Financial Services Regulation & Compliance - Cross Sectoral April 2018


CBI updates FAQs on Payment Services Directive

The first Payment Services Directive (EU) 2007/64/EC (PSD1), which came into force in 2009, established common rules for certain types of electronic payments, such as credit transfers, direct debits, card payments, and mobile and online payments. Directive 2015/2366/EU on payment services (PSD2) updates and complements the rules set out in PSD1 and takes new providers of innovative payment services into account.

The FAQs seek to clarify the changing regulatory framework around payment services and provide information on the authorisation process.

CBI head of Securities and Markets Supervision addresses RegTech

Colm Kincaid, Director of Securities and Markets Supervision at the Central Bank of Ireland, (CBI) opened a roundtable discussion on RegTech organised with the UK Financial Conduct Authority and UCC's Governance Risk and Compliance Technology Centre. Mr. Kilcaid, noting the potential of RegTech to lower the costs of regulation and doing business, said that harnessing accurate data will play an important role in improving the CBI's supervisory effectiveness.

CBI head of Financial Conduct announces engagement programme with FinTech firms

CBI Director General of Financial Conduct Derville Rowland addressed the challenges posed and opportunities presented by the emergence of FinTech at the University College Cork Financial Services Innovation Centre. The European Commission's Action Plan on FinTech seeks to unify Europe's regulatory approach to the growing sector.

Turning to the CBI's approach, Director General Rowland revealed a new Innovation Hub that will let FinTech firms engage directly with the CBI. She stressed that the CBI will engage with incumbents and startups on an equal footing. At the centre of this programme, the CBI will start hosting regular FinTech Roundtables later in 2018. The Roundtables will facilitate two-way conversations around FinTech and innovation between the CBI and relevant stakeholders.

CBI publishes Guidance Note for payments, electronic money, and account information firms

The CBI has released a Guidance Note to help Payment Institutions, Electronic Money Institutions, and Account Information Service Providers with their applications for authorisation. The Note seeks to clarify how applicants should approach completing the application form and sets out the criteria by which applicants will be assessed.

Amendment proposed to meaning of 'Credit' in Credit Reporting Act 2013

The government proposed a Bill to amend the definition of 'Credit' under the Credit Reporting Act 2013. The 2013 Act obliges lenders to report to the Central Credit Register about certain credit applications they have received and credit agreements they have concluded. The Bill proposes to bring personal contract plans, hire purchase agreements, and similar arrangements within the scope of the 2013 Act.

CBI issues Guidance on Pre-Approval Controlled Functions for payment institutions

The CBI has published guidance for the rules governing Pre-Approval Controlled Functions (PCF) that are set out in the European Union (Payment Services) Regulations 2018 and the European Communities (Electronic Money) the  Regulations 2011. PCFs are certain roles in payment institutions for which individuals need pre-approval from the CBI in order to carry out. Examples of PCFs include directorships and senior management positions. The Guidance assists with a questionnaire that the CBI uses to assess the fitness and probity of proposed holders of PCFs.

Registrar of Credit Unions addresses Credit Union Management Association Spring Conference on ‘Developing Business Models’ in Athlone

Speaking to credit union CEOs and managers, Registrar of Credit Unions Patrick Casey noted the commercial challenges facing the sector and highlighted the importance of credit unions having a clear strategy and understanding of risk appetite before undertaking business model transformation. He noted credit unions must take ownership of the development of their future business model, providing the products, services and delivery channels their members need and expect in the future, on a basis that is within their capabilities.

Mr. Casey highlighted how the Central Bank supports future sector sustainability through its:

  • supervisory proportionality designed to strengthen credit union core foundations to enable business model development and to address viability issues as early as possible;
  • earned flexibility approach, where strong credit unions with required governance, risk and operational capabilities, are facilitated to do more;
  • regulatory responsiveness which can ensure the credit union framework remains tailored and proportionate, and that it continues to evolve in a responsive manner to support business model development – as evidenced for example by recent changes to facilitate investment by credit unions in social housing.
  • Improving the functioning of Economic and Monetary Union: lessons and challenges for economic policies

CBI Director of Policy and Risk gives update on Capital Markets Union

CBI Director of Policy and Risk Gerry Cross discussed the expected structure of the Capital Markets Union (CMU) at an event organised by the British-Irish Chamber of Commerce. Aspects of the Union include the cross-border distribution of investment funds and distinct prudential regulation for investment firms, both of which have been proposed by the European Commission. The Commission's Action Plan on sustainable finance also envisages green investing and financial stability at the centre of the CMU.

Director Cross pointed out a key difference between the CMU and the proposed Banking Union: with the CMU, there is no imperative for a single supervisor. What is needed, he said, is further convergence between national supervisors.

FSO releases 2017 Annual Review

The FSO published an overview of significant developments in 2017. These included the Central Bank and Financial Services Authority of Ireland (Amendment) Act 2017, which extended the time period for bringing complaints concerning long-term financial service products to the FSO. Complaints regarding mortgages made up the largest category at 26% of all eligible complaints.

CBI Deputy Governor discusses impact of Brexit on passporting and outlines regulatory approach to transitional arrangements

Deputy Governor of Prudential Regulation Ed Sibley spoke about the possible impacts of Brexit on the Irish and UK economies and emphasised the consequences of a 'hard' Brexit for the financial services sector. A 'hard' or unplanned Brexit could mean UK and Irish financial services firms lose the ability to passport their business into the other country. Deputy Governor Sibley noted that many firms will need to operate under transitional arrangements, which may take place over an extended period. The CBI is 'open to understanding' such transitional arrangements on a case-by-case-basis, in respect of both existing and applicant firms.

Minister for Justice addresses Dáil on Data Protection Bill 2018

Minister for Justice and Equalit Charlie Flanagan addressed the Dáil, Ireland's lower house of parliament, at the start of the Second Stage of the Data Protection Bill 2018. The Bill has already been passed by the Seanad, Ireland's upper house.

The harmonised rules set out in the EU's General Data Protection Regulation (GDPR) and the Data Protection Bill will ensure that the same data protection safeguards will operate across the EU. This will provide a level playing field for businesses, especially those involved in the cross-border provision of goods and services. Enhanced data protection standards will also be beneficial to the increasing numbers who avail of the Government’s online services.

The Bill, together with the entry into force of the GDPR on 25 May, will modernise and strengthen Ireland’s data protection laws and create a consistent data protection regime across the European Union.

Government approves and publishes proposed money laundering Bill

The Government approved and published a draft Bill that transposes most of the Fourth Money Laundering Directive. The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2018 focuses on customer due diligence and obliges 'designated persons' – such as banks – to assess money laundering risks on a business-wide basis. Such persons must also assess each individual business relationship for risks of money laundering. The Bill adds to the matters that must be dealt with in the designated person's anti-money laundering policies and procedures and introduces a requirement for these to be introduced group-wide.

The Bill also expands the role of the Financial Intelligence Unit, which receives information from designated persons about suspicious transactions. In addition, it lowers the threshold for 'high value goods dealers' to €10,000. 'Politically exposed persons' will include those holding political offices within Ireland as well as abroad. The Bill creates additional requirements for designated persons to identify and verify the identity of beneficial owners of the customer with whom the designated person deals.


European Parliament draft report calls for international agreements to govern equivalence regime for financial services regulation and supervision

The European Parliament's Committee on Economic and Monetary Affairs published a draft report on equivalence of third country financial services rules with EU regulations and procedures. The report noted the increasing importance of equivalence in this space and that international agreements between the EU and third countries would create reciprocal equivalence within third countries. The draft report concludes that the current regime, typically reliant on implementing acts, would be more certain and transparent if governed by international treaties scrutinised by the European Parliament.

ESMA publishes 2017 annual report on activities of accounting enforcers

The ESMA published its annual report on enforcement by European and national authorities of rules concerning financial information of listed issuers on regulated markets. In particular, the report focuses on enforcement activities aimed at regulatory convergence, such as those in relation to the International Financial Reporting Standards.

ESMA issues opinion on intended Accepted Market Practice

The ESMA, responding to a notification by the French financial regulator, outlined the  legal basis for its opinion explaining that Article 13 of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (MAR) provides that a national competent authority (NCA) may establish an accepted market practice (AMP). The relevant provision of MAR is supplemented by the Commission Delegated Regulation (EU) 2016/908 of 26 February 2016.

Commission issues guidelines on consent under GDPR

The European Commission has published Guidelines on the concept of consent in within the GDPR. The meaning of consent has evolved since previous data protection regulations. Generally, consent is only a lawful basis for holding data where the data subject has control, i.e. is offered a genuine choice to accept or reject the terms and conditions without detriment.

Consent, as understood in older instruments such as the ePiracy Directive and existing Article 29 Working Party Opinions, remain relevant in interpreting this point.

Commission proposes Directive on rules giving authorities access to financial information

The European Commission has proposed a directive setting out rules under which national authorities can access financial information for tackling serious crime. It also seeks to facilitate cooperation between member states' financial intelligence units though measures regulating the units' access to law enforcement information. The proposed directive requires member states to strictly designate those who may access such information and obliges states to keep a log recording access by national authorities to bank account information

European Parliament adopts Fifth Money Laundering Directive

The European Parliament adopted the Fifth Anti Money Laundering Directive. The Directive's key points include:

  • enhancing the powers of EU Financial Intelligence Units;
  • beneficial ownership registers for companies and trusts;
  • customer verification measures for virtual currencies;
  • reducing the threshold for identifying holders of prepaid cards from €250 to €100;
  • more stringent requirements for assessing whether non-EU countries pose a risk of money laundering;
  • enhance the access of Financial Intelligence Units to information, including centralised bank account registers.
  • ensure centralised national bank and payment account registers or central data retrieval systems in all Member States.

While the Directive's text is provisional, it will possibly be adopted by the European Council in May 2018

ESMA begins publishing extract from its confidential database of enforcement decisions on financial statements

The ESMA is publishing extracts from its confidential database of enforcement decisions on financial statements, with the aim of providing issuers and users of financial statements with relevant information on the appropriate application of the International Financial Reporting Standards (IFRS). European enforcers monitor and review IFRS financial statements and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

Publication of enforcement decisions informs market participants about which accounting treatments European national enforcers may consider as complying with IFRS; that is, whether the treatments are considered as being within the accepted range of those permitted by IFRS. Such publication, together with the rationale behind these decisions, will contribute to a consistent application of IFRS in the EEA. The ESMA explained that it will continue to publish further extracts from the database on a regular basis, with the next extract expected to be published in the second half of 2018.

Commission proposes enhanced protection for whistleblowers

The European Commission has proposed a new directive to strengthen and consolidate the currently-fragmented protection afforded to whistleblowers at an EU level. The proposal includes minimum standards of protection for people who disclose illegal activity. The standards include the availability of internal, external, and (where necessary) public reporting channels, requirements for national authorities to follow up on reports, and measures prohibiting retaliation against whistleblowers and offering support where retaliation has occurred.

The Commission proposes that whistleblowers should be protected where they had reasonable grounds for believing the information disclosed was true and in the public interest. At the same time, whistleblowers should be generally required to use internal reporting channels first. Individuals implicated in reports must also enjoy the presumption of innocence and the right to a fair trial.

For further information please contact a member of the Financial Regulation team.

Date Published: 4 May 2018