Financial Services Regulation and Compliance - General Cross Sectoral May 2023
Financial Services Regulation and Compliance - General Cross Sectoral May 2023
Governor's Blog – Crypto and How we Can Protect the Consumer
On 5 May 2023, Governor of the CBI, Gabriel Makhlouf, welcomed MiCA as an important step in the regulation of crypto assets and endorsed ‘backed crypto’ products, such as electronic money tokens (EMTs) and asset reference tokens (ARTs), which will be regulated under MiCA. Governor Makhlouf labelled ‘unbacked crypto’ a 'Ponzi scheme' and reiterated the CBI’s concern on the risk such products pose to consumers. Governor Mahklouf, in his blog post, signalled his intention to work with colleagues across the EU and global fora, such as the Financial Stability Board, to deliver a rigorous regulatory regime that promotes a level playing field and avoids arbitrage so as to serve the interests of the community at large.
CBI Speech – Preventing Financial Crime in a Rapidly Changing Environment: A Regulator’s View
On 25 May 2023, Director of Enforcement and Anti-Money Laundering of the CBI, Seána Cunningham, delivered a speech on Preventing Financial Crime in a Rapidly Changing Environment: A Regulator’s View at the European Anti-Financial Crime Summit in Dublin. Ms Cunningham emphasised the importance of collective effort at national and international level, as well as the need for awareness and vigilance in respect of scams and market abuse. Finally, Ms Cunningham noted that the types of risks posed by financial crime are quickly evolving, most notably in sanctions evasion.
European Union (Requirements for Credit Transfers and Direct Debits in Euro) (Amendment) Regulations 2023 [S.I. No. 253 of 2023]
On 24 May 2023, the Regulations were published. They will enter into force on 1 June 2023. The Regulations make certain amendments to the European Union (Requirements for Credit Transfers and Direct Debits in Euro) Regulations 2013 (S.I. No. 132 of 2013), with respect to the power of the CBI to require from payment service providers, payees, or payers such information, records, plans etc., as necessary for the performance of its duties under the SEPA Regulation or the European Union (Requirements for Credit Transfers and Direct Debits in Euro) Regulations 2013.
Safeguarding notice to payment and e-money firms
On 25 May 2023, the CBI issued a notice clarifying the nature of the specific audit of compliance with the safeguarding requirements under the European Union (Payment Services) Regulations 2018 (PSR) / European Communities (Electronic Money) Regulations 2011 (EMR).
Firms are required to prepare documentation setting out a description of aspects of their organisational arrangements in place on 31 December 2022 / as at the date of most recent their financial year end within the period 1 July 2022 to 30 June 2023. Firms should also prepare an assertion as to the quality of the description, which must be approved by the board of directors and be subject to a reasonable assurance attestation engagement by the statutory auditor (or another audit firm).
On 24 May 2023, the CBI published its annual report outlining notable achievements over the last year, including the completion of the mortgage measures framework review, the launch of its review of the Consumer Protection Code, concluding the tracker-related firm investigations, introducing new macroprudential rules for property funds, and strengthening the resilience of firms to climate-related and transition risks. The report also reiterates the CBI’s priorities for 2023.
Financial Services: Commission adopts draft memorandum of understanding with the United Kingdom
On 17 May 2023, the European Commission adopted a draft memorandum of understanding (MoU) establishing a framework for structured regulatory cooperation in financial services with the United Kingdom. The MoU will establish the administrative framework for voluntary regulatory cooperation related to financial services between the EU and the UK. This will include the establishment of a Joint EU-UK Financial Regulatory Forum, with the aim of facilitating structured dialogue on financial services issues.
The MoU does not deal with access of UK-based firms to the Single Market.
New proposal amending rules concerning financial services contracts concluded at a distance
On 11 May 2023, the European Commission published a proposal to simplify and modernise the existing legislative framework governing the distance marketing of financial services. The existing Distance Marketing of Financial Services Directive (Directive 2002/65/EC) will be repealed, while relevant aspects of consumer rights regarding financial services contracts concluded at a distance will be included within the scope of the horizontally applicable Consumer Rights Directive.
European Commission updates list of high risk third countries
On 17 May 2023, the European Commission updated the list of high risk third country jurisdictions that present strategic deficiencies in their AML/CFT regimes. Nigeria and South Africa were added to the list, whilst Cambodia and Morocco were delisted.
The list takes into account information from FATF, and the most recent changes determined at the FATF Plenary of February 2023.
Joint Committee – Annual Report 2022
On 23 May 2023, the ESAs published their Joint Annual Report for 2022. The Joint Committee focused on issues of cross-sectoral relevance, such as joint risk assessment, sustainable finance, digitalisation, consumer protection, securitisation, financial conglomerates, and central clearing. Notable measures include the Sustainable Finance Disclosure Regulation (SFDR) and the Digital Operational Resilience Act (DORA).
Proposal for a regulation on instant credit transfers in euro
On 22 May 2023, the European Council agreed its position on the proposal for a regulation of the European Parliament and of the Council amending Regulations (EU) No 260/2012 and (EU) 2021/1230 on instant credit transfers in euro. The regulation aims to improve the availability of instant payment options in euro to everyone who owns a bank account in the EU and in EEA countries. Under the proposed rules, payment service providers such as banks which provide standard credit transfers in euro will be required to also offer the service of sending and receiving instant payments in euro. The charges they apply (if any) must not be higher than the charges they apply for standard credit transfers.
The European Council will next commence negotiations with the European Parliament to agree a final version of the text.
Report from the Commission assembling specific payment account related data from Member States
On 12 May 2023, the European Commission published a report reviewing implementation of the Payment Accounts Directive, as required by Article 27 of Directive 2014/92/EU on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features. The Commission concluded that on all main measures, including transparency and comparability, switching service, and the right to a payment account with basic features, the Directive is functioning as intended.
ECB: Report on Card Fraud in 2020 and 2021
On 26 May 2023, the ECB has published a report on card fraud on in 2020 and 2021. Encouragingly, the ECB determined that card fraud in 2021 had fallen to the lowest level since data collection began. Specifically, the ECB noted a 12% decline in card-not-present fraud after the introduction of strong customer authentication requirements. It also noted that 63% of total value of card fraud involves cross-border transactions.
ESAs propose ESG disclosures for STS securitisations
On 25 May 2023, the ESAs jointly submitted RTS on the ESG impact disclosure for simple, transparent and standardised (STS) securitisations under the Securitisation Regulation (SECR) to the European Commission. These final draft RTS aim to help market participants make informed decisions about the sustainability impact of their investments.
The key proposals included in the technical standards specify ESG disclosures which would apply to STS securitisations where the underlying exposures are residential loans, auto loans and leases. These technical standards aim to ensure consistency with those developed under the Sustainable Finance Disclosure Regulation (SFDR) which distinguish between the publication of available information on mandatory indicators (e.g. energy efficiency) and on additional indicators (e.g. emissions). The European Commission is expected to endorse the RTS within three months of publication.
Joint ESA discussion paper on advice to the European Commission on two delegated acts specifying further criteria for critical ICT third-party service providers (CTPPs) and determining oversight fees levied on such providers under DORA
On 26 May, the ESAs invited market participants to provide their feedback on the proposals in the discussion paper regarding the criteria referred to in Article 31(2) of DORA to be considered when assessing the critical nature of ICT third-party service providers, as well as in relation to the amount of the fees levied on CTPPs and the way in which they are to be paid. Responses should be submitted by 23 June 2023.
Regulation of the European Parliament and of the Council on Markets in Crypto-Assets
On 16 May 2023, the European Council voted to adopt the Regulation on Markets in Crypto Assets (MiCA). MiCA will protect investors by increasing transparency and putting in place a comprehensive framework for issuers and service providers including compliance with the anti-money laundering rules.
The new rules cover issuers of utility tokens, asset referenced tokens and so-called 'stablecoins'. It also covers service providers such as trading venues and the wallets where crypto assets are held. This regulatory framework aims to protect investors, preserve financial stability, while allowing innovation and fostering the attractiveness of the crypto asset sector. It also introduces a harmonised regulatory framework in the European Union which, given the global nature of crypto markets, is an improvement compared to the current situation with national legislation in some member states only.
Regulation of the European Parliament and of the Council on information accompanying transfers of funds and certain crypto-assets and amending Directive (EU) 2015/849
On 16 May 2023, the European Council voted to adopt new rules governing the information accompanying transfers of funds and certain crypto assets. Crypto asset service providers will be obliged to collect and make accessible certain information about the sender and beneficiary of the transfers of crypto assets they operate, regardless of the amount of crypto assets being transacted. This enhances the traceability of crypto asset transfers, such that possible suspicious transactions can be better identified and blocked.
Sanctions imposed in response to the crisis in Ukraine
Since February 2022, the EU imposed a number of sanctions in response to the crisis in Ukraine. The most recent sanctions package (the Tenth Package) was issued in April 2023. It contains new listings, trade and financial sanctions, including further export bans and import bans. 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.