Financial Services Regulation & Compliance - Cross Sectoral May 2018


Markets Update Issue 7 2018

The CBI published Issue 7 of its Market Update 2018. The Markets Update includes the publication of the Thirtieth Edition of the Central Bank AIFMD Q&A Document and a Central Bank communication on Innovation and Technology, as well as a number of ESMA publications.

Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2018

The Criminal Justice (Money Laundering & Terrorist Financing) (Amendment) Bill 2018 has passed the Second Stage in the Dáil and was referred to the Select Committee on Justice and Equality for Committee Stage. The final draft of 5MLD has now been signed by both the Council and the Parliament, but it has not yet been published in the Official Journal.

The Bill 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. '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.

CBI responds to Questions of Oireachtas Finance Committee

The CBI has submitted a response to questions posed by the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach during a meeting on 18 January 2018. The questions concern the regulation of Credit Servicing and Credit Retail Firms, passporting by financial services firms into Ireland, regulation of cryptocurrencies, and issues relating to the tracker mortgage examination.

General Data Protection Regulation

The President signed the Data Protection Act 2018 into law on 25 May 2018.The Act implements derogations permitted under the GDPR and represents a major overhaul of the regulatory and enforcement framework.

Fintech sector census launched

The Fintech census was launched by Minister of State for Financial Services and Insurance, Michael D'Arcy. The purpose of this census is to provide information on the scale, scope and strategic positioning of the Irish Fintech sector. The census will be available to all Fintech companies operating in Ireland.

CBI may enforce diversity at board and management levels of regulated firms – Deputy Governor Donnery

Speaking at the Central Bank of Malta's 50th anniversary conference, CBI Deputy Governor Sharon Donnery linked problems with financial firms to a lack of diversity at senior levels. She cited research which suggests a connection between greater diversity and improved governance, decision-making, and productivity. Deputy Governor Donnery added that the CBI hopes that firms will take the lead in improving leadership diversity. Failing that, however, the CBI will consider specific diversity requirements at senior levels in regulated firms.

Special Advisor Martin Moloney addresses seminar on Transforming Culture in Regulated Financial Services

Special Advisor Martin Moloney spoke about the role of culture in financial regulation. Both Derville Rowland, CBI Director General of Conduct Regulation, and Ed Sibley, CBI Deputy Governor of Prudential Regulation, have stressed the issue of culture recently.

Mr. Moloney emphasised that regulated firms themselves have a responsibility to lead cultural shifts. However, regulators can also impact culture through governance requirements around board-level awareness of ethical issues and by increasing the formality of individual accountability of firm leaders. Regulators can also develop culture by providing firms with feedback from regulatory investigations.

Central Bank issues Annual Performance Statement for 2017

CBI Governor Philip Lane described how the re-organisation of the CBI's financial regulation activities during the year helped to better deliver on the bank's mandate. He then set out the CBI's priorities for 2018; the Tracker Mortgage Examination and a review of banking culture will be key objectives. Thematic inspections on Small and Medium Enterprise (SME) lending, holding of client funds by payment institutions and retail credit firms' handling of long-term careers are to be expected. The CBI also anticipates a Brexit-driven spike in firms seeking to establish in Ireland. Meanwhile, the CBI's supervision of authorised institutions will focus on the ability of these firms' plans to withstand the impact of the UK's departure.

CBI publishes Consultation on Potential Amendments to the Fitness and Probity Regime for Credit Unions

Following a review of the Fitness and Probity regime for credit unions, the CBI published Consultation Paper CP113 Consultation on Potential Amendments to the Fitness and Probity Regime for Credit Unions on 8 September 2017. In conducting this review, the CBI aims to ensure the regime remains appropriate for the sector and to maintain the confidence of credit union members in those occupying key roles in Credit Unions. The review considered recent developments such as sector restructuring and business model development, the findings of 2016 themed inspections on Fitness and Probity in credit unions and supervisory findings around governance and systems of control arising from on-site inspections.

CBI publishes Annual Report 2017

The CBI has published its Annual Report. The CBI's activities for 2017 were included in the report as were its main priorities and achievements last year. The CBI reports a profit of €2.6bn last year with both Irish and global economic recovery expected to continue. The report highlights work carried out in financial regulation.

GDPR guidelines published

The Data Protection Commissioner published a guide relating to entering a Data Processing Contract. The General Data Protection Regulation comes into force on 25 May 2018. The guide relates to changes to the obligations on Controllers and Processors when entering these contracts.

Criminal Justice ( Corruption Offences) Bill 2017 – Seanad report and final stage

The Criminal Justice (Corruption Offences) Bill 2017 passed the Seanad report and final stages on the 30 May. The Bill will now be sent to the President for signing. The Bill will bring Irish law into line with the UK position under the 2010 Bribery Act by creating the offence of corporate corruption. The new offence can be committed by bodies corporate where officers or agents acting on behalf of the company engage in corrupt practices. It will be a defence for bodies corporate to establish that they took all reasonable steps to prevent the corrupt acts. The Bill also creates international reach by allowing for one to be tried in Ireland for corruption committed outside the State.

Calls for views regarding the Draft EU Directive on Representative Actions for the Protection of the Collective Interests of Consumers

The Department of Business, Enterprise and Innovation is requesting views from interested parties regarding the proposed EU Directive. The draft directive aims to allow qualified entities to take representative actions against traders who infringe Union law. The EU law in Annex 1 provides for the regulation of the relationship between a consumer and a trader in the financial services sector. The new Directive if passed will repeal the Injunctions Directive 2009/22/EC.


European Framework for Threat Intelligence-based Ethical Red Teaming published

This framework tests the resilience of the European financial sector against cyber-attacks. The bespoke tests can be used by any entity operating in the financial sector. The tests will inform the testing entity how well they withstood the attack; helping them better protect themselves in the future.

Speech by Mario Draghi, President of the ECB, on risk-reducing and risk-sharing in our Monetary Union , at the European University Institute, Florence 11 May 2018

Mr Draghi thanked the university for its countless contributions in the field of economics, law, political science and history.  He described how it has often been the meeting point where academic research helps answer the urgent policy questions of the EU.

He said that 10 years after the great financial crisis, the euro area looks set to exit more resilient than it entered it. And that much of the harm caused by the economic downturn has now been reversed by a consistent period of growth. However he went on to stress that the Monetary Union is not complete and that the crisis revealed some specific fragilities in the euro area’s construction that so far have not been resolved.

He concluded by saying that in order to make the Monetary Union more robust against future challenges, we need to address these fragilities.

ESMA updates Q&A on MiFIR data reporting

ESMA has to updated its Q&As on data reporting under the Market in Financial Instruments Regulation (MiFIR)

The Q&As provide clarifications in relation to the requirements for submission of transaction reports and reference data under MiFIR. In particular, the Q&As relate to complex trades and National client identifiers for natural persons.

European Financial Stability and Integration Review published

The European Commission published the European Financial Stability and Integration review. The report details recent economic and financial developments in the European Union.

Commission proposes amendment to regulation of OTC derivatives

The European Commission has proposed an amendment to Regulation No 648/ 2012 (EMIR) that would impact the clearing obligation, reporting requirements, and risk mitigation techniques for over-the-counter (OTC) derivatives not cleared by a central counterparty. The proposal also includes amendments to the registration and supervision of trade repositories. The Commission believes that the amendments will provide regulators with more information about the OTC derivatives market and will help mitigate credit risk between OTC derivative counterparties.

ESAs publish their joint 2017 Annual Report

The 2017 Annual Report detailing the work of the EBA, EIOPA and ESMA has been published by the Joint Committee of the European Supervisory Authorities (ESAs). The Report highlights the ESAs activities in relation to consumer protection and the fight against money laundering.

Finance Watch publishes its Annual Report

The report encompasses commentary on a wide range of issues such as bank regulation and sustainable finance. It also details Finance Watch's past activities and future plans to further financial reform.

European Union (Financial Conglomerates) (Amendment) Regulations 2018

This Regulation gives full effect to Directive 2011/89/EU of the European Parliament and of the Council of 16 November 2011. This Directive relates to enabling appropriate supplementary supervision of insurance, banking groups, credit institutions, insurance undertakings and investment firms in a financial conglomerate.

'Virtual currencies ante portas' Speech by Yves Mersch, Member of the Executive Board of the ECB 14 May 2018

Mr Mersch spoke about how new innovations based on distributed ledger technology and blockchain have brought about wide-spread euphoria. He further articulated how their use to create “cryptocurrencies” or “virtual currencies” – to denote their lack of legal recognition – is often touted as something that could fundamentally change the financial sector.

'Economic developments in the euro area', speech by Peter Praet, Member of the Executive Board of the ECB, at the MNI Connect Roundtable, London, 14 May 2018

Mr Praet spoke about how, after several quarters of higher than expected growth, the latest euro area data pointed towards some moderation, but remains consistent with a solid and broad-based economic expansion.

He then went on to discuss how monetary policy measures introduced since 2014 have been central in supporting euro area growth and paving the way for a return of euro area inflation to a rate below, but close to, 2% over the medium term. Inflation developments, however, remain subdued. He concluded that,  overall, an ample degree of monetary stimulus remains necessary for underlying inflation pressures to continue to build up and support headline inflation developments over the medium term.

Money laundering and terrorist financing: new rules adopted

On 14 May 2018, the Council adopted the 5AMLD strengthening  EU rules to prevent money laundering and terrorist financing.

The directive sets out to close down criminal finance without hindering the normal functioning of payment systems. Amending directive 2015/849, it is part of an action plan launched after a spate of terrorist attacks in Europe in 2016.

The main changes to directive 2015/849 involve:

  • broadening access to information on beneficial ownership, improving transparency in the ownership of companies and trusts
  • addressing risks linked to prepaid cards and virtual currencies
  • cooperation between financial intelligence units
  • improving checks on transactions involving high-risk third countries

The provision of financial services in Ireland and from Ireland after Brexit - Deputy Governor Ed Sibley Speaking at the Institute of International and European Affairs

Governor Sidley addressed the impact of Brexit on the Irish financial services system and on financial services firms, both those currently supervised by the Central Bank of Ireland and those seeking to relocate business to Ireland. He did  not dwell on the economic risks of Brexit and stressed that this was not because they are unimportant but because they have been well flagged in other Central Bank speeches and publications.

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

Date Published: 8 June 2018