ICYMI
- Data Centres to be classed as 'critical national infrastructure' in the UK
- Draghi Report makes wide-ranging recommendations to boost European competitiveness
- Australian Cyber Ready survey: balancing proportionality and severity
UK
LSB comments on proposed reduction in APP scam reimbursement cap
The Lending Standards Board (LSB) has published its response to PSR CP24/11, which proposed changes to the reimbursement cap in the Authorised Push Payment (APP) fraud reimbursement framework. The LSB is the governor of the Contingent Reimbursement Model (CRM) Code for APP Fraud, which does not put a cap on the amount reimbursed to a customer following a successful scam, and also includes provisions on scam detection and prevention. The LSB is concerned that the new framework risks leaving many customers with fewer protections than they have currently.
The LSB is concerned that the new framework risks leaving many customers with fewer protections than they have currently. The LSB's concerns include that: the cap decrease from £415,000 to £85,000 will cover only 90% of cases, with the remaining 8% accounting for £30m of customer losses; and that the new rules do not invite payment service providers (PSPs) to consider whether their acts or omissions contributed to the success of scams, disincentivising PSPs from investing in appropriate systems and controls. [20 Sep 2024] #Payments #APPScams
FPP: Response to CfI on big tech and digital wallets
The FCA Practitioner Panel (FPP) has published its response to the FCA's Call for information (CfI) on big tech and digital wallets. Noting that digital wallets are becoming a critical part of payments infrastructure, the FPP's comments focus on the implications of the prevalence of big tech in this rapidly evolving provision, and highlight where regulatory attention might best be focused to provide consumers with appropriate understanding, protection, and choice in the long-term, to make the market as effective as possible. In particular, the response notes that clarification of proper apportionment of responsibility when things go wrong between digital wallet providers and individual payment providers would be welcome. [20 Sep 2024] #BigTech #DigitalWallets
FSCP responds to FCA and PSR consultations – insurance, big tech & digital wallets
The Financial Services Consumer Panel (FSCP) has published its responses to the following:
- FCA Discussion Paper 24/1 – DP24/1 on the regulation of commercial and bespoke insurance business– the FSCP agrees with the concerns and issues identified in the discussion paper and supports the FCA’s view that it is necessary to distinguish between larger commercial enterprises and both micro businesses and smaller small and medium-sized enterprise (SME) firms.
- FCA and the Payment Systems Regulator (PSR) call for information on big tech and digital wallets– the FSCP stressed that it is vital digital wallets work well for all and that they must: enable competition and switching, ensure security and offer system-wide resilience, be non-discriminatory and offer safe access for all. It is with a focus on these issues that the FSCP has responded to the call for information. The FSCP also set out its view of what a well-functioning payments landscape would look like for UK consumers. [18 Sep 2024] #BigTech #DigitalWallets
FCA speech: Frameworks for effective fraud prevention measures
The FCA has published a speech by its Director of the Specialist Directorate, Andrea Bowe, at the Westminster Legal Policy Forum Keynote Seminar. Ms Bowe spoke about how the FCA tackles financial crime across its authorisation, supervision and enforcement functions, and touched on the progress made in fighting fraud, noting that the latest statistics suggest that losses are stabilising.
To continue to move the dial on tackling fraud, Ms Bowe emphasised that collaboration and collective effort were key. One way in which the FCA is seeking to do this is through working closely with industry to develop practical answers. She highlighted addressing money mule activity as a crucial area for collaboration.
Ms Bowe also discussed the work of the FCA with big tech platforms to address the risk of illegal financial promotions and scam adverts, and underlined the importance of ingenuity and innovation in order to keep pace with developing financial crime risks. [17 Sep 2024] #APPScams #FinProms #FinancialCrime
Europe
ECB: Speech by Elizabeth McCaul on the future of EU banking supervision– connecting people and technology
The European Central Bank (ECB) has published a speech by Elizabeth McCaul, Member of the Supervisory Board of the ECB, at the Supervision Innovators Conference 2024. Within her talk, Ms McCaul outlined the Single Supervisory Mechanism (SSM) tech strategy for 2024-2028, which builds on two main pillars: people and technology. With regard to the 'people' pillar, Ms McCaul set out how the ECB was aiming to increase the use of suptech by banking supervisors, including by providing 'suptech champions' to support users as they adapt to the new tools.
For the 'technology' pillar, Ms McCaul explained the importance of having access to shared technology across the ECB and national competent authorities (NCAs) to facilitate collaboration between supervisors. Data analytics and automating processes through the use of AI are further key elements of the technology pillar.
Concluding her remarks, Ms McCaul said she was convinced that 'a strong SSM collaborator working in a single team with shared technology, an empowered data expert who bases decisions on advanced supervisory analytics and an agile supervisor making use of process automation and the latest technology' is the future of supervision. [19 Sep 2024] #SupTech #Data
ECB Research Bulletin: Consumer demand for CBDC as a means of payment
The European Central Bank (ECB) has published a research bulletin on consumer demand for central bank digital currency (CBDC) as a means of payment. The researchers analysed payment survey data to develop a framework to understand the role of adoption frictions and design strategies in shaping CBDC demand. It suggests that customers may be hesitant to use CBDC at first, preferring traditional payment methods. However, CBDC intake may increase if design is tailored specifically for customers' needs. [18 Sep 2024] #CBDC #Payments
Australia
RBA/Treasury report: CBDC and the future of digital money in Australia
The Reserve Bank of Australia (RBA) and the Treasury have released a report on central bank digital currency (CBDC), concluding that there is currently no strong case for a retail CBDC in Australia. The report states that Australia's existing payment system is functioning well and meets people's needs. However, the RBA and the Treasury remain open to revisiting this stance as more information about the benefits and costs becomes available. The report also suggests that a wholesale CBDC could potentially enhance the efficiency of Australia's financial markets when combined with other forms of digital money and infrastructure upgrades. [18 Sep 2024] #CBDC #Payments
Hong Kong
HKMA invites firms to participate in Gen AI Sandbox
The HKMA has issued a circular to invite authorised institutions (AIs) to participate in the Generative Artificial Intelligence (GenA.I.) Sandbox initiative announced in collaboration with the Hong Kong Cyberport Management Company Limited (Cyberport) in August 2024 (see our previous update).
The sandbox aims to provide a risk-controlled environment for AIs to develop, test, and pilot innovative artificial intelligence-based solutions in real world banking scenarios. AIs can leverage Cyberport's computing power and obtain targeted supervisory feedback throughout their trials. Based on the results of the trials, the HKMA will share good practices and consider the need for developing further supervisory guidance.
Applications for the first cohort are open until 15 November 2024, and will be prioritised based on the factors set out in the annex to the circular. Selected projects should begin within one month of the announcement (tentatively in December 2024), and be completed within six months. Participants are required to submit regular progress updates and a final report upon project completion.
The HKMA encourages AIs to explore a range of artificial intelligence implementations. The trials are expected to leverage advanced artificial intelligence, including GenA.I., models designed for real-time interaction, domain-specific assessment, decision-making support or predictive analytics, with a specific focus on enhancing risk management, anti-fraud measures and customer experience.
AIs are encouraged to collaborate with fintech firms when developing use cases for the trials. Cyberport provides a catalogue of fintech firms, language model providers, and GenA.I. solution providers to assist AIs in forming partnerships and exploring relevant technologies. [20 Sep 2024] #AI #Sandbox
Singapore
MAS/ABS: Major retail banks to introduce Singpass Face Verification
The Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) have announced that major retail banks in Singapore will progressively implement Singpass Face Verification (SFV) over the next three months to strengthen the digital token (DT) setup process for retail banking customers.
SFV will be triggered in higher risk scenarios to strengthen and complement existing authentication methods for DT setup. SFV uses a face scan to verify a customer’s identity against national records before the customer’s DT can be activated for use.
The use of SFV is the latest security measure that banks are rolling out to protect customers from scams. Other initiatives and self-help tools include the phasing out of one-time passwords (OTPs) for bank account login by DT users and the Money Lock feature, through which customers can 'lock up' specified amounts of their funds to prevent them from being accessed digitally. [18 Sep 2024] #Security
Malaysia
BNM: Malaysia and Cambodia launch cross-border QR payments connectivity
Bank Negara Malaysia (BNM) and the National Bank of Cambodia (NBC) have launched the cross-border QR payment linkage between Cambodia and Malaysia. Under this linkage, consumers and merchants in both countries will be able to make and receive instant cross-border QR payments.
The project commenced after the signing of a memorandum of understanding in February 2024 between BNM and NBC to strengthen cooperation in payment system and innovation. [19 Sep 2024] #Payments #QR
Thailand
SECT consults on amendment to regulations - warning statements on the investment risks of digital tokens
The Securities and Exchange Commission Thailand (SECT) has published a consultation on a proposed amendment to the regulations regarding warning statements on investment risks for digital tokens. The amendment requires initial coin offering (ICO) portals and ICO issuers to put in place appropriate warning statements under the same standard and clearer warning presentation regarding investment risks. This is to ensure that investors have sufficient information regarding risks or limitations prior to using services or making investment decisions on digital tokens.
Responses to the consultation are requested by 16 October 2024. [16 Sep 2024] #DigitalTokens #Crypto
US
SEC: Systemic risk in AI
The Securities and Exchange Commission (SEC) has released a transcript of the video of Chair Gary Gensler's office hours in which he discussed systemic risk in AI. [19 Sep 2024] #AI
SEC charges DeFi company and its founders with misleading investors and acting as unregistered brokers
The SEC has announced charges against a purported decentralized finance (DeFi) company and its co-founders for allegedly misleading investors and engaging in unregistered broker activity with respect to two blockchain-based investment platforms that collectively once held cryptoassets worth more than $1bn.
To settle the charges, the company and its founders, without admitting or denying the SEC’s allegations, consented to the entry of final judgments ordering various forms of relief, including permanent injunctions, conduct-based injunctions, civil penalties, disgorgement with prejudgment interest, and equitable officer-and-director bars against the co-founders for a period of five years. The settlements are subject to court approval. [18 Sep 2024] #DeFi
SEC charges multiple individuals and entities in relationship investment scams
The SEC has announced charges against five entities and three individuals in connection with two relationship investment scams involving fake cryptoasset trading platforms. The entities solicited investors via social media apps. These charges are the SEC’s first enforcement actions alleging these types of scams. [17 Sep 2024] #Crypto #Fraud
SEC charges audit firm with negligence and violating auditor independence requirements
The SEC has announced that an audit firm has agreed to pay $1.95m to resolve two actions in relation to misconduct in its audits of a now-defunct cryptoasset trading platform, and auditor independence violations.
In one of the actions, the SEC alleges that the firm misrepresented its compliance with auditing standards by issuing two audit reports that falsely represented that the audits complied with Generally Accepted Auditing Standards (GAAS). [17 Sep 2024] #Crypto
Rashid Ahmed
FSR & CCI Professional Support Paralegal, London
Vasuki Balasubramaniam
FSR & CCI Professional Support Paralegal, London
Disclaimer
The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.