Financial services regulatory update - April 2022

BCBS: artificial intelligence and machine learning newsletter

On 16 March 2022, the Basel Committee on Banking Supervision (BCBS) published their newsletter on artificial intelligence (AI) and machine learning (ML). Due to increased adoption of AI and ML technologies, the BCBS is analysing the use of these technologies by banks and identifying potential supervisory requirements. Banks should ensure staff are appropriately skilled with AI and ML technologies, including model developers, validators, users, and independent auditors. The key areas for continued supervisory analysis are: 

• That banks retain responsibility for due diligence and oversight of outsourcing AI-ML models. AI-ML models are likely to be more complex than traditional models. 
• There may be inherent risks arising from the use of larger data sets, use of cloud technology, and interconnectivity with third parties related to AI-ML. There may be greater data governance challenges relating to data quality, relevance, security, and confidentiality.  
• Underlying data in AI-ML models could cause biases leading to unethical outcomes. 

The BCBS is continuing work that focuses on understanding the extent and degree of which model outcomes can be understood, and suitable governance structures for AI-ML models.  

FCA: speech on consumer confidence 

On 15 March 2022, Therese Chambers, Director of Consumer Investments at the FCA, gave a presentation at the Personal Investment Management & Financial Advice Association (PIMFA) Virtual Fest 2022. The key takeaways are: 

• The FCA is committed to ensuring consumer compensation is fairer and more sustainable through the financial services compensation scheme.
• The FCA is open to ideas for reducing the cost of compensation, although only 35% of consumers feel financial firms are transparent and honest in their involvement.
• The FCA aims to encourage mainstream investments to achieve a 20% reduction of consumers with high-risk tolerances holding over £10,000 (cash) by 2025.
• For those that have lower risk tolerances, or vulnerabilities, the FCA aims to achieve a 50% reduction of consumers investing in high-risk investments.
• The FCA is aiming to reduce the value of monies consumers lose to scams by reducing scams enabled or committed by authorised firms.

FCA: consumer investments data review

On 3 March 2022, the FCA published its third consumer investments data review, which focuses on its work towards tackling consumer harm in the investment market, during the period April to September 2021. The key findings include: 

• Reports of cryptocurrency scams have increased for both the Supervision Hub and the ScamSmart website by 14% and 49%, respectively. Over 300 cases relating to potential unregistered cryptoassets businesses have been opened by the Supervision team, and 172 firms have been added to the unregistered cryptoasset business list.  
• A total of 735 consumer alerts about unauthorised firms or individuals were published. There were 16,300 reports of potential unauthorised activity received by the FCA.  
• The FCA prevented 32 new firms from entering the consumer investments market. This represents one in four at the gateway. Nine of these were suspected for "phoenixing" or "lifeboating" by advice firms. 
• There have been custodial sentences for three unauthorised individuals. A further 27 authorised firms have been persuaded to provide voluntary requirements, and 10 authorised firms have imposed own-initiative requirements to restrict activities and prevent harm.  

Conflict in Ukraine: FCA webpage

The FCA has published a new webpage tracking the statements it has made in relation to the conflict in Ukraine and providing further information for firms in relation to operational and cyber resilience, financial sanctions and market abuse. 

FCA: notice to regulated firms with exposure to cryptoassets

On 24 March 2022, the FCA published a notice to all regulated firms to remind them of their existing obligations when they are interacting with or exposed to cryptoassets and related services. The notice sets out some areas of risk that firms should consider: 

• Being clear with consumers. 
• Financial crime and registration of cryptoassets businesses. 
• Having appropriate systems and controls in place to counter the risk of being misused for financial crime. 
• Prudential considerations.
• Custody considerations.

The notice concludes with a summary of how the FCA is working with domestic and international regulators and organisations, as well as industry participants. 

ASA: warning to businesses over misleading and socially irresponsible cryptocurrency adverts 

On 22 March 2022 the Advertising Standards Authority (ASA), the UK's independent advertising regulator, published its enforcement notice and press release reminding companies of their obligations to comply with the CAP code (UK Code of Non-broadcast Advertising and Direct & Promotional Marketing), which is the code for non-broadcast advertisements, sales promotions and direct marketing communications. The ASA has confirmed that it considers this a priority issue. 

This notice relates to adverts for cryptocurrencies, crypto exchanges, and adverts or promotions involving the sale, supply, or transfer of cryptocurrencies, which are targeted at UK consumers, or globally on behalf of UK-based advertisers. Both paid, and non-paid-for adverts across all media formats are within scope of this notice. 

Among other requirements, adverts must state prominently and clearly that cryptocurrencies are unregulated, investments can increase or decrease in value, and in the UK, profits may be subject to capital gains tax.

The ASA will engage in targeted enforcement action if businesses have not addressed these issues by 2 May 2022.  

ESAs: consumer warning on cryptoassets

On 17 March 2022, the European Supervisory Authorities (ESAs) warned that cryptoassets are "not suited for most retail consumers as an investment or means of payment or exchange".  

The ESAs have reiterated the following key risks associated with cryptoassets: market volatility; the dissemination of false or misleading information and advertisements; the lack of consumer resource given that the cryptoassets are outside existing EU financial services protection; product complexity; fraudulent activities; market manipulation, lack of transparency and low liquidity; and security/operational risks. 

FMLC: letter to HM Treasury on the regulation of cryptoassets

On 15 March 2022, the Financial Markets Law Committee (FMLC) published a letter to HM Treasury highlighting uncertainties regarding the regulation of cryptoassets. The FMLC recommends that a coordinated approach should be taken to create a single, coherent, and bespoke regulatory regime for cryptoassets. 

The letter highlights the following areas of legal uncertainty: 

• In contrast to mainstream financial services activities, there is little connection between proposals for the regulation of the promotion of cryptoassets and the FSMA authorisation regime, which could lead to a complex authorisation scheme. 
• Few authorised firms will be able to show they are suitable and competent to approve cryptoassets related financial promotions, establishing a barrier to entry and restricting innovation.  
• There is uncertainty regarding the proposed regime for stablecoins, due to its similarities with e-money, and how this may impact the promotion of cryptoassets, especially as this will not apply to e-money.  
• There are concerns surrounding the lack of specific exemptions for cryptoassets. 

ECON: proposed regulation on markets in cryptoassets

On 14 March 2022, the European Parliament's Economic and Monetary Affairs Committee (ECON) published a press release, in which it confirmed it had adopted its report on the Commission's proposed Regulation on markets in cryptoassets (MiCA) (2020/0265(COD)). The press release highlights the following proposed amendments to the Regulation: 

Climate change

Cryptoasset mining activities that contribute substantially to climate change will be included in the legislative proposal for EU taxonomy of sustainable activities by 1 January 2025. ECON also requests the Commission to include legislation addressing consumption of energy resources in various other sectors.

Supervision

Supervisory responsibilities are split as follows: 

• ESMA: supervising issuance of asset-reference tokens.
• EBA: supervising electronic money tokens. 

The final report is available here. 

FCA: warning on crypto ATMs

On 11 March 2022, the FCA published a warning that any firm offering cryptoassets ATMs are doing so illegally. The FCA will be instructing operators to stop offering these services or will take enforcement action.

The FCA published a list of unregistered crypto firms that may have been providing these services, of which 110 are no longer operating.  

It is noted that the Gidiplus Limited appeal (Gidiplus Limited v the FCA [2022] UKUT 00043 (TCC)) against the FCA for refusing its application for registration under the MLRs has been rejected.  

TNFD: consultation on first draft of disclosure framework

On 15 March 2022, the Task Force on Nature-related Financial Disclosures (TNFD) published the beta version of the TNFD disclosure framework. Please see our recent insight article for further information on this here. 

FCA: announcement of successful applicants for the Green FinTech Challenge, and case study

On 3 March 2022, the FCA updated the Green FinTech Challenge 2021 webpage announcing the successful applicants. This challenge is part of a wider FCA initiative to assist firms in transitioning to a net-zero economy.  

Of the 25 applicants, 10 have been accepted, with 5 approved for the regulatory sandbox, and 5 that will benefit from the FCA's direct support services. All 10 firms will be provided with bespoke support and engagement. The FCA has published a case study on Cogo, a previous successful applicant, to identify how it will support firms. As part of this case study the FCA: 

• Worked closely with Cogo to develop an understanding of their business model, user journey and what regulated activities were being carried out. 
• Provided Cogo with an "informal steer" (one of its regulatory tools) on whether the firm's activities met the definition of an account information service (AIS) provider. Further to the FCA developing an understanding of Cogo's business, the FCA suggested it is likely to be providing AIS services. 

Cogo went on to successfully enter partnerships with several UK banks.

EU Platform on Sustainable Finance: final report on social taxonomy

On 28 February 2022, the EU Platform on Sustainable Finance published its Final Report on Social Taxonomy. This report proposes a structure for a social taxonomy with regards to sustainable finance and sustainable governance. 

The social taxonomy adopts certain aspects from the environmental taxonomy such as the structure of the development of social objectives. The proposed taxonomy is made up of three social objectives: decent work (including for value-chain workers), adequate living standards and wellbeing for end-users, and inclusive and sustainable communities and societies.  Unlike the environmental taxonomy, the social taxonomy introduces sub-objectives which aim to address different aspects of the three social objectives.  For example, the sub-objectives may emphasise social rights such as the right to food, health, housing, and education. 

The European Commission will now analyse the report.  

UK Finance: payments regulation review

On 17 March 2022, UK Finance published its UK payments regulation review. The report identified opportunities to enhance the regulatory regime and encourages industry and regulator collaboration. The key opportunities highlighted are: 

• Market change: proactive and reactive engagement can assist in the introduction of innovative technologies; it is important to adopt a technology neutral approach; and by incorporating the 'same activity, same risk, same regulation' approach.  
• Regulatory co-ordination and public policy: the regulatory framework should be flexible and proportionate. Regulatory change can be improved by implementing co-ordination and structured reviews. There should be supervisory certainty for market participants.  
• EU and international: Brexit has led to a generational opportunity to assess the UK approach to payment regulation, although the UK must not risk access to markets or infrastructure.  

LSB: key work programme initiatives for 2022

On 3 March 2022, the Lending Standards Board (LSB) published its January 2022 LSBulletin, outlining key work initiatives including the contingent reimbursement model code (CRM code) for authorised push payment (APP) scams. 

The LSB are looking to move forward with planned activity over the coming months. As part of this, the LSB will be:

• Conducting follow-up work from the previous thematic reviews of the CRM code.  
• Publishing an updated customer information document. 
• Updating the wording of the CRM code.
• Collaborating with industry and stakeholders to define the CRM codes success measures.
• Considering how the CRM code could be applied more broadly across different types of business models in the financial services sector. 

FCA: SCA webpage update on approach to SCA reauthentication exemption

On 1 March 2022, the FCA published its updated strong customer authentication (SCA) webpage. This includes a new section on the SCA reauthentication exemption, which explains that changes have been made following consultation. These changes are set out in policy statement (PS21/19). The changes include: 

• Article 10A of the SCA-RTS – a new exemption that would mean reauthentication is not required by customers when accessing information through a third-party provider (TPP), instead TPPs will obtain consent from customers periodically. 
• Encouragement to apply the exemption on 26 March 2022 when the SCA-RTS is in force. It is perceived that adoption will help reduce barriers to growth of open banking and innovation.  
• Expectations that TPPs will be ready as of 26 March 2022 to reconfirm consent from customers as soon as practical. Although, the FCA will not object if TPPs do not reconfirm consent until 30 September 2022, subject to whether consent is periodically reconfirmed at least every 90 days.  

FCA: retail mortgage lenders portfolio letter: March 2022

On 11 March 2022, the FCA published a portfolio letter which was sent to firms in the retail mortgage lenders (RML) portfolio. This letter sets out the key risks of harm for RML customers, and the FCAs expectations, over the next 2 years, including: 

• Supporting mortgage customers in financial difficulty: Tailored support guidance provides a suitable framework to apply to those that fall into financial difficulty. The handbook rules should also be considered to demonstrate compliance. 
• Managing maturing interest-only (IO) mortgages: Communication strategies should be employed to provide customers with time to act if there is doubt about the ability to repay IO mortgages. The communication strategy should be a robust governance arrangement which could include a written strategy, consideration of options, providing guidance to, and monitoring frontline staff.  
• Responsible lending: RMLs should not seek to increase mortgage volumes by lowering stringency of affordability checks. As demand for later life lending increases, RMLs should continue to take a prudent and proportionate approach to assessing customers' income beyond retirement.  
• Treating customers in vulnerable circumstances fairly: The fair treatment of vulnerable customers should be embedded in RMLs business models, culture, policies, and processes, and they should be able to evidence how they monitor this and what changes occur because of this monitoring.  
• Improving diversity and inclusion: RMLs need to understand the needs of the customers and be able to respond to them when designing products and services. RMLs should provide flexible customer service. Diversity of staff and board members is beneficial in this respect. 

The letter also provides an update on helping mortgage prisoners, ESG strategy, and that the temporary transitional powers are ending soon.  

The next review by the FCA will take place in 2024. 

FCA: non-bank mortgage lenders portfolio letter: March 2022

On 11 March 2022, the FCA published a portfolio letter which was sent to firms in the non-bank mortgage lender (NBL) portfolio. This portfolio is defined by firms that do not take deposits and offer either regulated mortgage contracts or regulated bridging loans. This letter covers similar key risks of harm for NBL customers as above with retail mortgage lenders, with the addition of: 

• Adequate financial resources: The FCA expects NBLs to monitor their prudential position proactively, take necessary steps to ensure the Threshold Conditions are being met, and notify the FCA promptly if experiencing any difficulties. Firms should pay particular attention to liquidity requirements, stress testing and contingency fundings plans as set out in MIPRU 4.2D (Mortgage and Home Finance Firms, and Insurance intermediaries). Firms should employ appropriate and up to date wind-down plans that have been reviewed and approved by their board.  

The letter also provides similar updates as covered in the letter on retail mortgage lenders, with the addition of borrowers in difficulties recovering from arrears.  

The next review by the FCA will take place in 2024.  

High Court: CCA business purpose exemption and unfair relationship claim

On 9 March 2022, judgment was handed down by David Hodge QC (sitting as High Court judge) in Campbell v Tyrrell and others [2022] EWHC 423 (Ch).  This case provided an opportunity for the Court to consider the business purpose exemption and unfair relationship claim, whereby the Claimant was seeking a declaration that the mortgage was unenforceable. The key issues were: 

• Whether the loan agreement was a regulated activity, or subject to the business purpose exemption of s16B Consumer Credit Act 1974 (CCA).
• Whether the relationship between the Claimant and the Second Defendant is an unfair relationship as defined in s140A and s140B CCA.   

The following are points of interest in the judgment:

Business purpose exemption 

• A loan taken out to repay existing business debt is wholly for business purposes, and the declaration was considered valid despite omitting the words "or predominantly" as this is sufficient where the loan agreement is entered into wholly for business purposes under the presumption of s16B(2).  
• The presumption was rebutted as the Second Defendant knew the loan was not wholly or predominantly for the purpose of their own business.  
• It was held that the loan agreement was a regulated agreement for the purpose of the CCA. The loan agreement and legal charge are unenforceable as no default notice or enforcement order had been obtained from Court. 

Unfair relationship 

• The relationship was not considered unfair for the purposes of s140A CCA. The Second Defendant had no knowledge that the Claimant was inexperienced in the business of obtaining loans. 
• The judge also noted that the Claimant had received legal advice from a solicitor, had previously guaranteed a business debt of her then husband (the first Defendant), and had been active in negotiations with the Second Defendant.  

The reference to the business exemption of s16B CCA remains relevant as it is reflected in Art. 60C(3) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) (RAO). 

UK regulators: joint statement on Open Banking 

On 25 March 2022, HM Treasury, the Competition and Markets Authority (CMA), the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) published their joint statement on the future of Open Banking.  

This statement sets out plans to establish a joint regulatory oversight entity for the development of Open Banking. This statement sets out that the regulatory entity should: 

• Include a new committee led jointly by the FCA and the PSR, to provide a vision and strategic roadmap. 
• Be central to delivering new proposals to support innovation and competition. 
• Be independent, well governed and underpinned by a set of values and cultures that include an emphasis on integrity and promoting ethical behaviours. 
• Operate with sufficient resources. 
• Consider the interests of relevant industry and end-user stakeholders, including consumers and businesses.  

Court of Appeal: Quincecare duty appeal

On 14 March 2022, the Court of Appeal handed down its judgment granting an appeal of the 18 January 2021 summary judgment decision in Philipp v Barclays Bank UK plc [2021] EWHC 10 (Comm). 

The High Court had granted summary judgment in favour of the Defendant on the basis that the principle of the Quincecare duty of care did not extent to authorised push payment (APP) fraud. The Claimant had appealed that the duty of care does arise where the customer is authorising the transfer (where they have been tricked by the third-party fraudster). The Defendant argued that the Quincecare duty of care is only relevant where instructions are made by an agent acting for the customer. 

The Consumers' Association were granted permission to intervene, and supported the appeal, suggesting that to restrict the Quincecare duty of care as the Defendant suggests would be illogical.  

Birss LJ granted the appeal, concluding as follows: 

• The Quincecare duty of care is "a duty on a bank to make inquiries and refrain from acting on a payment instruction in the meantime" and is not dependent on whether the instruction is made by an agent or customer of the bank.  
• To determine whether such a duty arises on the facts is a matter to be decided at trial.  
• Summary judgment should be set aside.  

PRA: operational resilience and operational continuity in resolution policy statement

On 11 March 2022, the PRA published policy statement PS2/22 on operational resilience and operational continuity in resolution (OCIR). Guidance on operational resilience will come into force on 31 March 2022, and OCIR will come into force on 1 January 2023.

PRA: Insurance sector supervisory priorities for 2022

On 2 March 2022, the PRA published Charlotte Gerken's speech on the PRA's supervisory priorities for the insurance sector in 2022 following topics highlighted in the PRA's letter dated 12 January 2022 to UK insurers. 

The PRA sets priorities in the context of its statutory objectives to ensure safety, soundness and to protect policy holders. This helps provide a framework for decision making when the PRA needs to respond to events. 

The annual priorities letters are a product of the sector risk assessment and horizon scanning. The topics highlighted in the priorities letters are not expected to be surprising but do give boards and their advisers an idea of prudential risk topics relevant to supervision and which the PRA considers important at any given time. 

The topics highlighted in the letter are ESG, diversity & inclusion, operational resilience and approaches to third country branches.

FCA: update on market share test for ancillary activities exemption

On 14 March 2022, the FCA published its update on the market share test under the ancillary activities exemption for commodity derivatives.  

The ancillary activities exemption provides that firms can, on an ancillary basis, carry on investment services and activities relating to commodity derivatives and emission allowances without FCA authorisation. 

The use of this exemption is subject to the market share test, requiring the calculation of the aggerated notional value of all trades in commodity derivatives, emission allowances and emission allowance derivatives traded on, or outside EU trading venues. However, ESMA will no longer publish consolidated trading figures across the EU, and the FCA has confirmed that it will not be publishing this data.  

Where no data is available from a regulator or EU institution to satisfy the market share test, the regulated activities order will enable firms to carry on their business, relying on the ancillary activities exemption without obtaining authorisation. 

On 4 March 2022, the FCA published consultation paper CP22/4 which includes amendments to make clear that performance of the market share test is not prerequisite to benefit from the ancillary activities exemption.  

FCA: where next for UK market structure

On 3 March 2022, Edwin Schooling Latter, Director of Markets and Wholesale Policy's, spoke at a European Market Structure conference on "where next for UK market structure". 

His speech identified a number of areas where there is a clear consensus for change: 

• Trade reporting obligation.  
• Reference prices. 
• Post-trade flags. 
• Calculation of thresholds for block trades in bonds and derivatives. 

HM Treasury: response to regulation of non-transferable debt securities consultation

On 1 March 2022, HM Treasury published its response to the April 2021 consultation paper regarding its proposals to bring the issuance of non-transferrable debt securities (mini-bonds) (NTDS) within the scope of financial services regulation.  

The purpose of this document is to provide a summary of the responses from stakeholders, following responses from the government and the next steps. 

Responses suggest that stakeholders generally agree that NTDS should be within the scope of regulation, although some requested a joint approach to treat NTDS and other types of securities consistently.  

Feedback suggests that prospectuses are not considered an effective manner of providing investors with written information, although investors would benefit from more written information when considering investment. 

HM Treasury's response indicates their preference for non-transferable securities (including NTDS) to be included within scope of the new public offering regime. They consider this akin to making the issuance of NTDS a regulated activity, with issuance of non-transferable securities via an intermediary a requirement. The use of intermediaries would be likely as NTDS issuers would likely prefer to avoid becoming authorised.  

The proposals are not final and may be subject to change if HM Treasury believes further consideration is required to ensure balance between consumer protection and allowing businesses to raise finance through issuance of securities. HM Treasury believe the proposals meet the recommendation to bring non-transferrable securities within scope. 

FCA: PRIIPs regulations

On 25 March 2022, the FCA published policy statement PS22/2. This statement summarises the feedback to consultation paper CP21/23 on the UK PRIIPs regime, which we covered in our August 2021 update.  

The changes remove information from the Key Information Document (KID) about the performance of certain products which can be misleading for consumers and will allow more informed investment choices for those buying without financial advice.  

Firms have until 31 December 2022 to implement the changes. The FCA has also given more clarity on how it expects firms to construct narrative descriptions of performances within KIDs.

FCA: research rules for collective portfolio managers to mirror those applying to investment firms

On 4 March 2022, the FCA published its quarterly consultation paper CP22/4. The consultation paper sets out several proposed changes including changes to the research rules for collective portfolio managers in the Conduct of Business sourcebook so that such firms are subject to the same requirements as investment firms. 

Comments on the proposals should be made by 11 April 2022. 

IA: call for action on climate change and diversity ahead of AGM season

On 1 March 2022, the Investment Association (IA) published the IA shareholders priorities and IVIS approach for 2022. The priorities are issued and the IVIS (Institutional Voting Information Service) analyse UK listed companies against these priorities and IA guidelines to help shareholders reach a decision at an AGM. 

IVIS will issue "amber-top" warnings for companies that do not disclose against the four pillars of the Task Force on Climate-Related Financial Disclosures (TCFD).  

IVIS will issue a "red-top" warning where FTSE 100 companies do not meet the Parker Review target to have one ethnically diverse board member, and "amber-top" warning for FTSE 250 companies that do not meet the requirement for ethnic diversity on their board or have an action plan to achieve this by 2024.  

IVIS will, in 2022 issue "red-top" warnings where FTSE small cap companies and FTSE 350 companies do not meet the specific requirements of female representation. 

FCA: response to the complaint commissioner's report on the FCA's oversight of LC&F

On 15 March 2022, the FCA published its response to the complaints commissioner's report into its oversight of LC&F (London Capital & Finance plc). The complaint commissioner, Dame Elizabeth Gloster, made various recommendations in her report concerning the oversight by the FCA relating to LC&F.  

The FCA set out in their response the recommendations it has accepted. The following include some of the points noted in the response: 

• The FCA will reconsider by the end of May 2022, improvements that could be made to the language and prominence of risk warnings. 
• The FCA intends to publish its internal guidance for determining ex gratia payments for delays in its complaints handling, by the end of April 2022.  
• The FCA denies that the Register is misleading. The FCA acknowledges however, that it may be challenging for consumers to navigate given that firms are not required to inform the FCA of unregulated activities that they carry out, and these are not included on the Register. 

FCA: former CFO of AIM-listed company sentenced after making false and misleading statements to the market

On 3 March 2022, the FCA published a press release regarding the sentence of five and a half years imprisonment, and 10 year disqualification from being a director, for the former CFO of Redcentric, an AIM-listed company. 

The former CFO was found guilty of: 

• Two counts of making a false or misleading statement. 
• Three counts of false accounting. 

Redcentric had issued false and misleading unaudited interim results for November 2015, and false and misleading audited final year results for June 2016. These led to losses for shareholders. The individual was found responsible for artificially inflating the share price. 

A former finance director of Redcentric has also been sentenced to three years imprisonment. 

FCA: FCA fine Barclays for failings in business relationship with payments firm

On 28 February 2022, the FCA published its final notice of 24 February 2022 that was issued to Barclays Bank plc for failing in oversight and monitoring of its business relationship with Premier FX Ltd. 

Barclays has been fined £783,800 for the breach, and has voluntarily agreed, with the FCA, to make payment of £10,076,943.75 for distribution to Premier FX's customers. The fine imposed takes the voluntary payment into account.

In the events leading to Premier FX's liquidation, Barclays as the sole banker in the UK is considered not to have acted with due skill, care, and diligence in monitoring Premier FX. Barclays failed to: 

• Implement appropriate further enquiries to ensure the actual business and expectations of Premier FX's businesses aligned. 
• Identify deficiencies in Premier FX's internal controls.  

EBA: anti-money laundering and counter-terrorism financing

On 24 March 2022, the EBA published its letter to EU co-legislators on the views of experts in relation to the European Commission's anti-money laundering and counter-terrorism financing package. The letter includes a note by the experts, which it believes will be useful in finalising the legislation, this includes comments on: 

• Co-operation and information exchange: experts request the legislators consider whether the proposals will enable effective co-operation and exchange of information between AMLA and competent authorities, and other EU standards setters during the policymaking process. 
• Direct supervision: the eligibility criteria should extend to entities, such as cyrptoasset service providers, that are currently excluded from direct supervision by the AMLA, but which may expose the internal market to significant risks.  

Economic Crime Levy assessment and collection legislation comes into force

On 10 March 2022, the Economic Crime (Anti-money Laundering) Levy Regulations 2022 (SI 2022/269) were made. The regulations came into force on 1 April 2022.

The Economic Crime Levy (ECL) was introduced by the Finance Act 2022 and applies to those entities carrying on a business within the scope of the MLR with over £10.2 million in UK revenue.

The regulations empower HM Treasury to make provisions for the assessment and collection of the levy by the relevant collection authority entity (HMRC, the FCA or the Gambling Commission) and the timeframes for the levy to be paid.  

Later this year, draft regulations will be published in respect of appeals, debt transfers, information sharing and enforcement. 

FATF: statement on adoption of amendments regarding transparency and beneficial ownership

On 4 March 2022, the Financial Action Task Force (FATF) published a statement that it has adopted amendments to Recommendation 24 on transparency and beneficial ownership of legal persons. 

The amendments aim to strengthen the international standards, ensuring greater transparency of ultimate ownership and control of legal persons, and mitigate risk of their misuse. The FATF will analyse implementation to identify best practices and supporting implementation put in place by countries. 

The FATF is also reviewing Recommendation 25, beneficial ownership of legal arrangements, to ensure consistency. The FATF will be assessing implementation of the amended requirements at the start of the next round of mutual evaluations.  

It is expected that all countries take steps to implement the new standards and determine the timeframe for implementing them at a national level. 

According to data recently published by the FCA, what has been the main technology focus of firms accepted into the Regulatory Sandbox since it began in 2016?

• Robo-advice.
• Artificial intelligence/Machine learning.
• DLT/Blockchain/Crypto.
• Regtech.

The answer to last month's trivia: 6 of the 12 skilled persons reports commissioned by the FCA in Q3 2021/22 related to Lot E, Financial Crime.