FinTech Global Regulatory Round-up – w/e 19 November 2021

FSB: Plenary report

The Financial Stability Board (FSB) has published its plenary report in which it records the issues discussed at the last Members' meeting. Discussion at the meeting covered the vulnerabilities in the global financial system, issues of particular relevance to emerging market and developing economies (EMDEs), and the FSB’s work programme for 2022.

In addition, the report highlights the key issues in completing resolution reforms going forward, including follow-up work to close gaps identified in the evaluation of the effects of too-big-to-fail reforms for systemically important banks. The FSB's 2021 Resolution Report will be published in early December.

The plenary report also set out the main priorities for the FSB's work programme, including:

• international cooperation and coordination in financial authorities’ response to Covid-19;
• enhancing the resilience of the non-bank financial intermediation (NBFI) sector and follow-up to the FSB’s Holistic Review of the March 2020 market turmoil;
• containing the risks from the use of crypto technology, including unbacked crypto-assets, stablecoins and decentralised finance, while harnessing the benefits;
• assessing and addressing financial risks from climate change; and
• finalising and monitoring implementation of the post-2008 crisis reforms.

The finalised 2022 work programme will be published in January. [19 Nov 2021]

#Stablecoins

CPMI consults on payment system operating hours

The Committee on Payments and Market Infrastructures (CPMI) has published a consultative report requesting comments on extending and aligning payment systems operating hours for cross-border payments. The report outlines three potential 'end states', which are: an incremental increase in opening hours on current operating days; an extension to current non-operating days; and an increase to full 24/7 provision.

The report also introduces the concept of a 'global settlement window' – the period when the largest number of realtime gross settlement (RTGS) systems simultaneously operate. It also discusses operational, risk and policy considerations related to those end states.

Feedback is requested by 14 January 2022. [18 Nov 2021]

PSR CP21/10 - Reducing losses from APP scams

The Payment Systems Regulator (PSR) has published Consultation Paper 21/10 (CP21/10) on authorised push payment (APP) scams. The PSR remarks that it is concerned by the increase in both the number and the cost of APP scams. CP21/10 sets out a number of proposals which the PSR expects could deliver a significant reduction in losses incurred through APP scams. These include:

• requiring the major payment service providers (PSPs) in the 12 largest banking groups in Great Britain and two largest banks in Northern Ireland outside those banking groups to publish data on their performance in relation to APP scams, and reimbursement levels;
• improving intelligence sharing between banks to enhance detection and prevention of APP scams; and
• making reimbursement mandatory for victims of scams who have done nothing wrong.

Feedback is requested by 14 January 2022. [18 Nov 2021]

FCA Market Watch 68

The FCA has published Market Watch 68. This issue focuses on web-based trading platforms which are widely used for Rates and Fixed Income products. The FCA discusses its concerns about gaps in users’ surveillance of web-based platform activity, in particular, market abuse surveillance, data challenges, compliance awareness, market abuse risk assessments, record keeping and onboarding governance. The FCA also noted its continued observation of firms using questionable rationales to justify their potential failure to meet obligations under the UK Market Abuse Regulation (UK MAR).  [16 Nov 2021]

#Data 

ESMA: New Q&A on ECSPR

ESMA has published a new questions and answers (Q&A) on European crowdfunding service providers for business Regulation (ECSPR). [19 Nov 2021]

EBA: Letter on call for advice on PSD2

EBA has published a letter from John Berrigan of the EC Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA), on a call for advice the review of the revised Payment Services Directive (PSD2). The letter sets out the areas in which the EC is seeking advice, including:

• scope and definitions;
• licensing of payment institutions (PIs) and supervision of payment service providers under PSD2;
• transparency of conditions and information requirements;
• rights and obligations;
• strong customer authentication (SCA);
• access to and use of payment accounts data in relation to payment initiation services and account information services;
• access to payment systems and access to accounts maintained with a credit institution;
• cross-sectoral topics; and
• enforcement of PSD2.

EBA is expected to respond by 30 June 2022. [18 Nov 2021]

#PSD2

#SCA

EC: Speech on EU payments market developments

The EC has published a speech by Mairead McGuinness, Commissioner for Financial Services, Financial Stability and the Capital Markets Union. In this wide-ranging speech, Ms McGuiness reviewed a number of payments-related developments, including: the EU's Retail Payment Strategy; instant payments and direct access to payment systems; IBAN discrimination; the review of the PSD2; the potential to extend the scope of the Settlement Finality Directive (SFD); the development of Digital ID; the revision of the EC's anti-money laundering (AML) framework; and central bank digital currencies (CBDCs) and the Digital Euro. [17 Nov 2021]

#InstantPayments

#CBDCs

#DigitalEuro

Improving the technology neutrality of Treasury portfolio laws

The Government has released exposure draft legislation to provide more flexibility for businesses, individuals and regulators when communicating with each other and invites submissions on this draft until 10 December 2021.

The Treasury Laws Amendment (Modernising Business Communications) Bill aims to achieve this flexibility by:

• expanding the scope of the global regimes that allow documents to be signed and sent electronically in the Corporations Amendment Bill;
• legislating relief for companies, registered schemes and disclosing entities sending documents to ‘lost members’ under the Corporations Act 2001;
• allowing newspaper notices to be published in any accessible and reasonably prominent manner across Treasury portfolio laws;
• updating payment provisions in Treasury legislation to ensure electronic payments can be made; and
• updating the National Consumer Credit Protection Act 2009 and associated legislation to give consumers and credit providers greater flexibility when updating details and sending documents. [19 Nov 2021]

MAS round-up of SFF 2021

In a press release, MAS rounds up the highlights from the sixth edition of the Singapore FinTech Festival (SFF), which took as its theme: 'Web 3.0 and its impact on financial services’.  The week-long SFF attracted 60,000 attendees, representing a 33% year-on-year growth; it drew over two million views and more than 160 countries were represented.

Among the key highlights of SFF week are a number of initiatives which MAS launched, including:

• National Artificial Intelligence (AI) Programme in Finance - MAS and the National AI Office (NAIO) launched the National Artificial Intelligence (AI) Programme in Finance to build deep AI capabilities within Singapore’s financial sector to strengthen customer service, risk management, and business competitiveness;
• Phase two of SGFinDex - MAS and the Smart Nation and Digital Government Group launched the second phase of the Singapore Financial Data Exchange (SGFinDex), allowing individuals to now view information on their investment holdings at The Central Depository as part of their consolidated financial position;
• Sandbox Plus - MAS announced Sandbox Plus, an enhancement to the MAS FinTech Regulatory Sandbox framework, to further catalyse financial innovation and FinTech adoption; and
• Retail Central Bank Digital Currency (CBDC) paper - MAS released a paper outlining MAS’ preliminary assessment of the economic case for a retail CBDC in Singapore, and its potential implications for financial stability and monetary policy.  [17 Nov 2021]

#CBDCs

RBI seeks feedback on recommendations made by the Working Group on digital lending

The Reserve Bank of India (RBI) has released the final report of the Working Group on digital lending for public feedback. The report contains a number of recommendations which aim at enhancing consumer protection and making the digital lending ecosystem safe and sound while encouraging innovation. Feedback on the report is requested by 31 December 2021. [18 Nov 2021]

SECP consults on guidelines on the registration and licensing of online lending platforms

The Securities and Exchange Commission, Philippines (SECP) has published a draft Memorandum Circular on Guidelines on the Registration and Licensing of Online Lending Platforms for comment. Feedback on the draft is requested within 15 days of 18 November 2021. [19 Nov 2021]

CFTC Obtains Federal Court Order against Florida Man and Foreign Defendants for Role in Fraudulent Binary Options and Digital Asset Scheme

The CFTC has announced that a District Court has orders granting permanent injunctions against a resident of Florida and residents of Israel, and requiring them to pay a combined $7 million in disgorgement and civil monetary penalties for violations of the Commodity Exchange Act and CFTC regulations. The orders also impose permanent trading and registration bans on the defendants, among other injunctive relief.

The court’s orders stem from a CFTC complaint filed on 5 May 2020, charging the defendant and others with fraudulently soliciting tens of millions of customers and prospective customers to open and fund off-exchange binary options and digital assets trading accounts. Specifically, the orders find that the defendants created, disseminated and/or facilitated the use of fraudulent solicitations in emails, websites, and video sales letters promising free access to purportedly successful automated trading systems that traded on behalf of clients in binary options involving commodity interests and digital assets. These accounts traded foreign exchange currency pairings, metals, and digital assets through websites operated by unregistered binary options and digital asset brokers. The orders require defendants to pay disgorgement and a civil monetary penalty. The CFTC continues to litigate this matter against two additional entity defendants and one relief defendant. [17 Nov 21]

DoJ Announces that $56 Million in Seized Cryptocurrency to be Sold as First Step to Compensate Victims of BitConnect Fraud

The US Department of Justice (DoJ) and the US Attorney’s Office for the Southern District of California obtained an order from a Federal District Court for authority to liquidate approximately $56 million in fraud proceeds seized from the self-described “number one promoter” of BitConnect, a cryptocurrency, who consented to the seizure.

According to court documents, the defendant, a Los Angeles resident, pleaded guilty to participating in a massive conspiracy to defraud BitConnect investors in the US and abroad, in which investors were fraudulently induced to invest over $2 billion. The BitConnect scheme is the largest cryptocurrency fraud scheme ever charged criminally. With entry of the court’s interlocutory sale order, the US government will begin the process of seeking to make whole victims of the BitConnect scheme by selling the cryptocurrency and holding the proceeds in US dollars. The US government will maintain custody of the seized proceeds in cryptocurrency wallets and intends to use these funds to provide restitution to the victims pursuant to a future restitution order by the court at sentencing. This liquidation is the largest single recovery of a cryptocurrency fraud by the US to date. [16 Nov 21]