The Guidance is issuing in the context of increasing EU focus on outsourcing risks, which include cloud outsourcing, chain outsourcing, concentration risk and offshoring.
The Guidance will require regulated firms to assess functions that are outsourced, including both intragroup entities and third party providers, and the relative importance of each function, including intragroup arrangements and delegation arrangements. Unsurprisingly, the CBI notes that outsourcing and delegation are not different concepts. The identified risks must be managed and governed appropriately and be subject to ongoing monitoring.
The Guidance is to be applied in a proportionate manner to all firms. The proportionate application of the Guidance will be framed by each firm’s outsourcing risk assessment and resulting controls, and whether an outsourced function is critical or important.
CBI will be obliging firms to establish and maintain a register of all outsourcing arrangements and to submit outsourcing registers on a cyclical basis commencing in January 2022.
You can read more about the detail of the proposed Guidance here.
Liquidity - CBI letter to certain fund management companies on liquidity
The CBI issued a letter to fund management companies (FMCs) that were surveyed as part of the ESRB/ ESMA liquidity risk project. While the letter was specific to this set of firms and a sub-set of funds they manage, the findings from the ESMA Review are important and should be noted by all firms. The letter requires FMCs in receipt of the letter to consider how liquidity risk management frameworks and fund structures should be adapted and the steps needed to increase funds' resilience to future shocks. This consideration is to be concluded and the results presented to and approved by the board of the FMC by 30 June 2021. The elements for consideration include:
alignment of the liquidity profile of funds' investments, the risk profile of investors, redemption policies and settlement periods and the development of new policies to correct misalignments in a timely manner
ensuring the full suite of liquidity management tools (LMTs) are in place and used appropriately. This should include consideration of the circumstances where LMTs are appropriate outside of stress scenarios
disclosures in fund documentation and communication with investors to ensure clarity and transparency around the regular use of LMTs and conditions for their implementation
assessment of all other factors that could impact fund liquidity or trigger unplanned sale of assets (such as margin calls)
realistic and conservative estimate of which percentage of a fund's assets can be liquidated over certain time periods and ensuring redemption policies are aligned
information on the profile of the investor base to better understand any potential risks associated with redemption patterns, particularly in stressed market conditions
designing and testing funds' liquidity risk management frameworks and planning for future market disruption events should not assume government or central bank interventions
Sustainable Finance Disclosure Regulation (SFDR) - The ESAs Final Report, with draft RTS on the content, methodologies and presentation of SFDR disclosures, the Supervisory Statement on the application of the SFDR and a letter to the EU Commission identifying priority questions on SFDR.
Central Bank letter to fund management companies that were surveyed as part of the ESRB/ ESMA liquidity risk project (discussed above).
ascertaining, as part of customer due diligence (CDD) measures on a customer who is obliged to register beneficial ownership information on a central register (under S.I.110 of 2019 and S.I. 233 of 2020), that the information concerning the beneficial ownership of the customer is entered on the central register
verifying senior managing officials as beneficial owners
updating procedures for Enhanced CDD (ECDD) with the specified steps which should be applied by DPs in the context of ECDD
providing for the sharing of information relating to suspicious transactions in group situations involving third countries
updating Low and High Risk Factors (to reflect the schedules to the Act)
Also of interest:
STRs: FIU Ireland will be obliged, where practicable, to provide timely feedback to a DP on STRs on the effectiveness of and follow-up to reports made to it.
PEPs: the Minister for Justice, in consultation with the Minister for Finance, may issue guidelines on domestic "prominent public functions".
CBI: the Minister for Justice may confer additional functions on the CBI. CBI must establish a whistleblowing channel.
Improved co-operation with EU NCAs.
Beneficial Ownership of Trusts: a new Chapter 9B deals with the Designation of Classes of Express Trust (and Matters Related to Such Trusts) for Certain Purposes. This will (we expect) allow for certain trusts to be carved out of the obligation to register beneficial ownership information, including an occupational pension scheme, an approved retirement fund, a profit sharing scheme or employee share ownership trust, a trust for restricted shares, the Haemophilia HIV Trust, a unit trust captured by S.I. No. 233 of 2020, such other arrangement or class of arrangements as may be prescribed.
You can read more about the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 here.