customer due diligence in person or reductions of monitoring due to remote working, or due to possible risks of fraud in government cash handout schemes. It reminds firms that they should ensure that they continue to effectively mitigate risks and are able to detect and report suspicious activities. In addition, the FATF urges financial institutions to use responsible digital customer onboarding and the delivery of financial services wherever possible and refers institutions to the FATF's recently released Guidance on Digital ID. Furthermore, the FATF encourages countries and financial institutions to consider appropriate use of simplified due diligence measures to assist in the delivery of government benefits established in response to the pandemic.

    View the FATF's statement.

    View details of the FATF's Guidance on Digital ID.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • UK Conduct Regulator Dear CEO Letter to Firms on Consumer Protection During COVID-19 Pandemic
    03/31/2020

    The U.K. Financial Conduct Authority has published a Dear CEO letter addressed to firms providing services to retail investors on the actions they should be taking to protect consumers during the COVID-19 pandemic. Firms are expected to provide strong support and service to consumers, to be transparent with their customers and to report to the FCA immediately if they foresee themselves getting into financial difficulty.

    Read more.
  • UK Joint Money Laundering Steering Group Consults on Crypto-Asset Exchange and Custodian Wallet Provider Guidance
    03/18/2020

    The U.K. Joint Money Laundering Steering Group has launched a consultation on its proposed new Guidance on how the U.K. Money Laundering Regulations apply to crypto-asset exchange providers and custodian wallet providers. The proposed Guidance will form a new Sector 22 section in Part II of the existing JMLSG Guidance. Comments on the proposed Guidance should be submitted by May 18, 2020.

    Read more.
  • Guidance Published on Digital Identification Technologies for Anti-Money Laundering Purposes
    03/06/2020

    The Financial Action Task Force has published Guidance on how digital identification technologies can be used to conduct some aspects of customer due diligence for anti-money laundering purposes. The FATF presents a risk-based approach to the use of digital ID software, relying on a set of open source, consensus-driven assurance frameworks and technical standards for digital ID systems. In addition, the FATF sets out a series of recommendations for relevant authorities, regulated entities (meaning financial institutions, virtual asset service providers and designated non-financial businesses and professions) and digital ID services providers. The Guidance is non-binding, however, it clarifies the FATF's standards.

    View the FATF's Guidance on digital ID.
  • EU Consultation on Revised Risk Factor Guidelines for Assessing Money Laundering Risks
    02/05/2020

    The European Banking Authority has launched a consultation on proposed revisions to the Risk Factor Guidelines for financial institutions to assess money laundering and terrorist financing risks. The proposed changes aim to take into account the most recent revisions to the EU Anti-Money Laundering Directive (i.e. 5MLD) and newly identified risks, including those specified in the EBA's implementation reviews. The consultation closes on July 6, 2020.

    Read more.
  • UK Joint Money Laundering Steering Group Proposes Amendments to Guidance
    02/03/2020

    The Joint Money Laundering Steering Group has opened a consultation on proposed amendments to its Guidance. The revisions to the Guidance are to account for changes introduced by The Money Laundering and Terrorist Financing (Amendment) Regulations 2019. The Regulations amend the existing Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, incorporating changes arising from the EU’s Fifth Anti-Money Laundering Directive. 

    Read more.
  • UK Government Launches Consultation on Application of EU Fifth Money Laundering Directive to Trusts
    01/24/2020

    HM Treasury and HM Revenue and Customs have launched a consultation on the implementation of rules governing the registration of trusts under the EU Fifth Anti Money Laundering Directive. Responses to the consultation should be submitted by February 21, 2020.

    Read more.
  • International Organization of Securities Commissions Recommends UTC Clock Synchronization to Facilitate Market Abuse Monitoring
    01/16/2020

    The International Organization of Securities Commissions has published a report in which it recommends that where jurisdictions require clock synchronization for trading purposes, clocks should be synchronized to Coordinated Universal Time (UTC). In its 2013 report - Technological Challenges to Effective Market Surveillance – Issues and Regulatory Tools (FR04/13) – IOSCO recommended the introduction of a requirement for trading venues and their participants to synchronize the business clocks used to record the date and time of a reportable event. The practice assists regulators in monitoring the markets for market abuse and identifying market abuse. Certain jurisdictions have already implemented clock synchronization according to UTC, including Australia, Canada and the EU.

    View IOSCO's report.
  • Bank of England and UK Conduct Regulator Announce Proposals for Financial Sector Data Reforms
    01/07/2020

    The Bank of England and U.K. Financial Conduct Authority have published a series of proposals setting out their plans to enhance their data and analytics capabilities. The proposals include a revised FCA data strategy, a BoE discussion paper on transforming data collection and a viability report published by the FCA and BoE, together with seven regulated firms, on the possibilities of digital regulatory reporting. The FCA and BoE depend on data to conduct their supervisory responsibilities.  

    Read more.
  • New EU Regulation Enhances European Supervisory Authorities' Powers
    12/27/2019

    An EU Regulation has been published amending the European Supervisory Authorities' powers under various pieces of EU legislation. The Regulation grants ESMA additional powers to monitor market data and authorize benchmark administrators under the Markets in Financial Instruments Regulation and the Benchmarks Regulation, respectively. It also amends the legislation founding the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority, granting them additional powers to facilitate their supervisory duties. The Regulation will enter into force on December 30, 2019. The provisions regarding ESMA's enhanced supervisory powers over market data and benchmarks will apply from January 1, 2022. All other provisions regarding the European Supervisory Authorities' enhanced powers will apply from January 1, 2020.

    Read more.
  • UK Secondary Legislation Published Implementing EU Fifth Money Laundering Directive
    12/20/2019

    The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 have been published, amending the existing Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. The amending Regulations incorporate changes made to EU legislation under the EU’s Fifth Anti-Money Laundering Directive. The majority of the amending Regulations provisions will come into force on January 10, 2020, with the exception of those governing: (i) customer due diligence on anonymous prepaid cards; and (ii) requests for information about accounts and safe-deposit boxes, which will come into force on July 10, 2020 and September 10, 2020 respectively.

    Read more.
  • European Supervisory Authorities Publish Guidelines on AML/CTF Cooperation
    12/16/2019

    The European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority (collectively known as the European Supervisory Authorities) have published joint guidelines aimed at enhancing cooperation between national regulators in combating anti-money laundering and counter-terrorist financing. The EU Fourth Money Laundering Directive requires national regulators to cooperate in their AML/CTF supervision of entities that operate on a cross-border basis. 

    Read more.
  • EU Report on Accepted Market Practices Under the Market Abuse Regulation
    12/13/2019

    The European Securities and Markets Authority has published an annual report to the European Commission on the application of accepted market practices under the 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.

    Read more.
  • European Securities and Markets Authority Publishes Final Report on Suspicious Transaction Reporting Under the Market Abuse Regulation
    12/12/2019

    The European Securities and Markets Authority has published its final report on the compliance of Member States with suspicious transaction and order reports under the Market Abuse Regulation, in which it sets out the results of its peer review into certain aspects of the STOR framework. Experts from national regulators and ESMA were appointed to conduct the review and issued a self-assessment questionnaire to all 31 EEA national regulators, as well as conducting on-site visits to six national regulators.

    Read more.
  • New EU Regulation on Promotion of Small- and Medium-Sized Enterprise Growth Markets
    12/11/2019

    A new Regulation amending the revised Markets in Financial Instruments Directive, Market Abuse Regulation and Prospectus Regulation has been published in the Official Journal of the European Union, introducing changes to support small- and medium-sized enterprise growth markets as trading venues. 

    Read more.
  • EU Council Pushes for Further Harmonization of EU Anti-Money Laundering Rules
    12/05/2019

    The Council of the European Union has adopted strategic priorities for reforms to the EU's anti-money laundering and countering the financing of terrorism regime and has called upon the European Commission to put those priorities into action.

    Read more.
  • UK Conduct Regulator to be Appointed as Supervisor of UK Cryptoasset Businesses
    12/02/2019

    The U.K. Financial Conduct Authority will be appointed as the supervisor of U.K. cryptoasset businesses under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 as a result of amendments that will be made to the Money Laundering Regulations due to come into force on January 10, 2020. The amendments are being made in order to implement the EU’s Fifth Money Laundering Directive, which Member States must introduce as part of their national laws by January 2020.

    Read more.
  • UK Conduct Regulator Consults on Guidance on Managing Inside Information
    11/27/2019

    The U.K. Financial Conduct Authority has published a newsletter for primary market participants seeking feedback on draft best practice guidance for government departments, industry regulators and public bodies on the identification, control and disclosure of inside information. Comments on the best practice note should be submitted by January 15, 2020.

    The FCA determined that new, up-to-date guidance on inside information was required to reflect recent legal and regulatory developments, including the introduction of the Market Abuse Regulation in July 2016. Certain of these developments are directly applicable to the actions of government departments, industry regulators and public bodies. The guidance is targeted at these entities and feedback on the guidance is therefore sought particularly from them. The note sets out certain relevant aspects of the Market Abuse Regulation and provides suggestions for how these entities can identify inside information that they become privy to, including questioning whether the information has been made public, whether it is precise and whether a reasonable investor might use it as part of the basis of an investment decision. It also provides suggestions on controlling and handling inside information once it has been identified and on the systems and controls that should be adopted around disclosing the information.

    View the FCA's guidance.
  • 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.
  • European Banking Authority Urges EU Legislative Update for Cross-Border Banking and Payment Services in the Digital Era
    10/29/2019

    The European Banking Authority has published a report identifying potential barriers to customer choice and the cross-border provision of banking and payment services in the EU, together with proposals for how to overcome these issues. Building on the EBA's FinTech Roadmap and the European Commissioner's Consumer Financial Services Action Plan, the report sets out the areas where the institutions, including FinTech firms, may face challenges when seeking to provide intra-EU cross-border services, focusing on authorizations and licensing, consumer protection and conduct of business requirements and anti-money laundering and countering the financing of terrorism. The EBA makes recommendations for where changes to EU primary legislation or further guidelines could address the issues to enhance the EU's single market.

    Read more.
  • 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.

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  • 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.

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  • 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. 

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