April Monthly Regulatory Update

By Kyte Ekstrom | AML, Compliance, Crypto-Assests, FCA Regulation, FinTech, News | 0 Comments

Bank of England Publish Press Release on Central Bank Digital Currency

The Bank of England and HM Treasury have announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential UK CBDC. A CBDC would be a new form of digital money issued by the Bank of England and for use by households and businesses. It would exist alongside cash and bank deposits, rather than replacing them.

The main aims of the Taskforce is to:

  • Coordinate exploration of the objectives, use cases, opportunities and risks of a potential UK CBDC.
  • Support a comprehensive assessment of the overall case for a UK CBDC.
  • Monitor international CBDC developments to ensure the UK remains at the forefront of global innovation.

Bank of England Press Release on Central Bank Digital Currency

Central Bank Digital Currency Taskforce Terms of Reference

Regulating the UK as a Global Financial Centre

Nausicaa Delfas, Executive Director of International and Interim Chief Operating Officer of the FCA, delivered a speech at the City and Financial Global’s Future of UK Financial Services Regulation Virtual Summit. In the speech, Ms Delfas confirms the FCA’s commitment to maintaining open and fair UK markets, the importance of setting standards that support and encourage innovation, and the need for strong supervisory co-operation between respective jurisdictions. She notes that the departure from the EU presents us with new opportunities and a newfound position which allows the FCA to have a new, and more nimble approach to domestic policymaking.

Ms Delfas’s highlights important areas to address in the coming years, including; sustainable finance and the UK’s future regulatory framework, the FCA’s approach to the supervision of international firms, and the consistency of cross-border regulation.

FCA speech on regulating UK markets

IMPORTANT: FCA Publishes Reminder – Changes to Consumer Credit Firms Post-Brexit

From 1 June 2021, changes for firms subject to regulations 8, 10 and 11 of the Disclosure Regulations 2010, and the relevant rules in the FCA Handbook will come into effect.

The FCA has published a new webpage reminding firms of changes that certain consumer credit firms will have to make to their pre-contract consumer credit information forms.

The Treasury has set out transitional provisions (until 31st May 2021) for firms subject to regulations 8, 10 and 11 of the Disclosure Regulations. For firms that are subject to regulation 8 of the Disclosure Regulations, from 1st June 2021 these firms must only use the new (post-Brexit) Pre-Contract Credit Information Form. While firms subject to regulations 10 and 11 and CONC 2.7.2R(4)(a), of the FCA Handbook, must only use the new pre-contract consumer credit information (overdrafts) form.

If the Disclosure Regulations are not complied with, a credit agreement may only be enforceable against the debtor on an order of the court under the Consumer Credit Act 1974.

Changes for Consumer Credit Firms Post-Brexit

Webpage Amendments – Consumer Credit

FCA Publishes Financial Promotions Quarterly Data

The data shows the number of financial promotions that have been amended or withdrawn due to non-compliance with the FCA’s rules. The FCA realised the need for greater transparency over non-compliant financial promotion outcomes, this was due to both the proactive work the FCA performs to ensure promotions meet requirements and also following complaints. The quarterly review pertains particularly to the overriding requirement that promotions must be fair, clear and not misleading.

The FCA reviewed 441 financial promotions; 38 cases resulted in 105 promotions being amended or withdrawn through the FCA’s interaction with authorised firms

The FCA intends to continue publishing financial promotions data on a quarterly basis.

FCA: Financial promotions quarterly data

FCA publishes speech on Purposeful AML controls

The FCA has published a speech by Mark Steward, Executive Director of Enforcement and Market Oversight. The speech, delivered at the AML & ABC Forum 2021, was on the importance of purposeful anti-money laundering (AML) controls.

Highlights from the speech include:

  • Two of the FCA’s biggest sanctions in the last 12 months related to failures to address financial crime and anti-money laundering (AML) risks.
  • The FCA currently have 42 investigations ongoing into firms and individuals involving, systems and controls over politically exposed persons, customers with significant cash intensive operations, correspondent banking and trade finance, and transaction monitoring, among others.
  • The complexity of AML investigations as they are rarely transactional and require a systemic understanding of how a firm operates, its governance controls, its cultural habits, and the nuts and bolts of sometimes opaque systems.
  • In the last 12 months, the FCA have increased their surveillance of online investment promotions targeting offers from unauthorised firms, potential investment scams and other ‘too good to be true’ promotions, including lead generation sites.

Speech by Mark Steward: The Importance of purposeful anti-money laundering controls

UK-EU MoU Technical Negotiations have Concluded – What regulatory changes can you expect?

Discussions on The Joint Declaration on Financial Services Regulatory Cooperation alongside the Trade and Cooperation Agreement have now been concluded. Before the MoU can be signed formal steps need to be undertaken on both sides, but it is expected that this will be done ‘expeditiously’.

Once signed, the MoU, will enable the framework for voluntary regulatory cooperation in financial services between the UK and the EU, establishing a Joint UK-EU Financial Regulatory Forum. The joint forum will serve as a platform to facilitate dialogue on financial services issues. We will update you once the final MoU has been published.

Other articles of interest include:

[ESMA Consultation Paper on Framework for EU Money Market Funds](https://www.esma.europa.eu/press-news/esma-news/esma-consults-framework-eu-money-market-funds#:~:text=ESMA aims to review the,regulation%2C and proposes potential reforms.)

ESMA has Published a Statement to clarify Transparency Requirements Applying to UK Issuers (Statement (ESMA32-61-1156)

The Statement’s aim is to provide clarifications on the application of the Transparency Directive (TD) requirements by UK issuers with securities admitted to trading on regulated markets in the EU, under Article 4 of the Transparency Directive (Directive 2004/109/EC), and to promote common supervisory practices among NCAs when exempting UK issuers from their TD requirements.

Issuers with a registered office in the UK, from the 1st of January 2021, are now considered in the EU as third country issuers. Article 23(1) of the TD allows NCAs to exempt third country issuers from the obligations under Article 4 of the TD provided that the third country sets equivalent requirements.

The TD requires issuers with securities admitted to trading on a regulated market in the EU (EU issuers) to make public their annual financial report at the latest four months after the end of each financial year.

For further details of UK issuer exemptions from this obligation and UK Issuers which are not required by UK law to prepare consolidated financial statements, click the link below:

ESMA – Public Statement

FCA publishes policy statement on Annual Financial Crime Reporting

The FCA has published a policy statement on the extension of the FCA’s annual financial crime reporting obligation (PS21/4). This will affect firms that are supervised under Money Laundering Regulations (MLRs); including banks, building societies and crypto-asset businesses.

The policy statement proposes that additional firms and crypto-asset businesses should submit an annual financial crime report (referred to as ‘REP-CRIM’).

REP-CRIM is intended to provide the FCA with information on a range of indicators, reflecting the potential money laundering risks of regulated activities carried out by firms. Data required to be reported under REP-CRIM includes information on:

  • politically-exposed persons.
  • high-risk jurisdictions and customers.
  • the number of Suspicious Activity Reports that have been filed.
  • sanctions screening systems.
  • prevalent frauds.

Firms that will be brought into the scope of REP-CRIM for the first time need to take steps to prepare the submission of REP-CRIM returns as and when they become due.

FCA Policy Statement PS21/4

Annual Financial Crime Reporting Requirements for Crypto-asset Businesses Registered under MLRs

The FCA has published its Feedback Statement on Open Finance (FS 21/7)

The Call for Input explored the opportunities and risks presented by Open Finance. Open finance involves extending open banking-like data sharing and third-party access to a wider range of financial sectors and products (such as savings, investments, pensions and insurance). It is based on the principle that financial services customers own and control both the data they supply and which is created on their behalf..

The FCA’s Feedback Statement addressed the following:

  • Maximisation of the potential of open banking.
  • Key themes and issues arising from Open Finance, including risks and benefits, feasibility and cost, the regulatory framework, common standards and infrastructure.
  • Draft principles for Open Finance, noting that the version of the principles set out in the Call for Input were a good starting point.
  • The FCA’s role in this context and next steps.

The FCA states that they will support the government as it considers the timing, scope and nature of any legislation on Open Finance, and also plans to assess the regulatory framework that would be needed to support the project.

Feedback Statement FS 21/7: Open finance

FCA publishes guidance FG21/3 on Advising on pension transfers

The finalised guidance FG21/3 has been published in order to help firms give suitable pension transfers advice on a consistent basis.

Due to weak record keeping, and poor practices the FCA discovered that many firms are struggling to give consistent and suitable advice which meets the FCA’s rules to consumers. Where the FCA found suitable advice, in many cases it discovered poor practices in the advice process based on a misunderstanding of the requirements, poorly designed systems, outdated processes or inadequate disclosures. The advice is intended to help firms understand how to apply the FCA’s Handbook rules when giving defined benefit transfer advice.

Some firms may be required to make changes to their processes where their approach falls short of the FCA’s standards.

Changes are likely to include the way firms:

  • Collect information about their client’s circumstances to give suitable advice.
  • Use the information they collect to assess whether a defined benefit transfer is suitable.
  • Communicate their advice effectively to consumers.

This guidance comes into effect immediately.

Finalised Guidance FG21/3: Advising on Pension Transfers

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