FinTech Global Regulatory Round-up – w/e 25 June 2021

BIS: Annual Economic Report - CBDCs chapter

The Bank for International Settlements (BIS) has published a chapter from its Annual Economic Report on central bank digital currencies (CBDCs). The chapter covers:

• the design of CBDCs and how they would fit into the financial ecosystem;
• the international dimension of CBDC issuance and the implications for cross-border payments;
• the of integration of tokenised assets; and
• the use of application programming interfaces in the CBDC context.

The full BIS Annual Economic Report 2021 and the BIS Annual Report 2020/21 will be published on 29 June 2021. [23 Jun 2021]

BoE and Pay.UK collaboration on ISO 20022 payment messages

The BoE and Pay.UK have issued a joint press release outlining the progress they have made towards implementing ISO 20022 in the Clearing House Automated Payment System (CHAPS) and New Payments Architecture (NPA) since beginning to collaborate in 2018. The release sets out how the BoE and Pay.UK will continue to collaborate through 2021 and beyond. [25 Jun 2021]

#Data

BoE: Speech on evolution of UK payments system

The BoE has published a speech delivered by its Executive Director for Banking, Payments and Innovation, Victoria Cleland, at City Week 2021 entitled "A new dawn for payments". Among other things, in the speech, Ms Cleland talks about the BoE's real time gross settlement (RTGS) system, setting out forthcoming milestones. [22 Jun 2021]

OJ: ECB Opinion on a proposed Regulation on a pilot regime for market infrastructures based on DLT

The European Central Bank (ECB) opinion on a proposed Regulation on a pilot regime for market infrastructures based on distributed ledger technology (DLT) has been published in the OJ. The ECB welcomes the proposed Regulation, which aims to enable investment firms, market operators and central securities depositories to operate market infrastructures based on DLT. The ECB also makes a number of general and specific observations on the proposed Regulation and sets out its recommended amendments to the EC's draft. [22 Jun 2021]

EC: Consultation on DMD(FS)

The EC has launched a consultation on the Distance Marketing of Consumer Financial Services Directive (DMD(FS)). The consultation aims to assess DMD(FS) in light of the digitalisation of the retail financial sector and increasing sectoral legislation in this area.

Feedback is requested by 28 September 2021. [22 Jun 2021]

#Digitalisation

HKMA publishes seventeenth issue of Complaints Watch

The HKMA has published the seventeenth issue of its Complaints Watch.  The Complaints Watch is a periodic newsletter highlighting the latest complaint trends, emerging topical issues and good practices that authorised institutions (AIs) may find helpful.  The latest issue provides guidance on the following matters:

• Enhancing consumer protection against phishing scams – The HKMA has noted the surge in phishing SMS messages and emails resulting in financial losses to customers and/or banks concerned.  AIs should take steps to ensure consumer protection and enhance control measures, including reviewing current arrangements for one-time passwords (OTP) messages, handling complaints in a fair, consistent and prompt manner, ensuring the proper handling and addressing of customers' enquiries, and stepping up educational efforts and alerts to customers on the importance of protecting credit card and OTP information.  The HKMA is in discussions with the industry on introducing additional safeguards against phishing scams.
• Protecting safety of customer transactions – The HKMA has received several recent complaints of bank staff abusing the trust of their customers and co-workers, and perpetrating misconduct through deception of unguarded co-workers and officers with relevant approval authority to circumvent the internal control processes of the banks concerned.  AIs should remain vigilant and have in place good practices and internal monitoring measures, such as reinforcing clear segregation of duties, conducting surprise compliance checks, strengthening whistleblowing mechanisms, carefully verifying customers' identities and authorisations, and introducing annual customer portfolio confirmation processes for elderly and vulnerable customers.  [23 Jun 2021]

#Scams

HKMA publishes circular on tech baseline assessment for selected licensed banks as part of Fintech 2025 strategy

The HKMA has published a circular to request selected licensed banks to participate in a tech baseline assessment, which is part of the HKMA's recently announced Fintech 2025 strategy (see our previous update).

The tech baseline assessment is part of the initiative to promote all-round adoption of fintech by Hong Kong banks and encouraging them to fully digitalise their operations from front-end to back-end.  It aims to take stock of banks' current and planned adoption of fintech in the coming years so that the HKMA can identify the fintech business areas or specific technology types which may be underdeveloped and may benefit from the HKMA's support.

Licensed banks with significant operations in Hong Kong are expected to participate in this assessment, and are required to submit a three year plan for fintech adoption. This plan should be endorsed by the board of directors (in the case of locally-incorporated banks) or developed under the scrutiny of the head office or regional headquarters (in the case of foreign bank branches).

The three year plan should include:

• a review of the bank's current adoption of fintech, and clear indications of how and the degree to which fintech will be incorporated within different aspects of the bank's front to back-end operations by 2025;
• concrete action plans on fintech adoption, covering factors such as budget and resource allocation, talent development and leadership/governance arrangements; and
• the bank's assessment of how fintech adoption will impact its longer-term business strategy and competitiveness.

The HKMA is currently developing a questionnaire to assist banks in their development of the three year plans, which will be circulated once completed.  The three year plan and the completed questionnaire are required to be submitted to the HKMA by 31 December 2021.  [18 Jun 2021]

#FinTechStrategy

#Digitalisation

MAS extends training support measures

The Monetary Authority of Singapore (MAS) and the Institute of Banking and Finance (IBF) have announced extensions to the enhanced training support measures to build capabilities and strengthen employability of the local workforce. To ensure that financial institutions, FinTech firms and individuals continue to place emphasis on training and upskilling, MAS will extend the measures as follows:

• The course fee subsidies under the IBF-Standards Training Scheme (IBF-STS) and Financial Training Scheme (FTS) [1] will be extended by 6 months to 30 June 2022 with 80% of course fees subsidised, before returning to a more sustainable rate of 70% and 50% respectively from 1 July 2022.
• To help mature workers acquire industry-relevant skills as the industry transforms, Singapore citizens aged 40 and above will continue to receive the enhanced subsidy at 90% from 1 January 2022, for training under IBF-STS and FTS.
• The Training Allowance Grant (TAG) [2] will be extended for employees sponsored by financial institutions and FinTech firms by one year to 30 June 2022 at a rate of $10 per training hour. [25 Jun 2021]

SECP reminds companies to register online lending apps

The SECP has issued a notice to Lending Companies (LC) and Financing Companies (FC) that own, operate, and/or utilise online lending platforms (OLPs) to ensure they comply with SECP's disclosure and reporting requirements in respect of OLPs. The notice highlights that, 'Continuous failure to comply despite being given notice of violations and an opportunity to  make  the  necessary  corrections  shall  constrain  the  Commission  to  revoke  the company’s Certificate of Authority to Operate as a Financing/Lending Company.' [24 Jun 2021]

SEC Charges ICO Issuer and CEO With Fraud and Unregistered Securities Offering

The SEC has announced settled charges against a company and its CEO for making materially false and misleading statements in connection with an unregistered offer and sale of digital asset securities.

According to the SEC's order, the defendant provided an intellectual property search service for inventors and others users through its software platform.  The SEC’s order finds that from August 2017 through January 2018, the defendants raised $7.6 million from investors by offering and selling digital tokens. As stated in the order, in promoting the ICO, the defendants made numerous materially false statements to investors and potential investors, including false statements concerning the company’s revenues, number of employees, and the software platform's user base. The order finds that the defendant misused $38,163 in investor proceeds to pay his personal expenses. The order also finds that although the digital tokens constituted securities, the defendant company's offering was not registered with the SEC and no exemption from registration applied. [22 Jun 2021]