FinTech Global Regulatory Round-up - w/e 4 December 2020

ISDA has published legal guidelines for smart derivatives contracts and specifically foreign exchange derivatives. The guidelines seek to ensure that the design and implementation of new technology solutions for foreign exchange derivatives are consistent with existing legal and regulatory standards. These guidelines also highlight areas where further industry collaboration will be required to identify existing areas of legal and regulatory uncertainty and to develop solutions.

The Financial Action Task Force (FATF) has published a survey on enhancing cross-border payments; the survey was developed in collaboration with the Basel Committee on Banking Supervision (BCBS). FATF is seeking views from banks, payment service providers, Fintech companies, money or value transfer services providers, and other stakeholders, on how challenges facing cross-border payment services may be overcome.

Feedback is requested by 15 January 2021.

The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of the BCBS, has endorsed  endorsed a series of recommendations from BCBS to focus its policy and supervisory agenda on future risks to the global banking system and its vulnerabilities. BCBS's future work will focus on new and emerging topics including structural trends in the banking sector, the ongoing digitalisation of finance and climate-related financial risk.

The Bank for International Settlements (BIS) has published an overview of Project Helvetia, a joint proof-of-concept experiment between the BIS Innovation Hub Swiss Centre, the Swiss National Bank and the financial infrastructure operator SIX Group, which successfully shows the feasibility of integrating tokenised digital assets and central bank money.

#Settlement

#ProjectHelvetia

FATF has published the address delivered by its President Marcus Pleyer at the annual Israel Money Laundering and Terror Financing Prohibition Authority (IMPA) Conference. During his remarks, Mr Pleyer highlighted the FATF's report on Red Flag Indicators for Virtual Assets, which provides the private sector with an overview of the common suspicious activity to look out for. He also advised that as the virtual asset sector changes rapidly, the FATF will continue to closely monitor developments and emerging risks, including the risks associated with stablecoins. In November, the FATF submitted a report to the G20 Finance Ministers and Central Bank Governors which stated that FATF standards apply to stablecoins. Mr Pleyer highlighted that this means that any business using them will have to observe the relevant anti-money laundering rules.

#Stablecoins

#AML

#CTF

#RedFlags

The Islamic Financial Standards Board (IFSB) that it would hold a 2^nd Innovation Forum, themed, Digital Transformation of Islamic Finance and other Innovative Solutions for Post-Covid-19 Recovery will on 30 November 2020.

The FCA has published guidelines for the preparation of European Single Electronic Format (ESEF) annual financial reports for submission to the FCA. The guidelines cover the select number of FCA-specific requirements that depart from the ESEF reporting manual published by the European Securities and Markets Authority (ESMA).

#ESEF

The House of Commons (HoC) Public Accounts Committee (PAC) has published a report on the production and distribution of cash. The report is critical of the arrangements for oversight of the production and distribution of notes and coins. It also raises concerns about access to cash. The PAC makes a number of recommendations, including that HM Treasury (HMT) present a plan of action, including draft legislation, for securing access to cash across the UK, and that overall responsibility for the cash system be allocated to a single body. [4 Dec 2020]

#Cash

Bilateral

The FCA has published its evaluation of the impact of the Retail Distribution Review (RDR) and Financial Advice Market Review (FAMR). The evaluation includes an assessment of automated advice services.

The FCA noted that there is room for further development and innovation of models and services that could serve more consumers at different stages of their lives. The FCA has also published the consumer research report prepared by Ignition House.

The FCA currently has a Call for Input (CfI) on consumer investments open. The CfI closes on 15 December 2020; the regulator will incorporate feedback received into future policy development.

#AutomatedAdvice

#AI

#Platforms

The BoE has published a statement regarding supervisory cooperation on operational resilience, underlining its commitment to continuing to work closely with the European Central Bank (ECB) and Federal Reserve to ensure supervisory approaches are coordinated.

The ECB has echoed this sentiment in its own statement.

The BoE has published its annual report on its supervision of financial market infrastructures (FMIs), which sets out how the BoE has exercised its responsibilities in respect of supervising FMIs since publication of the 2019 report, and outlines the BoE's domestic and international policy work to strengthen the regulatory and supervisory frameworks for FMIs.

The BoE has also published a webpage entitled 'Financial market infrastructures – what happens when you pay?'.

#Settlement

HMT has published a consultation which sets out HM Government's (HMG's) proposed changes to help protect customers in the event of a payment institution (PI) or electronic money institution (EMI) being put into insolvency. In particular, HMT proposes to introduce a bespoke Special Administration Regime for PIs and EMIs. Feedback is requested by 14 January 2021.

#ePayments

Pay.UK has published the conclusions and next steps to its consultation 'Next Generation Standard for UK Retail Payments'.

The consultation conclusions are relevant for developers of ISO 20022 messages, service and solution providers, and end users (businesses, charities, and individuals). They provide a statement of Pay.UK's intentions regarding the implementation of the UK retail standard, what it has already started doing, and the plan for the next 18 months.

#ISO20022

The BoE has announced the appointment of a private sector partner to assist in the design, construction and assurance of a new cloud environment. During the two-year partnership, Appvia will be supporting development and project teams within the BoE in testing and deploying code in cloud environments, working with security teams to integrate the cloud into existing operational and security processes; and implementing information governance compliance so staff are able to collaborate safely and securely.

The EU Commission has published the remarks of President von der Leyen at the Digital Summit of the German Federal Government. The Commission President focused her remarks on how digital technology can help to address climate change challenges.

BIS has published the closing remarks by Mr Burkhard Balz, Member of the Executive Board of the Deutsche Bundesbank, at the virtual conference 'Future of Payments in Europe'.

BIS has also published the speech delivered by Mr Fabio Panetta, Member of the Executive Board of the European Central Bank (ECB) at the same event.

APRA has published the speech of Wayne Byres, the chair of APRA, which he delivered to the 2020 Forum of the Risk Management Association. In his speech, Mr Byres emphasised the increasing importance of being prepared for the unexpected from a regulatory perspective, particularly given the testing year 2020 has been for many entities. In light of this, Mr Byres identified areas of focus which present an opportunity for improvement to further strengthen the resilience of the financial system. These areas are capital, liquidity, credit risk, operational and cyber risks, people, and climate.

The Monetary Authority of Singapore (MAS) has announced that eligible non-bank financial institutions (NFIs) will have direct access to the banking system’s retail payments infrastructure from February 2021. NFIs that are licenced as major payment institutions under the Payment Services Act will be allowed to connect directly to Fast and Secure Transfers (FAST) and PayNow.

Direct connection to FAST and PayNow will enable users of NFI e-wallets to make real-time funds transfers between bank accounts and e-wallets as well as across different e-wallets. Currently, most e-wallets require the use of debit or credit cards to top-up funds, and funds transfers between e-wallets are not possible.

#Payments

#eWallets

BIS has published the remarks of Mr Adnan Zaylani Mohamad Zahid, Assistant Governor of Bank Negara Malaysia (BNM), at the 3rd Islamic Fintech Dialogue (IFD2020). The focus of the Assistant Governor's address was on Islamic finance, e-payments and FinTech. He explained that BNM was committed to support the digital transformation of the financial sector, and specifically referred to the e-KYC policy document to enable digital on-boarding of customers. This is expected to be a catalyst in the provision of end-to-end financial services, particularly in a 'low touch' environment.

#eKYC

#Digitalisation

#LowTouch

The FDIC has issued a FIL in which it advises that, alongside the Fed and OCC, it will conduct an ‘Ask the Regulators’ webinar for supervised institutions on the use of Artifical Intelligence (AI), including machine learning (ML), on December 16, 2020. The CFPB will also participate.

More information on registering for the webinar can be found on the webpage linked above.

#MachineLearning

FINRA has issued a statement warning firms of an ongoing phishing campaign that involves fraudulent emails that include the domain ‘@invest-finra.org’. This domain is not connected to FINRA and firms should delete all emails originating from this domain name. FINRA recommends that anyone who clicked on any link or image in the email immediately notify the appropriate individuals in their firm of the incident.