Financial Services Regulation and Compliance - General Cross Sectoral July 2022
Financial Services Regulation and Compliance - General Cross Sectoral July 2022
Central Bank (Individual Accountability Framework) Bill 2022
The Department of Finance has now published the long-awaited Central Bank (Individual Accountability Framework) Bill 2022 on 28 July 2022. This follows on from publication of the General Scheme for the individual accountability framework legislation which was previously published in July 2021.
Irish Central Bank releases new XBRL taxonomy and guidance
On the 29 July 2022, the CBI has published its latest XBRL Taxonomy, version 2.1. It forms part of the CBI’s updated reporting requirements for electronic money institutions and payment institutions The CBI is transitioning the reporting format for these institutions from web form to XBRL for quarterly accounts and supplementary returns, in line with a wider move by the CBI toward the use of XBRL. Alongside the XBRL Central Bank of Ireland Taxonomy 2.1 itself, a range of guidance notes and example files have also been made available.
CBI highlights weaknesses in virtual asset service providers’ AML/CFT frameworks
On 11 July 2022, the CBI, published a bulletin in relation to virtual asset service providers (VASPs), seeking to assist applicant firms to strengthen both their applications for registration and their anti-money laundering and countering the financing of terrorism (AML/CFT) frameworks.
Since 23 April 2021, VASPs are required to comply with the relevant AML/CFT obligations under the Criminal Justice Act 2010 to 2021. Firms that wish to conduct business as a VASP must apply to the CBI for registration. The CBI is currently progressing the assessment of registration applications, and has provided feedback to 90% of applicants on their proposed AML/CFT frameworks.
The bulletin outlines key issues identified through the assessment process, sets out the CBI’s expectations in relation to key AML/CFT requirements, and advises firms that registered VASPs, as with all supervised entities, will be subject to a supervisory levy.
The CBI identified, in the vast majority of applications, a lack of understanding and compliance with key AML/CFT obligations, in addition to significant control weaknesses. The lack of compliance, coupled with control weaknesses, resulted in a significant number of the applicant firms not being able to demonstrate to the CBI that they could meet their AML/CFT obligations.
Director of Enforcement & Anti-Money Laundering, Seána Cunningham said “All firms regulated and supervised by the Central Bank for AML/CFT purposes must be able to demonstrate a robust AML/CFT control framework that complies with the relevant obligations. The Central Bank will only register a firm when it is satisfied that the firm can meet its AML/CFT obligations on an ongoing basis."
EBA adopts decision on reporting of payment fraud data under the revised Payment Services Directive
On 1 July 2022, the European Banking Authority adopted a decision on the reporting by competent authorities of payment fraud data under the Payment Services Directive (PSD2). Competent authorities shall report to the EBA the payment fraud data under the PSD2, as specified in the EBA guidelines on fraud reporting, via the European Centralised Infrastructure of Data (EUCLID) and according to the EBA Data Point Model.
This decision allows the establishment of a streamlined workflow arrangement whereby the European Central Bank, on behalf of the relevant competent authorities, could submit data in line with the specifications set out in the EUCLID Decision.
ECB supports EU issuance service
The ECB acting on behalf of the Eurosystem, will support the European Commission in its goal of ensuring the funding of the Next Generation EU (NGEU) programme for the recovery and transformation of the European economy after the coronavirus (COVID-19) pandemic.
With NGEU, the Commission will become one of the largest supranational issuers of debt securities denominated in euro. Debt securities issued under the NGEU programme are expected to reach a total value of €800bn by 2026.
The Commission is setting up an EU issuance service (EIS) in close collaboration with the National Bank of Belgium Securities Settlement System (NBB-SSS), a central securities depository (CSD) owned and operated by the Nationale Bank van België/Banque Nationale de Belgique. Via the EIS, the Commission will issue EU debt securities to NBB-SSS, which will act as issuer CSD, distributing the securities in the primary market via its links with investor CSDs throughout the EU. The securities will be settled in central bank money in TARGET2-Securities , but CSDs not participating in TARGET2-Securities will also be able to access the securities. The EIS is scheduled to go live in the second half of 2023.
FSB statement on international regulation and supervision of crypto-asset activities
On 11 July 2022, the FSB published a statement noting that crypto-assets and markets must be subject to effective regulation and oversight commensurate to the risks they pose, both at the domestic and international level. It calls for adherence by so-called stablecoins and crypto-assets to relevant existing requirements where regulations apply to address the risks these assets pose. It also calls for crypto-asset service providers to ensure compliance with existing legal obligations in the jurisdictions in which they operate at all times.
This statement outlines the work the FSB is taking forward, in collaboration with standard-setting bodies, including the Financial Action Task Force, on the regulation and supervision of ‘unbacked’ crypto-assets and ‘stablecoins’, as well as on analysing the financial stability implications of decentralised finance. This work should provide a solid basis for a consistent and comprehensive regulation of crypto assets.
Letter from the ECB President to Irene Tinagli, ECON Chair, on progress on climate-related action plan
On 4 July 2022, the ECB President sent a letter to Irene Tinagli, ECON Chair, on progress and next steps on the climate-related action plan. The Governing Council of the European Central Bank has decided to take further steps to include climate change considerations in the Eurosystem’s monetary policy framework. It decided to adjust corporate bond holdings in the Eurosystem’s monetary policy portfolios and its collateral framework, to introduce climate-related disclosure requirements and to enhance its risk management practices.
These measures are designed in full accordance with the Eurosystem’s primary objective of maintaining price stability. They aim to better take into account climate-related financial risk in the Eurosystem balance sheet and, with reference to our secondary objective, support the green transition of the economy in line with the EU’s climate neutrality objectives. Moreover, the measures provide incentives to companies and financial institutions to be more transparent about their carbon emissions and to reduce them. Additionally, measures are to be regularly reviewed to check that they are fit for purpose and aligned with the objectives of the Paris Agreement and the EU’s climate neutrality objectives.
Experts invited to join technical talks on digital euro
On 1 October 2021, the ECB launched an investigation phase to consider what a digital euro might look like. During this phase, which is expected to take two years, they will look at how a digital euro could be designed and distributed to retailers and the public. After the investigation phase concludes, the Eurosystem will decide whether to start developing a digital euro.
On 8 July 2022, the ECB is inviting technology experts to take part in online technical talks to explore options for the design of a central bank digital currency.
The talks will focus on the large-scale application of privacy-enhancing technologies in settlement of retail payments. The topics that will be explored are:
How can the payment asset issuer exert control over settlement rules and maintain adequate, tamper-proof evidence of the amounts in circulation, while also minimising the accessibility of sensitive information? (“Sensitive information” is to be understood as any information that allows the operator of a ledger to link transaction data to an individual user.)
What are successful examples of large-scale applications?
How can back-end IT architecture facilitate these privacy-enhancing techniques?
The talks will be held at expert level as closed sessions with members of the ECB’s digital euro project team. Each talk will comprise a presentation lasting 20 minutes, followed by 25 minutes for questions and answers approximately.
Sanctions imposed in response to the crisis in the Ukraine
Since February, the EU imposed a number of sanctions in response to the crisis in the Ukraine. Given that the crisis is developing and sanctions are continuing to evolve, the CBI is publishing details of new restrictive measures/sanctions that are adopted in this regard, as well as any associated EU/UN guidance, on their dedicated webpage.
For more information on these topics please contact any member of A&L Goodbody's Financial Regulation team.