FinTech Global Regulatory Round-up – w/e 18 March 2022

BCBS: Newsletter on AI and machine learning

The Basel Committee on Banking Supervision (BCBS) has published a newsletter on artificial intelligence (AI) and machine learning which sets out some of the issues which the BCBS has been discussing internally in light of banks' increased interest in, and use of, AI and machine learning.

The BCBS explains that it is working to develop its understanding and will focus on:

• the extent and degree to which the outcomes of models can be understood and explained;
• AI and machine learning model governance structures, including responsibilities and accountability for AI and machine learning-driven decisions; and
• the potential implications of broader usage of AI/ML models for the resilience of individual banks and for financial stability. [16 Mar 2022]

#MachineLearning

Responses to HoL Economic Affairs Committee report on CBDCs

HM Treasury and the BoE have both responded to the House of Lords Economic Affairs Committee report, Central bank digital currencies: a solution in search of a problem?. HMT's response addresses the Committee's recommendations, noting that no decision has been taken as to whether to issue a central bank digital currency (CBDC). The response also confirms the intention to publish a consultation in 2022 setting out HMT's and the BoE's assessment of the case for a UK CBDC. The shorter BoE response replies to the recommendations specifically addressed to the BoE and the HMT-BoE CBDC Taskforce. [18 Mar 2022]

HMG response to report on draft Online Safety Bill

HM Government (HMG) has responded to the Joint Committee on the draft Online Safety Bill’s report and introduced the Bill into the House of Commons (HoC). HMG's response is set out in a policy paper which discusses the scope and substance of the Bill. In particular it covers: illegal harm to adults; harms to children; platform design; powers of the regulator; regulatory cooperation and parliamentary oversight.

The following has been published alongside the response:

• the Online Safety Bill as introduced into Parliament; and
• explanatory notes on the Bill. [17 Mar 2022]

FMLC: Letter to HMT on financial promotions rules for Cryptoassets

The Financial Markets Law Committee (FMLC) has published a letter sent to HMT regarding the proposed approach to the regulation of cryptoasset promotions. The letter highlights several potential areas of legal uncertainty in relation to the regulation of cryptoassets and related activities in the UK. [15 Mar 2022]

FCA, BoE and OFSI joint statement: Sanctions and the cryptoasset sector

The FCA, Bank of England (BoE) and the Office of Financial Sanctions Implementation (OFSI) have published a joint statement on financial sanctions and the cryptoasset sector in relation to the conflict in Ukraine. The regulatory authorities remind firms that the use of cryptoassets to circumvent economic sanctions is a criminal offence under the Money Laundering Regulations 2017 and regulations made under the Sanctions and Anti-Money Laundering Act 2018. The statement also outlines steps firms can take to reduce the risk of sanctions evasion via cryptoassets. [14 Mar 2022]

ESAs: Statement on risks of crypto-assets for consumers

The European Supervisory Authorities (ESAs) have published a statement on the risks of crypto-assets for consumers. In the statement, the ESAs explain that crypto-assets are highly risky and speculative, and set out the key steps consumers can take to ensure they make informed decisions. In particular, the ESAs highlight that retail consumers:

• face the very real possibility of losing all their invested money if they buy these assets;
• should be alert to the risks of misleading advertisements, including via social media and influencers; and
• should be particularly wary of promised fast or high returns, especially those that look too good to be true.

The ESAs also warn consumers that they should be aware of the lack of recourse or protection available to them, as crypto-assets and related products and services typically fall outside existing protection under current EU financial services rules. [17 Mar 2022]

#RetailConsumers

#SocialMedia

ECON Report on MiCA

The European Parliament's (EP) Economic and Monetary Affairs Committee (ECON) has adopted its report on the proposed Regulation on markets in cryptoassets (MiCA). ECON published a draft version of the report in March 2021. Inter-institutional negotiations will now begin. [15 Mar 2022]

Update from the ASEAN Capital Markets Forum 

The Securities Commission Malaysia (SCM) has published an update from the 36th Chairs' Meeting of the ASEAN Capital Markets Forum (ACMF). The following further steps were of particular note:

• the success of the training program on Sustainable Finance held in December 2021, with training on Fintech and Crypto to be provided in the first half of 2022; and
• progress towards creating a one-stop knowledge hub on sustainable finance in the ACMF website, and in developing the ASEAN Collective Investment Schemes (ASEAN CIS) Digital Repository which will become a platform to promote and publicize cross-border offerings of fund in ASEAN. [18 Mar 2022]

#Digitalisation

BSP beefs up cybersecurity for financial system stability

The Governor of the Bangko Sentral ng Pilipinas (BSP) has said the BSP is intensifying its cybersecurity efforts, both within the organization and among its supervised entities, amid accelerated growth in digital transactions. In a forum jointly organized by the Economic and Commercial Mission of Israel to the Philippines, Bankers Association of the Philippines (BAP), and Israel’s Ministry of Finance, the Governor stressed that “cybersecurity is crucial to ensuring a safe, efficient, and resilient Philippine financial system” and described BSP's approach to cybersecurity as comprehensive, agile, risk-based and engaging.

The BSP is developing an Advanced Supervisory Technology (SupTech) Engine for Risk-Based Compliance (ASTERisC) that will streamline and automate regulatory supervision as well as reporting and compliance assessment of cybersecurity risk management within the financial institutions BSP supervises. BSP continues to engage with those institutions through the BAP Cyber Incident Database, an Israeli web-based portal and a platform to share information on cyber threats and the best industry practices in cybersecurity. [15 Mar 2022]

#SupTech

DoJ announces that former Canadian government employee extradited to the US to face charges for dozens of ransomware attacks

The DoJ has announced that a Canadian man was extradited from Canada to the US on an indictment returned in the Middle District of Florida that charges him with conspiracy to commit computer fraud and wire fraud, intentional damage to a protected computer, and transmitting a demand in relation to damaging a protected computer arising from his alleged participation in a sophisticated form of ransomware. The ransomware has targeted dozens of victims all over the world, including companies, municipalities, hospitals, law enforcement, emergency services, school districts, colleges, and universities. Attacks have specifically targeted the healthcare sector during the Covid-19 pandemic, taking advantage of the global crisis to extort victims.

According to court documents, the defendant, of Gatineau, Quebec, Canada, from April through to December 2020, conspired to and did intentionally damage a protected computer and transmit a ransom demand in connection with doing so. The indictment also alleges that the US intends to forfeit more than $27 million, which is alleged to be traceable to proceeds of the offenses.  [10 Mar 2022]