July Regulatory Update

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FCA publishes statement on its expectations for Benchmark Administrators and firms using Appointed Representatives regarding the Appointed Persons Regime (APR) – 30 June

The FCA stated that it recognises that firms may need longer periods of temporary arrangements if, for example, an Approved Person is absent because of coronavirus, or if recruitment to replace an Approved Person has been delayed due to the pandemic.

The statement confirms:

  • the FCA’s intention to issue a modification by consent to the 12-week rule, which will allow temporary arrangements for up to 36 weeks, providing further flexibility to firms
  • approved persons who have been furloughed can retain their approval during their absence and will not need to be re-approved by the FCA when they return
  • the FCA does not expect firms to notify it under Form D of the temporary arrangements envisaged in the statement

FCA statement regarding the APR.

FCA extends assessment deadline for solo-regulated firms under the SMCR – 30 June 2020

The FCA has announced it will extend the deadline for solo-regulated firms to undertake their first assessment of the fitness and propriety of their certified persons under the Senior Managers and Certification Regime (SMCR) from 9 December 2020 to 31 March 2021 in light of the disruption caused by COVID-19.

To ensure SM&CR deadlines remain consistent, the FCA intends to consult on extending the deadline for the following requirements from 9 December 2020 to 31 March 2021:

  • the date the Conduct Rules come into force
  • the deadline for submission of information about Directory Persons to the Register
  • fitness and propriety tests for Certified Persons

FCA press release regarding assessment deadline for solo-regulated firms under the SMCR

FCA publishes Policy Statement PS20/7: FCA regulated fees and levies 2020/21

The FCA published its 2020/21 periodic fees and levies.

All firms will be affected by the Policy Statement, and contained within it is a table to help fee-payers identify which chapters relate to them. Firms can use the online fees calculator to calculate their individual fees based on the final rates.

FCA Policy Statement PS20/7: FCA regulated fees and levies for 2020/21

HM Treasurey publishes statement on the future UK-Swiss financial services relationship

The statement, made jointly with the Swiss Federal Department of Finance, confirms that the UK and Switzerland intend to conclude a legally binding international agreement to establish mutual recognition of each jurisdiction’s regulatory and supervisory regimes in the fields of insurance, banking, asset management and capital markets, including market infrastructure.

The commitment to develop an international agreement on financial services aims to enhance cooperation and trust between the two countries to reduce costs and barriers for UK firms accessing the Swiss market, and vice versa.

HM Treasury statement on the future UK-Swiss financial services relationship

Government press release

FCA updates trade repository registration arrangements – 26 June 2020

The FCA has updated its webpage on trade repositories (TRs) to publish updated instructions on TR registration arrangements under the retained EU law version of the Securities Financing Transactions Regulation (EU) 2015/2365 (UK SFTR).

It states that after 31 Decemeber 2020 any TR wishing to offer its services relating to onshored EMIR (UK EMIR) or onshored Securities Financing Transactions Regulation (UK SFTR) in the UK will need to be registered with, or recognised by the FCA.

To support a smooth transition to the new regime for TRs in the UK, the Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018 (TR Regulation), which transfers functions in relation to the registration of TRs from ESMA to the FCA, includes both a conversion and temporary registration regime for firms wishing to operate under UK EMIR as a TR in the UK after the end of the transition period.

To help firms understand their obligatins, the FCA has further information as to which application may be required on the webpage.

Updated FCA webpage on TRs

FCA to re-open notifications window – 1 July 2020

The FCA has updated its webpage on the temporary permissions regime (TPR) for inbound passporting EEA firms and funds to confirm that it will re-open the notifications window on 30 September 2020, which will allow firms and fund managers that have not yet made a notification to do so before the end of the Brexit transition period. The FCA states that there will also be an opportunity for fund managers to update their previously submitted notifications, if necessary.The FCA intends to communicate further on this in September 2020.

FCA temporary permissions regime (webpage)

The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020 (SI 2020/628)

The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020 (SI 2020/628) were made on 29 June 2020, and aim to ensure a coherent and functioning financial services regulatory regime in the UK at the end of the Brexit transition period by:

  • revoking several pieces of retained EU law and UK domestic law which would not be appropriate to keep on the statute books after the end of the transition period as they deal with cross-border activity within the EU and the functioning of EU institutions; and
  • making a number of amendments to address deficiencies in UK domestic law and retained EU law arising from the UK’s withdrawal from the EU.

Regulations 2, 3, 5, 6, 11 and 16 come into force on 30 June 2020. Regulations 1 to 10, 12 to 14 and 17 come into force immediately before 31 December 2020, with Regulations 4, 15 and Part 3 coming into force on 1 January 2021.

The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020 (SI 2020/628)

Basel Committee publishes updated Guidelines on risk management

Following its consultation on incorporating into the Guidelines practical guidance on the interaction between prudential and AML and CTF supervisors, the Basel Committee on Banking Supervision (Basel Committee) has published updated Guidelines on the management of anti-money laundering (AML) and counter-terrorist financing (CTF) risks.

The guidelines aim to enhance the effectiveness of supervision of banks’ money laundering and financing of terrorism (FT) risk management.

Updated Basel Committee Guidelines on the management of AML and CTF risks

Press release

European Commission commences infringement proceedings against nine member states – 2 July 2020

The European Commission has announced that it has commenced infringement proceedings against nine EU member states concerning failures to transpose and implement the Fourth Money Laundering Directive (EU) 2015/849 (4MLD) into domestic law before the transposition deadline of 26 June 2017.

Letters of formal notice have been sent to Luxembourg, Slovakia and Slovenia for incorrectly transposing 4MLD. Reasoned opinions have been sent to the Czech Republic, Denmark and Italy for failing to fully implement 4MLD into domestic law. The Commission has referred Austria, Belgium and the Netherlands to the European Court of Justice (ECJ) with a request for financial sanctions for failing to fully implement 4MLD into domestic law.

European Commission July infringements package

FCA updates webpage on considerations for UK firms – 7 July 2020

The FCA has updated its webpage regarding the considerations for firms on how business operations and consumers may be impacted by the end of the Brexit transition period, including with respect to outsourcing arrangements.

The webpage contains a list of questions to help firms understand whether they conduct business witin the EEA and if they might be affected at the end of the transition period.

FCA webpage on considerations for UK firms in light of the Brexit transition period

Bank of England publishes Industry Review of CHAPS enhanced ISO 20022 messages

The Bank of England has published an Industry Review on the implementation of the CHAPS enhanced ISO 20022 payment messaging standard, which forms part of the Bank’s real-time gross settlement (RTGS) renewal programme.

The Bank is engaging with the payments industry in the UK and abroad to develop harmonised standards, and seeks feedback on the near-final message schema published as part of the Review, ahead of publication of the final version in September 2020.

The deadline for comments on the near-final versions of the enhanced messages is 31 July 2020.

Bank of England industry review of CHAPS enhanced ISO 20022 messages as part of its RTGS renewal programme

A new messaging standard for UK payments: ISO 20022 (webpage).

FCA publishes finalised temporary guidance for payment firms – 9 July 2020

The FCA has published finalised temporary guidance on strengthening payment and e-money firms’ prudential risk management and safeguarding customers’ funds after consulting on draft guidance in May 2020.

The guidance applies to authorised:

  • payment institutions or small payment institutions
  • e-money institutions or small e-money institutions
  • credit institutions and custodians

The guidance aims to provide additional direction on how payment and e-money firms can ensure compliance with the safeguarding requirements under the Electronic Money Regulations 2011 and the Payment Services Regulations 2017, to help prevent harm to customers in the event of insolvency during the Covid-19 pandemic.

Finalised Guidance – Coronavirus and safeguarding customers’ funds: additional guidance for payment and e-money firms.

FCA publishes ‘Portfolio Strategy’ letter on compliance with regulatory obligations regarding Payment Services and E-Money firms – 9 July 2020

The FCA has published a ‘Portfolio Strategy’ letter from David Geale (Director of Retail Banking and Payments Supervision at the FCA) addressed to the CEOs of payment services firms and e-money issuers, setting out the FCA’s supervisory expectations of such firms in relation to their regulatory obligations and the key risks which may cause harm to consumers.

The FCA has identified 6 key areas where customers can be harmed through the non-compliance of firms. They are;

  • Safeguarding
  • Prudential risk management
  • Financial crime
  • Financial promotions and consumer communications
  • Governance and oversight
  • Records management and reporting

FCA Portfolio Strategy letter

UK Finance publishes article on planned implementation and compliance under PSRs 2017 – 3 July 2020

UK Finance has published an article on its planned implementation of strong customer authentication (SCA) requirements for e-commerce transactions in the UK under the Payment Services Regulations 2017.

According to UK Finance, the three key phases highlighted in the UK implementation plan are:

  • Phase 1 – Development (2020)

The aim is to ensure all parties and particularly e-merchants enable support for 3DS and/or correct flagging of transactions send directly via authorisations.

  • Phase 2 – Market Readiness (1 Jan – 31 May 2021

Implementations from e-merchants and issuers are expected to be completed during this phase. Issuers will start enabling SCA for certain transactions to provide e-merchants with a period of testing and transition which will have minimum impact to the customer’s check-out journey.

  • Phase 3 – Full Ramp up (1 Jun – 13 Sep 2021)

A gradual introduction of SCA to provide a period of adjustment and minimise any customer impact by enforcement date. During this period issuers will start checking randomly if e-commerce transactions are SCA compliant, and soft decline them if they are not.

UK Finance – Ensuring UK SCA compliance and minimising customer impact

HM Treasury publishes Policy Statement on changes to the FCA’s cancellation process

HM Treasury has published a statement which sets out how the new procedure will work in practice, including the situations in which it can be triggered.

There will be an additional streamlined process for cancelling authorisations, which will allow the FCA to cancel the authorisation of firms it suspects may no longer be carrying out FCA-regulated activities, if certain grounds are met. Where agreed with the firm, the FCA will be able to commence the new process by serving a first notice by letter or electronic means. If the firm does not respond within 28 days, including after a second notice is sent, the FCA will publish a notice on its website and on the firm’s Register entry stating that “action has been commenced with a view to removing the firm’s authorisation on the basis that it appears they are no longer carrying on a regulated activity”. One month after the publication, the FCA will cancel the firm’s authorisation.

The government stated that while it is not a formal consultation, HM Treasury welcomes views on the intended changes.

HM Treasury Policy Statement on changes to the FCA’s process for cancelling firms’ authorisation

HM Treasury publishes consultation on Financial Crime Levy

HM Treasury has published a Consultation Paper setting out its proposals for the introduction of an economic crime levy to fund the tackling of money laundering and to help delivery of the government’s 2019 economic crime plan.

The consultation seeks views on what the levy will pay for, how it should be calculated and distributed across the anti-money laundering (AML) regulated sector, and how the levy should be collected.

The consultation period closes on 14 October 2020.

HM Treasury consultation on introducing an economic crime levy to fund AML action.

Government website – Economic Crime Levy consultation.

HM Treasury and HMRC publish outcome of its consultation on extending the Trust Registration Service – 15 July 2020

HM Treasury and HMRC have published a summary of responses to its consultation on extending the Trust Registration Service to comply with the Fifth Money Laundering Directive (EU) 2018/843 (5MLD).

The consultation, which ran from 24 January 2020 to 21 February 2020, provided information and sought views on how the Directive was to be transposed and on how certain processes could work for the expanded Trust Registration Service.

Fifth Money Laundering Directive and Trust Registration Service – Summary of responses

European Commission adopts legislative proposal for a new Regulation regarding cross-border payments- 17 July 2020

The European Commission has adopted a legislative proposal for a new Regulation on cross-border payments in the Union (2020/0145(COD)). The proposed Regulation aims to codify the existing Regulation on cross-border payments (924/2009/EU), in line with the Commission’s policy to codify legislative acts after they have been amended at least ten times. The proposed Regulation will preserve the content of the existing Regulation while repealing and replacing it.

the Council of the European Union and the European Parliament will now consider the proposed regulation under the accelerated legislative process that applies to codification proposals.

European Commission proposal for a new Regulation on cross-border payments.

FCA Guidance Consultation GC20/3: Guidance for firms on the fair treatment of vulnerable customers

The FCA has published Guidance Consultation on its new best practice guidance for firms to do more to protect vulnerable consumers. The draft guidance aims to provide a framework that allows all firms to accurately assess whether they are treating vulnerable consumers fairly, ensuring consistency across the financial services sector.

Alongside the draft guidance, the FCA has also published research, with 21 case studies, on vulnerable consumers’ experiences of dealing with financial services firms, which highlights 4 key themes for firms to consider;

  • Recognising vulnerability and understanding customers’ needs
  • The value of sympathy
  • The importance of empowered and knowledgeable staff
  • Meeting vulnerable consumers’ communication needs

The guidance is open for consultation until 30 September 2020.

FCA Guidance Consultation GC20/3: Guidance for firms on the fair treatment of vulnerable customers

FCA report on its research on the experiences of vulnerable customers in financial services

FCA case studies on the experiences of vulnerable customers in financial services

HM Treasury publishes call for evidence in regards to its Payments Landscape Review

The call for evidence is the first stage of the review and sets out the government’s aims for payments networks in the UK. It also makes a high-level assessment of how well the current system delivers against the government’s aims and asks questions about the opportunities, gaps and risks that need to be addressed in order to ensure that the UK maintains its status as a country at the cutting edge of payments technology.

The call for evidence seeks feedback from stakeholders on these objectives and asks how the industry, regulators and government can better meet them.

The call for evidence closes on 20 October 2020.

HM Treasury payments landscape review: call for evidence

PSR launches call for input on development – 29 July 2020

The Payment Systems Regulator has announced the development of its future strategy. The purpose of the strategy is to define clear outcomes that they want to see in the payments sector.

The PSR wants input from all stakeholders before beginning the official consultation to be published at the end of 2020 or the beginning of 2021.

The engagement will be broken down into 3 key themes;

  • Innovation and future payment methods
  • Competition
  • Choice and availability of payment methods

The initial engagement period will end in September 2020.

PSR future strategy – more information

JMLSG publishes sectoral guidance on pooled client accounts, cryptoasset exchanges and custodian wallet providers

The Joint Money Laundering Steering Group (JMLSG) has published updated versions of Parts I and II of its guidance on the prevention of money laundering and the financing of terrorism in the UK financial services industry to include new sectoral guidance on pooled client accounts, cryptoasset exchanges and custodian wallet providers. The JMLSG consulted on the proposed revisions to its guidance in March and May 2020.

The JMLSG noted that it has submitted the revised guidance to HM Treasury for approval.

Part I JMLSG guidance on the prevention of money laundering and the financing of terrorism in the UK financial services industry

Part II JMLSG guidance on the prevention of money laundering and the financing of terrorism in the UK financial services industry