FinTech Global Regulatory Round-up – w/e 11 February 2022

Insights from Herbert Smith Freehills

Our latest podcast features two former regulators in conversation about operational resilience – Andrew Procter from Herbert Smith Freehills and Michael Sicsic from Sicsic Advisory. The discussion focuses on implementation of operational resilience requirements for the upcoming UK regulatory deadline of 31 March 2022 - Regulation in Focus Podcast – Operational Resilience 

HMT: Update on progress since the 2021 Mansion House speech

HM Treasury has published the speech delivered by John Glen MP, Economic Secretary to the Treasury at TheCityUK Annual Dinner and an update on the progress being made against the plans which the Chancellor set out in his July 2021 Mansion House speech. The Mansion House Update February 2022 sets out an inventory of actions taken under four headings which reflect HMG's broader aims: an open and global financial hub; a world leader in green finance; a sector at the forefront of technology and innovation; and a competitive marketplace promoting effective use of capital.

The Bank of England (BoE) has also published a speech by its Governor, Andrew Bailey who spoke at the same event. In his speech, Mr Bailey highlighted the resilience of the global financial system to shocks. In particular, he noted that having an open international system and the right regulation in place, are key to ensuring that the UK continues to be resilient. [11 Feb 2022]

#Innovation

PSR: Finalised plans for the wider implementation of CoP fraud prevention tool

The Payment Systems Regulator (PSR) has published a policy statement (PS22/1) following the publication of its consultation (CP21/11) in December 2021 on the wider implementation of the Confirmation of Payee (CoP) service, referred to as Phase 2. The PSR has confirmed its decision that all technical and system requirements for Phase 2 will be implemented by 31 May 2022.

The PSR has also published a new Specific Direction (SD11) on the closure of initial technical environment for CoP. SD11 outlines the actions required by relevant stakeholders to ensure all PSPs use CoP by 31 May 2022. SD11 comes into effect on 11 February 2022. [10 Feb 2022]

BoE: Update on transforming data collection programme

The Bank of England (BoE) has published a communication to firms to provide an update on the progress of the programme to transform data collection from the UK financial sector; the programme is jointly led by the BoE, FCA and the industry. The communication provides an overview of the progress and achievements since the last update in December 2021; it also sets out future plans.

The BoE particularly highlights the following three key takeaways for readers:

• subject to resource availability and approval by the Reporting Transformation Committee, the BoE would like to extend the phase one Commercial Real Estate (CRE) reporting use case from the end of March 2022 to the end of May 2022;
• the BoE would like industry participants who are part of the core delivery team to stay with the programme until March 2023, in particular to help the programme capture lessons learnt from the first iteration of the use cases; and
• the BoE would like firms to provide twice the levels and types of resource to phase two of the programme. [10 Feb 2022]

#RegReporting

#Data

FCA: Speech on the FCA's role and priorities in enhancing UK capital markets

The FCA has published a speech by Sarah Pritchard, Executive Director, Markets, delivered at the City & Financial Global - The Future of UK Financial Regulation Summit, addressing the future of UK financial services regulation and the future opportunities for financial markets. In her speech, Ms Pritchard refers to:

• the FCA transformation programme;
• the Future Regulatory Framework (FRF) review;
• the FCA’s role in capital markets and its priorities;
• ESG and sustainable finance; and
• what to expect from the FCA in 2022. [8 Feb 2022]

#FRF 

ESMA: Speech on our evolving digital world

The European Securities and Markets Authority (ESMA) has published a speech delivered by its Chair, Verena Ross at the Afore 6th Annual FinTech and Regulation Conference. Speaking at the Afore 6th Annual FinTech and Regulation Conference, Ms Ross spoke about the opportunities and risks of digitalisation, using data in finance, regulatory expectations, the Markets in Crypto-Assets Regulation (MiCA), and what is ESMA doing in this space. [9 Feb 2022]

ESAs: Joint response to the EC’s February 2021 Call for Advice on digital finance

The European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA) and European Securities and Markets Authority (ESMA) (together, ESAs) have published a joint report in response to the European Commission’s (EC) February 2021 Call for Advice on digital finance. The proposals made in the joint report aim to maintain a high level of consumer protection and address risks arising from the transformation of value chains, platformisation and the emergence of new 'mixed-activity groups' (MAGs). The proposals include:

• a holistic approach to the regulation and supervision of the financial services value chain;
• strengthened consumer protection in a digital context, including through enhanced disclosures, complaints handling mechanisms, measures aimed at preventing the mis-selling of tied/bundled products, and improved digital and financial literacy;
• further convergence in the classification of cross-border services;
• further convergence in addressing money laundering/financing of terrorism risks in a digital context;
• effective regulation and supervision of ‘mixed-activity groups’, including a review of prudential consolidation requirements;
• strengthened supervisory resources and cooperation between financial and other relevant authorities, including on a cross-border and multi-disciplinary basis; and
• active monitoring of the use of social media in financial services.

ESMA has also published two reports setting out the outcomes of a survey to national competent authorities (NCAs) and the outcomes of a public call for evidence covering fragmented value chains, digital platforms and MAGs. EBA has published a factsheet on the joint report. [7 Feb 2022]

MAS circular – Non-face-to-face CDD measures

MAS has issued AMLD 01/2022: Circular on Non-Face-to-Face Customer Due Diligence (CDD) Measures. The Circular sets out industry good practices observed by MAS and supervisory guidance on the measures to mitigate risks associated with the use of non-face-to-face technologies for CDD.  [8 Feb 2022]

MAS update – framework for equitable sharing of losses arising from scams

MAS has reported that banks in Singapore have substantially implemented the additional measures to bolster the security of digital banking announced on 19 January 2022. MAS notes that these measures provide a significant added layer of security to protect customers’ funds.

MAS is working with the industry to evaluate longer-term measures to be implemented in the coming months, as well as to develop a framework for equitable sharing of losses arising from scams. [4 Feb 2022]

RBI: Statement on Developmental and Regulatory Policies – plans to consult on IT outsourcing and governance

The RBI has issued its latest Statement on Developmental and Regulatory Policies. The statement sets out various updates relating to liquidity measures, financial markets, payment and settlement systems, and regulation and supervision. With regard to regulation and supervision, the RBI notes its intention to issue guidelines on IT outsourcing and on IT governance, risk, controls and assurance practices; draft Directions will be issued for consultation.  [10 Feb 2022] 

BSP: Passage of FCPA and PDIC amendments to reinforce trust

​In a press release, the Bangko Sentral ng Pilipinas (BSP) commends the Philippine Congress for the passage of the Financial Consumer Protection Act (FCPA) and the amendments to the Philippine Deposit Insurance Corporation (PDIC) charter.

The FCPA aims to strengthen protection for financial consumers against cybercrime, especially amid the pandemic; it will also enable financial regulators to better address consumer complaints and enforce sanctions against erring entities. The proposed amendments to the PDIC charter make the state deposit insurer an attached agency of the BSP instead of the Department of Finance.

Both bills will be enrolled and transmitted to Malacañang for the President’s signature. [10 Feb 2022]

Two Arrested for Alleged Conspiracy to Launder $4.5 Billion in Stolen Cryptocurrency

The Department of Justice (DoJ) has announced that two individuals were arrested for an alleged conspiracy to launder cryptocurrency that was stolen during the 2016 hack of Bitfinex, a virtual currency exchange, presently valued at approximately $4.5 billion. Thus far, law enforcement has seized over $3.6 billion in cryptocurrency linked to that hack. According to court documents, the defendants, a married couple, allegedly conspired to launder the proceeds of 119,754 bitcoin that were stolen from Bitfinex’s platform after a hacker breached Bitfinex’s systems and initiated more than 2,000 unauthorized transactions. Those unauthorized transactions sent the stolen bitcoin to a digital wallet under the defendants’ control. The criminal complaint alleges that the defendants employed numerous sophisticated laundering techniques, including using fictitious identities to set up online accounts; utilizing computer programs to automate transactions, a laundering technique that allows for many transactions to take place in a short period of time; depositing the stolen funds into accounts at a variety of virtual currency exchanges and darknet markets and then withdrawing the funds, which obfuscates the trail of the transaction history by breaking up the fund flow; converting bitcoin to other forms of virtual currency, including anonymity-enhanced virtual currency, in a practice known as “chain hopping”; and using US-based business accounts to legitimize their banking activity. The defendants have been charged with conspiracy to commit money laundering and conspiracy to defraud the US. [8 Feb 2022]