Financial Services Regulation and Compliance - General Cross Sectoral Oct 2019

DOMESTIC

Dear CEO Letter - Compliance by Trust or Company Service Providers (TCSPs or Firms) with their obligations under the Criminal Justice (Money Laundering and Terrorist Financing) Act, 2010 (CJA 2010)

The Central Bank of Ireland has issued a letter to CEOs of trust or company service providers (TCSPs or firms) in relation to compliance with their obligations under the Criminal Justice (Money Laundering and Terrorist Financing) Act, 2010. While the Central Bank noted improvements in anti-money laundering and countering the financing of terrorism (AML/CFT) controls in some areas since its 2017 seminar, it noted many TCSPs still place over reliance on their parent company's AML/CFT controls, in areas such as risk policies to procedures not being appropriately tailored to reflect the TCSP's practices.

Central Register of Beneficial Ownership of Companies

The deadline for filing beneficial ownership information with the RBO for companies incorporated before 22 June 2019 is 22 November 2019.

"More work required to continue to reduce risks of Brexit” - Deputy Governor, Ed Sibley

Speaking at the DCU Brexit Institute, Deputy Governor, Ed Sibley, outlined how the Central Bank’s work on Brexit has been delivering on the Central Bank’s mission to serve the Irish public good. He recognised that intensive work has delivered a strong level of preparedness for the significant potential shock of the UK leaving the EU without a deal. Mr. Sibley stated financial services firms still have a duty of care to their customers to take advantage of the extra time available to continue to prepare for the UK’s departure from the EU. 

Central Bank of Ireland hosting two Retail Intermediary Roadshows

The Central Bank of Ireland will host two roadshows for Retail Intermediary Firms and their related representative bodies in November. These events will include presentations on current and important issues for brokers and their businesses in the context of the regulatory climate, including:

  • Brexit
  • supervision and enforcement of the retail intermediary sector
  • AML/CFT and cyber security
  • protected disclosures
  • policy updates
  • funding

The roadshows will take place from 9.30am to 1pm on Tuesday, 12 November in the Carlton Hotel, Dublin Airport and Wednesday, 13 November in the Connacht Hotel, Galway.

Speech by Minister Donohoe to Kobn Conference on the proposed Senior Executive Accountability Regime (SEAR) in the Central Bank (Amendment) Bill 2019

In a speech delivered by Minister Donohoe on the proposed Senior Executive Accountability Regime (SEAR), the Minister stated that the forthcoming Central Bank (Amendment) Bill will roll out an individual accountability framework across the financial sector to achieve two key interlinked objectives (i) to improve the culture of the financial sector and (ii) to restore public trust in the sector. The Minister stated that greater levels of accountability will lead to better outcomes for all across the financial sector, including:

  • Customers will benefit from financial service providers that are fully accountable for the level of service and advice they provide.
  • Employees will benefit from having greater clarity of their exact role and responsibilities, and will be empowered to speak up when they see failings.
  • Firms and their shareholders will benefit through the creation of real accountability for senior executives by making them personally accountable for their actions and inaction, so the cost does not fall solely on the firm itself.

“Central banks can play an important role in analysing longer term issues, independent of politics and of election cycles.” - Deputy Governor, Sharon Donnery

Speaking at an event at TASC (Think Tank for Action for Social Change) Deputy Governor Sharon Donnery stated Central Banks can play an important role in analysing longer term issues due to being independent of politics and of election cycles. The Deputy Governor outlined three areas, in particular the Central Bank can focus on:

  • ensuring stability, this enables people to plan for the future
  • contributing to creating an environment where climate related financial risks can be more efficiently assessed and considered
  • better understanding of changing demographics that may have macroeconomic implications

Government approve draft legislation to regulate PCP and other credit type agreements

The Minister for Finance and Public Expenditure & Reform, Paschal Donohoe TD has announced Government approval to draft legislation to provide that all firms which offer personal contract plan (PCP), hire purchase and other similar credit type agreements to consumers will be required to be authorised by the Central Bank of Ireland as retail credit firms. Minister Donohoe stated that "as all the providers of PCP and other similar agreements to consumers will now have to be authorised by the Central Bank, the Bank will then be able to apply its Consumer Protection Code and its other consumer protection powers to such firms. This will improve the level of protection available to the consumers of such agreements”.

The Senior Executive Accountability Regime: Our Expectations of Firms - Director General Derville Rowland

On 31 October 2019, Director General of the Central Bank of Ireland (CBI), Derville Rowland, delivered a speech to the IBEC Fraud Prevention Forum in relation to the proposed Senior Executive Accountability Regime (SEAR). During her address, Director General Rowland explained that the CBI has been advocating for individual accountability at senior level for many years.  SEAR will complement the existing Fitness and Probity Regime. These reforms are expected to drive a cultural change, encourage accountability and responsibility at all levels throughout firms.

EUROPEAN

ESAs Joint Committee defines its priorities for 2020

The Joint Committee of the European Supervisory Authorities (EBA, EIOPA and ESMA) has published its 2020 Work Programme. In 2020, under the EBA's chairmanship, the Joint Committee of the three ESAs will continue its work in the areas of cross-sectoral risk analysis, consumer protection, financial conglomerates, securitisation as well as accounting and auditing. Areas of particular focus of its work will be on PRIIPs, financial innovation including the EU Commission's FinTech Action plan and the work of the European Forum for Innovation Facilitators (EFIF) as well as sustainable finance and securitisation.

ESAs highlight money laundering and terrorist financing risks in the EU financial sector

The three European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) have published their second joint opinion on the risks of money laundering and terrorist financing affecting the European Union's financial sector. Drawing on data and information provided by national and EU AML/CFT competent authorities, the ESAs are concerned about weaknesses in the control frameworks put in place by financial institutions, particularly for transaction monitoring and suspicious transactions reporting, in sectors with high volumes of transactions. The ESAs recognised that the development of adequate business-wide and customer risk assessments is still a challenge for financial institutions across different sectors and is an areas that would benefit from more guidance from national authorities.

EBA launches consultation on comprehensive Pillar 3 disclosures

The European Banking Authority (EBA) has launched a public consultation on nine new comprehensive implementing technical standard (ITS) for financial institutions' public disclosure under the Capital Requirement Resolution which would optimise the EBA Pillar 3 policy framework by moving from a silo based approach, with different disclosure policy products, to an all-inclusive ITS. It also implements regulatory changes introduced by the CRR2 and aligns the disclosure framework with international standards. The deadline for submission of comments is 16 January 2020.

EBA publishes opinion on disclosure to consumers buying financial services through digital channels

The European Banking Authority (EBA) has published an opinion addressed to the EU Commission with recommendations to ensure that disclosure requirements in EU law take account of the increasing use of digital marketing channels for financial services and the resultant issues potentially affecting consumers. The opinion provides recommendations as to how the Distance Marketing of Financial Services Directive (2002/65/EC,DMFSD) could be amended in order to ensure that it takes account of the increasing use of digital marketing channels and the resultant issues that potentially arise for consumers. The recommendations relate primarily to the scope and consistency of disclosure rules, the timing of disclosure, the presentation format and accessibility of information. In addition, they cover advertisements, pre-contractual information, rights of withdrawal, complaints handling and post-sale information.

EU Commission reports on use of blockchain in finance, trade and public services

The EU Commission's science and knowledge joint research centre (JRC) has published a report on the use and impact of distributed ledger technologies (DLTs) in finance, industry, trade and the public sector. Some key findings of the report include:

  • the opportunities and challenges of DLT vary greatly depending on the context, application and sector
  • key challenges currently posed by DLT include performance, scalability, energy consumption, data privacy and integration with legacy infrastructures
  • the introduction of DLT does not necessarily mean the end of intermediaries, traditional intermediaries will continue to play a role and new forms of intermediaries may surface
  • there is a need for further support and funding for pilots and experimentation spaces, such as sandboxes
  • policymakers must ensure they can balance the requirements of enforcing existing regulation, while still maintaining flexibility to keep pace with new and emerging technologies

EBA publishes opinion on the deadline and process for completing the migration to strong customer authentication (SCA) for e-commerce card-based payment transactions

The European Banking Authority (EBA) has published an opinion on the deadline for the migration to SCA under the revised Payment Services Directive (PSD2) for e-commerce card-based payment transactions. The opinion sets the deadline to 31 December 2020 and prescribes the expected actions to be taken during the migration period. In addition, the opinion recommends that, where required, NCAs communicate to PSPs in their jurisdiction that the supervisory flexibility they have exercised does not represent a delay in the application date of the SCA requirements in PSD2 and the EBA's technical standards. This means that NCAs will focus on monitoring migration plans instead of pursuing immediate enforcement actions against PSPs that are not compliant with the SCA requirements.

ESMA publishes final report on CSDR guidelines on standardised procedures and messaging protocols

The European Securities and Markets Authority (ESMA) has published its final report on the guidelines on standardised procedures and messaging protocols under the Central Securities Depositories Regulation (CSDR) Investment firms are expected to take measures to limit the number of settlement fails and to set up arrangements with their professional clients to ensure prompt communication of the necessary settlement information. In particular, investment firms should agree with their professional clients on the communication procedures and messaging protocols to be used between them, in order for the necessary settlement information to be timely provided to the investment firm.

For more information on this topic please contact any member of A&L Goodbody's Financial Regulation team.

Date published: 15 November 2019