FinTech Global Regulatory Round-up – w/e 1 April 2022

The Bank for International Settlements (BIS) Innovation Hub Singapore Centre and the Monetary Authority of Singapore (MAS) have developed a new prototype platform that integrates regulatory data and analytics – Project Elipse – which will enable 'quick access to early warning indicators, analytics, and prudential metrics for banking supervision'. The prototype is the first to be published on a new platform for sharing statistical and financial software, BIS Open Tech. [1 Apr 2022]

The Financial Stability Board (FSB) has published its work programme for 2022. Priority areas of work and new initiatives, including key deliverables to the G20 Indonesian Presidency, are:

• supporting international cooperation and coordination on current financial stability issues;
• enhancing the resilience of non-bank financial intermediation (NBFI);
• enhancing cross-border payments;
• harnessing the benefits of digital innovation while containing its risks; and
• addressing financial risks from climate change. [31 Mar 2022]

#Payments 

The Wolfsberg Group has published guidance on digital customer lifestyle risk management. The guidance explores how non face-to-face customer interaction could be considered a standard, or even lower risk channel for a financial institution, by further developing three core anti-money laundering/countering the financing of terrorism (AML/CFT) controls:

• more effective identification, verification and authentication processes at the onboarding stage;
• a multi-dimensional and continually reassessed customer risk profile; and
• a redesigned trigger-based approach for conducting ongoing due diligence. [30 Mar 2022]

#Consumers 

The FCA has published its regulatory round-up for March 2022. This issue covers the hot topics of financial sanctions in response to the conflict in Ukraine, the BSPS redress scheme, cryptoassets and increasing the Financial Ombudsman Service (FOS) award limit. [31 Mar 2022]

The FCA has published the following new webpages on automated advice and guidance models:

• Automated advice: existing rules and guidance;
• Apply to Innovation Pathways; and
• Support for automated models. [31 Mar 2022]

#Innovation 

The Bank of England (BoE) has published a speech by Victoria Cleland, Executive Director for Banking, Payments and Innovation, on the road to enhanced payments. In her speech, Ms Cleland considers:

• how payment services and user needs are evolving;
• new approaches in high-value payments;
• how central banks can influence the outcomes of innovation;
• the evolution of public infrastructure; and
• how the international community can work together. [31 Mar 2022]

The FCA has published a call for input on how synthetic data is being used to support financial services innovation. The FCA notes both the role of data in driving innovation and the challenge posed by the nature of financial data, which may be both sensitive personal data and/or commercially sensitive.  It identifies a potential role for synthetic data to address that challenge. Accordingly, the FCA is seeking to assess the existing market maturity of synthetic data within financial services and its potential for safely opening data sharing between firms, regulators and other public bodies.

Input is requested by 22 June 2022. [30 Mar 2022]

#Data 

The Bank of England (BoE) has published the minutes of the CBDC Technology Forum for March 2022. At its last meeting, the members of the forum discussed: the London Centre of the BIS Innovation Hub; interoperability; and financial inclusion.

The next meeting is expected to be in June 2022. [29 Mar 2022]

The Payment Systems Regulator (PSR) has published its annual plan and budget for 2022/23. The plan sets out the PSR's key aims, activities and expected costs for the upcoming year. In particular, the PSR aims to:

• improve outcomes for everyone who uses payment systems so they are fit for the future; and
• increase competition between different payment systems, including by unlocking the potential of account-to-account payments.

Alongside the plan, the PSR has published a factsheet and video. [29 Mar 2022]

The FCA has published a new Innovation Hub webpage on market insights. The new webpage allows the FCA to share with the broader market the considerable quantity of data and insights into the UK FinTech market the Innovation Hub has gathered to date. [28 Mar 2022]

ASIC Chair Joe Longo delivered a keynote address at the Melbourne University Law School Symposium in honour of Professor Ian Ramsay. In his speech, Mr Longo touched on a “critical element of ASIC’s future – digital capability” and the need for ASIC to adapt and innovate with technological change in order to keep pace with the sectors ASIC regulates. Mr Longo noted that ASIC collects large volumes of data across a range of platforms and one of his priorities as Chair is to enhance the use and interpretation of this data.  The increased use of technology “will be a step-change” in the way ASIC regulates however is something which ASIC is committed to.

Mr Longo also discussed how ASIC will continue to be open to engagement with other regulators like APRA at all levels. Whilst acknowledging that the breadth and complexity of ASIC’s mandate continues to expand, Mr Longo discussed how ASIC will need to be open to changes “that takes advantage of our best thinking on legislative design, the exercise of executive power and the extraordinary opportunities that technology and data present".  [30 Mar 2022]

#Technology

The Council of Financial Regulators has released its quarterly statement following a quarterly meeting held on 25 March. The statement notes that the Council discussed possible approaches to the regulation of stablecoins – a type of crypto-asset that aims to maintain a stable value against one or more currencies or assets, with a particular focus on payment stablecoins. These stablecoin arrangements bear similarities with stored-value facilities (SVFs) and the Council will now work on options for incorporating them into the proposed regulatory framework for SVFs. [30 Mar 2022]

#Cryptoassets 

MAS has announced that in collaboration with the BIS Innovation Hub Singapore Centre, it has developed a new prototype platform that integrates regulatory data and analytics – Project Ellipse – which will enable 'quick access to early warning indicators, analytics, and prudential metrics for banking supervision'.  The prototype is the first to be published on a new platform for sharing statistical and financial software, BIS Open Tech.  [31 Mar 2022]

Bank Negara Malaysia (BNM) has published its Annual Report 2021 (AR 2021), Economic and Monetary Review 2021 (EMR 2021), and Financial Stability Review for Second Half 2021 (FSR 2H 2021). The AR 2021 sets out the initiatives and workings of the Bank in 2021 in fulfilling its mandates to promote monetary stability and financial stability conducive to the sustainable growth of the Malaysian economy. The report features four articles, covering: the cost of living; linkages for efficient cross-border payments; repayment assistance; and money laundering and terrorism financing. In relation to FinTech, the FSR 2H 2021 reports that amid an increasing reliance by financial institutions on third party service providers, higher cloud adoption and rising ransomware threats, ensuring operational and cyber resilience remains a key focus for BNM and financial institutions. [30 Mar 2022]

#CyberResilience

The Chair of the Securities and Exchange Board of India (SEBI), Ms Madhabi Puri Buch, has launched 'Manthan' – a six-week long Ideathon led by SEBI in collaboration with others to promote innovation in the securities market. Ideas which emanate from Manthan may be taken forward in a hackathon. Manthan is open for registration from March 30 to May 14, 2022. [30 Mar 2022]

In a press release, the Bangko Sentral ng Pilipinas (BSP) expressed its aim to enhance the financial resilience of Filipinos through the BSP-led National Strategy for Financial Inclusion (NSFI) 2022-2028. BSP Governor Benjamin E Diokno explained, 'Financial resilience means individuals and households have the ability to mitigate and manage potential risks to their sources of income and their overall financial position.' The release further explains that 'To achieve its vision of inclusive growth and financial resilience for all, the NSFI has identified improved access to social protection and social safety nets--cash assistance, health and unemployment insurance, disaster risk insurance, and pension--as one of its objectives.'

The release follows the announcement of the launch of Digital Financial Inclusion Awards (DFIA), welcomed by the BSP Governor: 'With DFIA, we advance our inclusive digital finance agenda and microfinance advocacy further by recognizing microentrepreneurs as well as microfinance institutions that  have successfully ventured into digitalization.'  [27 – 28 Mar 2022]

The BSP has announced that it is exploring ways to foster digital financial innovation by enabling banks, electronic money issuers (EMIs) and financial service providers (FSPs) to transact with customers in a digital marketplace. The digital financial marketplace model is anchored on the Open Finance Framework, which allows the sharing of financial data of consenting customers to create innovative financial solutions that cater to their needs. The financial products or services to be offered include:

• retail loan products, such as home mortgage loans, credit cards, motor vehicle loans, salary loans, and consumer credit for other purposes;
• other retail financial products, such as cash cards, debit cards and other related products;
• retail insurance products, collective investment schemes or pooled investment funds, such as mutual funds and unit investment trust funds; and
• other financial products or services as may be authorized by the Monetary Board.

The proposed guidelines on the adoption of a digital financial marketplace model are aimed to set the criteria for engagement in marketplace operations as well as supervisory expectations on the governance and management of attendant risks.  [27 Mar 2022]

#Innovation 

The Commodity Futures Trading Commission (CFTC) has announced that a consent order was entered in the Western District of Texas in an enforcement action against a defendant and his company, a self-styled investment firm, finding that they misappropriated in excess of $7.2 million from investors who intended to trade forex or cryptocurrency in managed accounts. The order imposes injunctive relief, including bans relating to trading and registration.

In addition to finding the defendants liable for fraud, the order enjoins the defendants from future violations of the Commodity Exchange Act (CEA). The order also permanently bans the defendants from trading or registering with the CFTC and reserves determination of the amounts of restitution, disgorgement, and civil monetary penalty for future decision by the court. [29 Mar 2022]

The DoJ has announced that an Estonian man was sentenced to 66 months in prison for his years-long role in furthering and facilitating computer intrusions, the movement of fraudulently obtained goods and funds, and the monetization of stolen financial account information. He also participated in ransomware attacks causing over $53 million in losses and was ordered to pay over $36 million in restitution.

According to court documents, the defendant, of Estonia, who was apprehended in Latvia and extradited to the US, pleaded guilty in April 2021 to conspiracy to commit wire fraud affecting a financial institution and conspiracy to commit access device fraud and computer intrusions. The defendant was an active member of an exclusive online forum designed for Russian-speaking cybercriminals to gather safely and exchange their criminal knowledge, tools, and services. From 2009 through 2015, the defendant not only furthered the criminal aims of the forum, but he also worked closely with forum members and other cybercriminals for purposes of obtaining and exploiting stolen financial account information. [25 Mar 2022]