Authors
Charlotte Hill

Charlotte Hill

Partner

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Daniel Hirschfield

Daniel Hirschfield

Senior Knowledge Lawyer

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Authors
Charlotte Hill

Charlotte Hill

Partner

Read More
Daniel Hirschfield

Daniel Hirschfield

Senior Knowledge Lawyer

Read More

11 July 2022

Financial services update – 5 of 35 Insights

Financial services regulatory update - July 2022

In this month's update:

  • FCA's data strategy update 
  • Treasury Committee launches new framework for scrutinising proposed financial services regulations 
  • Government sets out plans to legislate for direct regulation of 'critical' third parties to the finance sector
  • Payment Systems Regulator's market reviews on scheme and processing fees and cross-border interchange fees
  • Government unveils its approach to the regulation of Buy-Now Pay-Later.
  • FCA's work update on market abuse and manipulation
General FS regulation

Treasury Committee: launch of sub-committee for scrutiny of financial services regulations

On 23 June 2022, the Treasury Committee published its report on future Parliamentary scrutiny of financial services regulations. As part of the future approach, a sub-committee will be established to take the lead on scrutiny of regulatory proposals, which will be chaired by Rt. Hon. Mel Stride MP.

The Treasury Committee believes it is most effective to intervene at the consultation paper phase of the regulatory proposal process.

A Financial Services Scrutiny Unit is being established to offer advice to the sub-committee.

The sub-committee will commence its work by scrutinising the Prudential Regulation Authority's (PRA) proposals for a 'Strong and Simpler Framework' (discussed further in the Banking and insurance section

European Affairs Committee: UK-EU relationship in financial services

On 23 June 2022, the House of Lords European Affairs Committee published its report on the UK-EU relationship in financial services. The report highlights the importance of the financial services sector to the UK, comprising 19.1% of all UK services exports, with 37% of total UK financial services exports in 2019 exported to the EU. The report considers how the government must ensure its approach to financial services meets the needs of the whole country and economy.

The report focuses on the following areas:

  • equivalence
  • regulatory cooperation
  • regulatory reform and divergence
  • opportunities.

FCA: data strategy update 2022

On 23 June 2022, the FCA published its update on data strategy.

The FCA originally published its data strategy in January 2020. The update sets out where the FCA has made progress, where it has more to do and where it has increased its focus.

The FCA's progress so far includes:

  • the deepening of its understanding of markets and consumers
  • becoming a digital and intelligence led regulator
  • improving firm data collection
  • building an innovation culture.

Whilst the FCA is pleased with the progress it has made over the past year, it notes that changes in the external market have reinforced its resolve to become a digital regulator. Looking ahead, the FCA is transforming its platform, building new tools, and improving data strategy across the entire data and technology pyramid and it will continue to modernise its enterprise architecture to a cloud-based system, with strengthened security and operational resiliency.

The aim of these efforts is for the FCA to become the first global financial services regulator to build a Digital Unified Intelligence Environment.

The FCA's data strategy has featured prominently in recent speeches from the regulator:

  • On 16 June 2022, Nikhil Rathi, FCA Chief Executive, gave a speech on shaping the rules for a data-driven future.
  • On 10 June 2022, Jessica Rusu, FCA Chief Data, Information and Intelligence Officer, gave a speech entitled "Innovation & Regulation: Partners in the success of Financial Services."

BoE and PRA: annual reports and accounts

On 23 June 2022, the Bank of England (BoE) and the Prudential Regulation Authority (PRA) published their annual reports and accounts, including a number of committee and sub-committee reports. Among other things, the main reports set out financial information, horizon scanning activities and reviews of delivery on goals.

Treasury Committee: future of financial services regulation

On 16 June 2022, the Treasury Committee published its report on the future of financial services regulation. The conclusions and recommendations refer to issues including:

  • regulatory objectives and priorities
  • the new normal
  • specific areas of regulation

HM Treasury has two months to respond to the report.

Fintech and cryptoassets

EU: Provisional agreement reached on markets incryptoassets (MiCA) proposal

On 30 June 2022, it was announced that the Council of the EU and the European Parliament had reached a provisional agreement on the markets in crypto-assets (MiCA) proposal, which covers issuers of unbacked crypto-assets, stablecoins, and trading venues and wallets.  The Council and Parliament must now approve the provisional agreement and formally adopt it.  MiCA is expected to come into force by the end of 2023.  

HM Treasury: Government sets out plans to legislate for direct regulation of "critical" third parties to the finance sector

On 8 June 2022, HM Treasury published its policy statement on "Critical third parties to the finance sector". Please see our recent insight article for further information.

EU: Regulation on pilot regime for market infrastructures based on DLT

On 2 June 2022, the European Parliament and Council of the EU published Regulation (EU) 2022/858 on the pilot regime for market infrastructures based on distributed ledger technology.  The Regulation came into force on 22 June 2022, 20 days after its publication in the Official Journal. 

The Regulation will apply to EU member states from 23 March 2023, except for Articles 8(5), 9(5), 10(6) and 17, which applied from 22 June 2022, and Article 16, which applied from 4 July 2021.

The Regulation will make certain amendments to the MiFID II Directive, MiFIR, and the Central Securities Depositories Regulation. 

HM Treasury: managing the failure of systemic digital settlement asset (including stablecoin) firms

On 31 May 2022, HM Treasury published its consultation on managing the failure of systemic digital settlement asset (including stablecoin) firms.  HM Treasury is seeking views on whether an amended Financial Market Infrastructure Special Administration Regime (FMI SAR) is the appropriate vehicle to become the primary legal framework to address the risk of failure of systemic digital settlement asset firms (DSAs). 

The government considers FMI SAR to be the most appropriate regime to adapt and that the BoE should be the lead regulator, but also notes that the Payment and E-Money Special Administration Regime (PESAR) is capable of being applied.

The consultation closes on 2 August 2022. 

ESG

ESMA: market characteristics of EU ESG rating and data providers

On 27 June 2022, ESMA published a letter providing an overview of the market for EU ESG rating providers following the call for evidence.  ESMA provides an overview of its findings, which includes the following:

  • the structure of the market among providers is split between a small number of very large non-EU entities, and a large number of significantly smaller EU entities
  • the majority of users of ESG ratings are typically contracting for these products from several providers simultaneously.  Notably, this is to increase coverage, either by asset class or geography, or to receive difference types of ESG assessments
  • a majority of users contract with a small number of rating providers, indicating a degree of market concentration.  Respondents highlighted a lack of coverage of industry, type of entity, and granularity as common shortcomings
  • entities covered by ESG products are required to dedicate at least some level of resourcing to their interactions with ESG rating providers. Shortcomings in these interactions include transparency as to the basis for the rating, timing of feedback or the correction of errors.

ESMA considers the feedback indicative of an immature but growing market, which bears resemblance to the credit ratings market.

FCA: evaluation paper on supporting innovation in ESG data and disclosures

On 23 June 2022, the FCA published its evaluation report on supporting innovation in ESG data and disclosures. The FCA and the City of London Corporation ran the second digital sandbox pilot between November 2021 and March 2022.  The key lessons learned during the pilot include:

  • the sustainability focus of the pilot was praised by participants and mentors, although ESG data and disclosures is a broad theme that can be difficult to link with financial services
  • ESG reporting and disclosures is a relatively new field for which open and rich data sets are not always accessible. This led to some participants changing the scope of their project.

Glasgow Financial Alliance for Net Zero: consultation on net zero transition plans 

On 15 June 2022, Glasgow Financial Alliance for Net Zero (GFANZ) published its interim report setting out recommendations and guidance on net zero transition plans in the financial sector, and launched a six-week public consultation. 

The report encourages consistency in approaches to transition planning across the financial sector, and to accelerate the adoption of net zero transition planning and related activities.  Alongside the report, GFANZ has published a set of transition planning documents, a guide providing an overview of these transition planning documents, and the interim report.

The consultation closes on 27 July 2022.

Basel Committee on Banking Supervision: principles for the effective management and supervision of climate-related financial risks

On 15 June 2022, the Basel Committee on Banking Supervision (BCBS) published the final version of its principles for the effective management and supervision of climate-related financial risks.  The principles aim to foster alignment in terms of supervisory expectations for addressing climate-related financial risks by improving risk management and supervisory practices related to these risks.

The BCBS sets out 18 high level principles. Principles 1 to 12 provide guidance to banks, and principles to 13 to 18 provide guidance for prudential supervisors.  The principles cover the following topics:

  • corporate governance
  • internal control frameworks
  • capital and liquidity adequacy
  • risk management process.

The principles cross-refer to other expectations in the Basel framework, such as the BCBS's core principles for effective banking supervision and the supervisory review process.

European Supervisory Authorities: clarification on the draft RTS under the Sustainable Finance Disclosure Regulation

On 2 June 2022, the European Supervisory Authorities (ESAs) published a statement to provide clarification on the draft regulatory technical standard (RTS) issued under the Sustainable Finance Disclosure Regulation ((EU) 2019/2088) (SFDR). The statement includes:

  • clarifications about the disclosure of principal adverse impacts (PAI) of investment decisions
  • guidance on pre-contractual financial product disclosures, periodic financial product disclosures, and taxonomy-related financial disclosures.

The clarifications relating to practical implications of the RTS follow numerous requests given their breadth and technical complexity.

Payment services and systems

Payment Systems Regulator: market reviews on scheme and processing fees and cross-border interchange fees

On 21 June 2022, the Payment Systems Regulator (PSR) published:

  • MR22/1.1 Market review of card scheme and processing fees.
  • MR22/2.1 Market review of UK-EEA consumer cross-border interchange fees.
  • Press release regarding the market reviews.

MR22/1.1 Scheme and processing fees

The review on scheme and processing fees focuses on Mastercard and Visa as these account for 99% of debit and credit card payments in the UK.  The review will examine:

  • scheme and processing fees set by Mastercard and Visa (the levels, structures and types of scheme and processing fees), including any changes in the fee levels
  • payments that Mastercard and Visa make to service-users including, for example, market assistance payments or rebates on scheme and processing fees.  The PSR may also consider levels, structures and types of payment made.

The review will focus on data from 2014 – present to enable it to build on the analysis and data collected in its card-acquiring services market review.

The review will consider:

  • if there are any factors that mean Visa and Mastercard have a position of market power and face weak constraints in setting scheme and processing fees
  • the differences in structure and/or levels of scheme and processing fees levied on different participants (including issuers and acquirers), and their impact on competition, innovation, and service-user interests.

MR22/2.1 Cross-border interchange fees

From December 2015 until the end of the transition period in December 2020, following the UK's withdrawal from the EU, interchange fees (IFs) for UK domestic, and UK-EEA transactions were subject to caps under the Interchange Fees Regulation – a cap of 0.2% of the value of consumer debit card transactions, and 0.3% of the value of consumer credit card transactions.

Additionally, card transactions used by a card issued outside the EEA at a merchant located within the EEA were subject to IF caps, as part of commitments offered by Mastercard and Visa to the EU.  These commitments were made binding in 2019 and differentiate between card-present (CP) and card-not-present (CNP) transactions. CP transactions are subject to the same caps, whereas CNP transactions are subject to higher caps.  These commitments are due to expire in 2024. 

Once the UK had withdrawn from the EU, the on-shored UK Interchange Fee Regulation applies the cap levels set out in the EU Interchange Fees Regulation.  The caps apply to transactions involving UK-issued cards making payment to an EEA merchant, but do not apply to transactions using an EEA-issued card to a UK merchant.  These are known as outbound IFs and are not subject to any caps.

Since withdrawal from the EU, Visa and Mastercard have applied the same levels to both inbound and outbound IFs for UK-EEA transactions.  For CP transactions, IFs have remained at the same level, whereas IFs for CNP transactions have increased from 0.2% and 0.3% to 1.15% and 1.5%, respectively.

The PSR wants to understand the rationale for the increased UK-EEA CNP transaction IF rates, and whether the increases are indicative of the market or aspects of the market not working well.  The PSR will focus its investigation on UK-EEA cross-border IFs in Visa and Mastercard systems, covering both debit and credit card consumers.  This will focus only on IFs that were previously covered by the EU caps, with outbound IFs the priority for review. 

Next steps

The PSR is seeking views on the draft terms of reference, and the responses are due by 5pm on 2 August 2022.

FCA: branch and ATM closures or conversions

On 14 June 2022, the FCA published its guidance consultation on branch and ATM closures or conversions: updated guidance for firms.

The FCA is publishing this updated guidance to ensure that expectations under their principles are clear.  Among other things, the FCA proposes to:

  • extend guidance on partial closures of branches to apply in the same manner as full closures
  • remind firms to consider whether emerging models meet the definition of a branch, and will not extend the definition, as it already includes non-traditional branches
  • firms should share closure analysis including usage trends and overall transaction volumes across a suitably representative time period. 

The guidance consultation closes on 26 July 2022. 

Consumer credit and home finance

FCA: supervisory strategy for mainstream consumer credit lenders portfolio

On 27 June 2022, the FCA published its portfolio letter setting out an updated view of the key risks mainstream consumer credit lenders (MCCLs) pose to consumers and the market they operate in. The risks are grouped into the following categories:

  • treatment of borrowers who fall into financial difficulty
  • inadequate assessment of affordability
  • persistent debt strategies
  • Section 75 Consumer Credit Act 1974 responsibilities
  • expectations of MCCL firms
  • an overview of the FCA's supervisory strategy and work programme.

HM Treasury: Regulation of Buy-Now Pay-Later

On 20 June 2022, HM Treasury unveiled its approach to the regulation of interest-free buy-now pay-later products. Please see our recent insight article for further information.

HM Treasury: Consumer Credit Act reform

On 16 June 2022, HM Treasury published a press release announcing the government's intention to reform the Consumer Credit Act 1974 (CCA).

The government plans to publish a consultation on the reform by the end of the year.

The proposed reform intends to move much of the CCA to sit under the FCA rather than under statute, enabling the FCA to respond quickly to emerging developments in the market. Amendments will be made to simplify technical terms to make clear to consumers what protections are in place and improve cost efficiency for businesses in complying with the regulatory requirements.

The reforms also aim to enable lenders to provide a wider range of finance whilst ensuring high levels of consumer protection.

The proposed reform is anticipated to be complex and require substantive work and is therefore expected to take place over an extended timeframe to ensure the reform is fit for purpose.

FCA: Dear CEO letter to lenders regarding the rising cost of living

On 16 June 2022, the FCA published its Dear CEO letter to lenders (including retail banks and consumer credit firms), to remind them of the standards expected of them, especially whilst consumers are affected by the cost of living crisis. The FCA reminds lenders to:

  • treat borrowers fairly and consider its tailored support guidance
  • meet its expectations: the FCA provides a non-exhaustive list of expectations
  • make changes to ensure customers in financial difficulty receive the help they need. This follows the review of outcomes from borrowers in financial difficulty, in which many firms reviewed needed to improve the experience to meet expectations.

The FCA will monitor the outcomes and take further action as necessary. They intend to publish findings from work on borrowers in financial difficulty, and plan to consult on the future of the tailored support guidance.

The Upper Tribunal: right to claim compensation and right to seek a validation order

On 15 June 2022, the Upper tribunal published its judgment in Barclays Partner Finance v Financial Conduct Authority [2022] UKUT 00151 (TCC), where it considered the rights of consumers where regulated agreements are unenforceable and the consumer is therefore entitled to recover compensation.

It was considered by the tribunal that the fact that a consumer had invoked the compensation process did not invoke the validation order process. It was determined that the right to claim compensation and the right to seek a validation order are separate processes which need to be independently invoked. Therefore, a claim for compensation could be made sometime after an application for a validation order.

Banking and insurance

Treasury sub-committee: proposed strong and simple framework

On 27 June 2022, the House of Commons Treasury Sub-Committee on Financial Services Regulations published the following in relation to the PRA's strong and simple framework: 

As part of the call for evidence, the sub-committee is seeking views on various aspects, including:

  • the scope of the framework, and views on the proposal generally, particularly whether activities should be excluded or included from the framework, and whether the classification of firms are appropriate
  • whether the proposals are appropriate to safeguard financial stability, and the safety and soundness of individual firms
  • the implementation of the framework in the context of the Basel 3.1 reforms. 

The consultation closes on 11 July 2022.

PRA: consultation on model risk management principles for banks

On 21 June 2022, the PRA published its consultation paper on model risk management principles for banks together with appendices.

The PRA has developed a set of principles that it considers to be key for establishing an effective model risk management (MRM) framework.  The PRA is proposing to embed these principles as supervisory expectations for all regulated banks, building societies and PRA-designated investment firms.  The expectations are set out in the proposed supervisory statement, which is included in the appendices. 

The proposed MRM principles cover the following areas:

  • Principle 1 – model identification and model risk classification
  • Principle 2 – governance
  • Principle 3 – model development, implementation, and use
  • Principle 4 – independent model validation
  • Principle 5 – model risk mitigants.

The proposals are not open to insurers at this time, given the ongoing Solvency II review.

The consultation closes on 21 October 2022.

FCA: travel insurance signposting rules

On 17 June 2022, the FCA updated its webpage on policy statement PS20/3 on signposting to travel insurance for consumers with medical conditions.

The update confirms that the FCA has decided to delay the post-implementation review of the rules by a year and intends to conduct the review in the period of April – October 2023.

The FCA considers that the impact of COVID-19 on the travel insurance market would undermine its ability to draw firm conclusions if the review were conducted this year. 

FCA: supervisory strategy for personal and commercial lines insurance intermediaries

On 13 June 2022, the FCA published its portfolio letter to firms in its personal and commercial lines insurance intermediaries (P&CLII) portfolio regarding its supervisory strategy.

This letter follows the 4 September 2020 letter for P&CLII, which we covered in our October 2020 update. The FCA highlights, among other things, that:

  • it is disappointing to continue to see evidence of consumer harms that are attributable to poor governance or insufficient focus on good customer outcomes
  • firms are expected to have implemented rules on prices deriving from the FCA's policy statement on insurance pricing practices
  • the FCA will test and review how firms implement changes through market intelligence, regulatory returns data and reporting
  • firms do not always adequately consider or plan for wind-down of their business. 

The FCA will continue engagement with P&CLII and aim to provide an updated view of key risks by the end of 2023.

BoE: resolvability assessment of major UK banks

On 10 June 2022,the BoE published its paper detailing its findings from its assessment of the resolvability of the major eight UK firms as part of the resolvability assessment framework.

The BoE concludes that there are several thematic and firm specific areas where further work is needed, although banks are in a fundamentally better place than in the 2007/2008 global crisis.  Banks are expected to:

  • continue to embed resolvability in their governance process
  • consider further testing of their resolvability capabilities conducted under time and resource constraints. 

The BoE expects to conduct direct verification of firms' resolvability preparedness.

The BoE will repeat its assessment of major UK banks in 2024, and every two years thereafter.

Securities, investments, and markets

FCA: work update on market abuse and manipulation

On 17 June 2022, the FCA published a press release providing an update on its work on market abuse and manipulation.  The press release responds to recent press reports about the FCA's approach, and this press release responds by highlighting the FCA's approach, which includes:

  • conducting daily monitoring of data to ensure the timeliness and accuracy of the disclosure of inside information
  • publishing annual market cleanliness statistics
  • analysing suspicious transaction and order reports to assess whether abusive or manipulative behaviour has taken place, and what further action should be considered, if any
  • publishing the findings of oversight work in the Market Watch publications.
  • taking criminal action where it is right to do so
  • using civil enforcement powers, which involves a different standard of proof. More than 10 subjects are currently awaiting decisions on cases, following FCA investigations.

FCA: the second phase of the Listing Rules reform

On 15 June 2022, Clare Cole, FCA Director of Market Oversight, gave a speech on the FCA's second phase of reform of the Listing Rules: increasing transparency and encouraging more market participation. The key takeaways include:

  • the success associated with being listed should be available to a wider range of companies, providing greater investment opportunities for investors in UK markets
  • ensuring the value of being listed is simpler to understand and removes any complexities that do not serve a genuine and defined purpose.
  • investors should be empowered to make decisions about the suitability of listed issuers to meet investment needs
  • the listing regime should be flexible enough for investors and issuers to agree where additional shareholder engagement, overseen by the FCA, is appropriate.

HM Treasury: senior managers & certification regime for financial market infrastructures

On 7 June 2022, HM Treasury published its response to the consultation proposing a senior managers & certification regime (SMCR) for financial market infrastructures (FMI).  Please see our previous update for more information on the consultation. 

The proposals aim to enhance accountability of senior managers and improve governance arrangements. The proposals cover CCPs, CSDs, recognised payment systems, and SSPs. On review of feedback from the responses, HM Treasury intends to design and put in place SMCR for CCPs and CSDs, with certain detailed aspects to be set out in secondary legislation and regulators' rules.  HM Treasury also intends for the option to extend SMCR to other systemic financial services entities in the future.  Legislating on SMCR for recognised payment systems and SSPs will be taken forward separately considering the upcoming review on the regulatory perimeter for systemic firms in payments chains by the BoE.

Further details on the plans to implement SMCR for CCPs and CSDs will be provided in due course.

Funds and asset management

Council of the EU: AIFMD and UCITS Directive

On 21 June 2022, the Council of the EU published its note containing the final compromise text of the proposed Directive amending the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) and the UCITS Directive (2009/65/EC) (AIFMD II) (2021/0376(COD)).

On 17 June 2022, the Council published a press release announcing that it had agreed the general approach on the proposed Directive amending the AIFMD and UCITS Directives. 

ESMA: common supervisory action on costs and fees of investment funds

On 31 May 2022, ESMA published its final report, that was caried out with national competent authorities (NCAs), on the costs and fees for investment funds.

The aim of the common supervisory action was to assess, foster and enforce compliance of supervised entities with key cost-related provisions in the UCITS framework. ESMAs analysis and conclusions are set out in the report, the key points include:

  • there is room for improvement on the applications of ESMA's June 2020 supervisory briefing on the supervision of costs in UCITS and AIFs
  • in some instances, portfolio managers exercise significant influence or decide the level of costs and fees charged by the fund.  This raises concerns of compliance with the delegation rules
  • there are divergent market practices regarding what constitutes due or undue costs, and conflicts of interest at UCITS managers. 

ESMA concludes that continued supervisory attention is required, and stresses that investors should be adequately compensated where they are charged with undue costs or fees where there were calculation errors resulting in financial detriment. 

ESMA will continue to work with NCAs and invites them to consider enforcement where necessary. 

ESMA: key priorities for EU retail fund investors

On 31 May 2022, Verena Ross, ESMA Chair, gave a speech on the key priorities for EU retail fund investors.  The speech covers ESMA's retail investor priorities under the following three topics:

  • The PRIIPs regulation – a significant number of changes are required, and ESMA encourages a broad review of the existing framework
  • Costs and fees for investment funds – further to the publication of the final report on costs and fees of investment funds, ESMA emphasises the importance of disclosures for costs and fees, to enable investors to easily compare the costs and performance on investment funds. 

Sustainability and greenwashing – the current sustainability disclosure framework is incomplete and imperfect.  Ideally, the required disclosures would have followed a corporate transparency regime.<  The corporate transparency regime is still a work in progress.  Together with the ISSB's global standards, these should help to improve underlying sustainability over time.

FCA enforcement action

FCA: FCA fine Ghana International Bank for AML controls failings

On 23 June 2022, the FCA published its decision notice that it issued to Ghana International Bank PLC (GIB) for failings in anti-money laundering controls related to correspondent banking activities. 

GIB has been fined £5,829,900 for failing to:

  • establish and maintain appropriate risk-sensitive policies and procedures
  • conduct adequate enhanced due diligence when establishing new business relationships
  • conduct adequate enhanced ongoing monitoring
  • the fine was subject to a 30% stage 1 discount from £8,328,500, pursuant to Regulation 42 of the Money Laundering Regulations. 

FCA: FCA fine JLT Specialty Ltd for financial crime control failings

On 22 June 2022, the FCA published its final notice that it issued to JLT Specialty Ltd, an insurance broker, for failings in financial crime control, allowing bribery of over USD3 million. 

JLT has been fined £7,881,700 for breach of Principle 3, management and control, for failing to take reasonable care to organise and control its affairs responsibly and effectively with adequate risk management systems. 

The fine was subject to a 30% stage 1 discount from £11,259,500, pursuant to the FCA's executive settlement procedures.

FCA: FCA fine TFS Loans Ltd (in administration) and require redress for affected guarantors

On 10 June 2022, the FCA published its final notice that it issued to TFS Loans Ltd (in administration), a guarantor loans provider, imposing a fine and requiring redress for affected guarantors.  Guarantor loans are regulated credit agreements, under which an individual other than the borrower provides a guarantee or indemnity. 

TFS has been fined £811,900 and is required to provide redress to guarantors who have suffered a loss resulting from TFS's failings.  The FCA found that between November 2015 and 10 April 2018 TFS was in breach of principle 6, treating customers fairly, and principle 3, organising and controlling affairs responsibly and effectively, as well as breaching CONC requirements. 

The fine was subject to a 30% stage 1 discount from £1,159,988, pursuant to the FCA's executive settlement procedures.

Economic crime

HM Treasury: review of the UK's anti-money laundering and countering the financing of terrorism regime

On 24 June 2022, HM Treasury published its review of the UK's anti-money laundering and countering the financing of terrorism regime, which focuses on improving the effectiveness of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).  The review is centred around three core themes:

  • systemic effectiveness
  • regulatory effectiveness
  • supervisory effectiveness.

Key conclusions identified in the report include:

  • supervisory reform is required. The government will consult on options for reform
  • the government is confident that most of the requirements and provisions are the right ones.  Although the government will align with and champion the Financial Action Taskforce's recommendations.
  • the government will set out clear objectives to the MLRs, in line with Financial Action Taskforce's methodology and embedding a renewed definition of effectiveness
  • the government will use existing processes including the national risk assessment to consider emerging ML and CFT risks and consider sectors for addition to the MLRs. The government does not intend to set out national priorities at this time but will focus on a system-wide effort to improve risk understanding and information sharing regarding risks and threats
  • government engagement with stakeholders will continue to deepen their understanding of the application of new technologies
  • the government does not intend to overhaul current guidance but will look to streamline the existing guidance.

FCA: FCA pursuing re-trial of insider dealing case

On 22 June 2022, the FCA published its press release stating that it intends to pursue a re-trial of two individuals for insider dealing.  The press release follows the decision of Southwark Crown Court to discharge the jury after they were unable to reach a verdict following an eight-week trial.  The re-trial is set to commence on 11 September 2023.

Financial Action Task Force: outcomes of June 2022 plenary

On 17 June 2022, the Financial Action Task Force (FATF) published its document setting out the outcomes of the 14 – 17 June 2022 plenary meeting.  The outcomes include:

  • finalising its targeted update on implementation of the FATF standards on virtual assets/virtual asset service providers (VASPs). The report focuses on FATF's travel rule, which requires VASPs to collect or send information on the identities of the originator and beneficiary with virtual asset transfers
  • discussions on progress of developing guidance to implement the FATF standard on beneficial ownership information for legal persons
  • considering amendments to strengthen Recommendation 25 of the FATF standard on beneficial ownership information for trusts and other legal arrangements.  FATF is releasing a white paper for public consultation
  • approving a set of actions to implement the March 2022 strategic vision for the global network of 206 jurisdictions, who have agreed to strengthen their respective regimes to tackle ML/CFT and proliferation financing
  • FATF published its priorities under Singapore presidency on 1 July 2022. 

HM Treasury: amendments to the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017

On 15 June 2022, HM Treasury published its response to the call for evidence and consultation on potential amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) and the Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations 2017 (OPBAS). 

The review covers various areas, including:

  • The transfer of cryptoassets – the Travel Rule will incorporate the transfer of cryptoassets as within scope of the MLRs, and the government has decided to allow a 12-month grace period, which runs from the point at which the amendments to the MLRs take effect, until 1 September 2023.
  • Change in control: cryptoassets firms – FCA supervision will be expanded by requiring proposed buyers of cryptoassets firms to notify the FCA ahead of the acquisition, allowing the FCA to perform a fit and proper assessment of the buyer, as well as object to the acquisition.<
FSR trivia

According to the FCA's recent update on its data strategy, how many financial adverts were amended or withdrawn in 2021?  

  • 153
  • 364
  • 480
  • 564

The answer to last month's trivia: since May 2021, the FCA has carried out 1,090 assessments as part of its "use it or lose it" approach to regulatory permissions.

In this series

Financial services regulatory

Financial services update - February 2021

4 February 2021

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update - January 2021

14 January 2021

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update - December 2020

3 December 2020

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update - November 2020

5 November 2020

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update - October 2020

1 October 2020

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update - September 2020

3 September 2020

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update - August 2020

6 August 2020

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update - July 2020

2 July 2020

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update - June 2020

4 June 2020

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update - May 2020

7 May 2020

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update - April 2020

2 April 2020

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update - March 2020

5 March 2020

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update – February 2020

6 February 2020

by Charlotte Hill, Daniel Hirschfield

Financial services regulatory

Financial services update - January 2020

8 January 2020

by Charlotte Hill, Daniel Hirschfield

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