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The EU’s second Capital Requirements Regulation (CRR2) entered into force on 27 June 2019, with many of its provisions taking effect in June 2021. It implements a sizeable portion of the international post-crisis regulatory framework, and is primarily designed to enhance the stability of the European banking sector. However it also takes a number of steps towards improving the state of competition in, and competitiveness of, the European banking sector.
The FCA recently published its Final Guidance on cryptoassets, reflecting the feedback it received on its Consultation Paper issued in January 2019.
The objective of the Guidance is to provide clarity to market participants on the types of cryptoassets and related activities that fall within the regulatory perimeter, the resulting obligations for firms, and the regulatory protections for consumers. It also provides more clarity around unregulated cryptoassets, and their implications for firms and consumers.
Below we highlight the key points and some of the considerations for firms already operating in, or considering entering, the cryptoassets market.
DAC6, the sixth version of the EU Directive on administrative cooperation, entered into force on 25 June 2018. This directive requires the mandatory reporting and automatic exchange of information with respect to certain cross-border arrangements of individuals, companies and other entities, with the aim of providing EU member states information to undertake risk assessments and react promptly against harmful tax practices.
DAC6 imposes new reporting obligations in respect of reportable cross-border arrangement on “intermediaries” and absent an intermediary, on “relevant taxpayers”. As such, all financial services organisations, including banks, brokers, investment managers and financial advisors with operations in the EU have to make an assessment as to whether they have participated (as intermediary or relevant taxpayer) in any reportable cross-border arrangements since 25 June 2018.
Where an organisation has participated in a reportable cross-border arrangement as an intermediary or a taxpayer, a legal obligation to report such arrangement to local tax authorities may result.
EU member states are required to implement the directive’s provisions into their domestic laws by 31 December 2019, and the relevant law must apply as from 1 July 2020.
On 22 July 2019, HM Revenue & Customs (HMRC) published a draft of The International Tax Enforcement (Disclosable Arrangements) Regulations 2019 (draft regulations) that would implement Council Directive (EU) 2018/822, or DAC6, in the UK. A consultation document also has been published seeking input from stakeholders and setting out HMRC’s current views on how the key concepts of DAC6 should be interpreted for UK purposes. Comments are due by 11 October 2019.
A consultation document, the “ConDoc”, was also published setting out HMRC’s current views on various elements of DAC6 and seeking input from various stakeholders on how certain concepts of DAC6 should be interpreted for UK purposes. The consultation responses are due by 11 October 2019.
On 13 June 2019, the FCA addressed a Dear CEO letter to Wealth Management and Stockbroking firms setting out its view of the key risks of harm that firms could pose to their customers or the markets in which they operate.
The FCA outlined four key ways in which customer harm could occur in this sector:
- By having reduced levels of savings and investments due to fraud, investment scams and inadequate client money, or assets controls;
- By losing confidence in the industry’s ability to deliver their financial objectives due to mismanagement of conflicts of interest and market abuse;
- Through reduced levels of savings and investments due to order handling procedures and execution processes that do not deliver best outcomes; and
- By being unable to understand the costs of services provided by firms, due to insufficient or inaccurate disclosure of costs and charges.
The FCA will expect all firms to consider how their activities could crystallise these risks and how best to mitigate them.
In response to these risks, the FCA set out its Wealth Management and Stockbroking supervision strategy. This is built upon the FCA’s approach to supervision strategy publication, which highlights how it will identify, prevent, reduce or correct potential and actual harm.
In this blog, we explore the key considerations for firms under each area of the FCA’s supervision strategy.
Following finalisation of the Bank of England’s (BoE) Resolvability Assessment Framework (RAF), in-scope firms will need to consider how they implement the framework. In the first blog in this series on the RAF, we consider the benefits of robust implementation and taking a long-term, rather than ad-hoc, approach. In this blog, we look at master playbooks. While the RAF is silent on the topic, we believe that master playbooks can be a useful tool both for demonstrating resolvability and for determining an overall strategy and work programme for implementing the RAF.
Last week, the Bank of England (BoE) published its final Policy Statement on the Resolvability Assessment Framework (RAF). In our previous blog we outlined details of the original Consultation Paper, which remain largely unchanged in the final policy. This blog sets out our views about how to deliver a structured approach that creates long lasting enhancements to resolvability, tailored to your business model and the importance of a top down strategic assessment and prioritisation.
The FCA is increasingly scrutinising whether the pricing practices used by individual firms, or present across particular financial markets, are fair to consumers. We have written previously about the FCA’s increasing scrutiny of cross-subsidisation and price discrimination, both pricing practices that the FCA has concluded can cause harm to consumers. The FCA has now published its Feedback Statement on Fair Pricing (FS19/04), following on from a Discussion Paper it published on the same topic last year.
Since the publication of its original paper on consumer vulnerability in 2015, the FCA has strengthened its approach to consumer vulnerability. The FCA considers that half of the UK population displays characteristics of potential vulnerability based on its definition. The protection of vulnerable customers - already a core FCA priority - has now been thoroughly embedded into its programme of thematic work and day-to-day supervision. Through its recent Guidance Consultation 19/3, the FCA seeks to provide greater clarity for firms regarding its expectations as to the fair treatment of vulnerable customers and practical guidance on translating those expectations into action.
Crucially, the FCA expects firms to embed the fair treatment of vulnerable customers into their culture at all levels and has made explicit its intention to hold firms to account where they are judged not to be doing enough to meet the expectations set out in the Guidance.
Risk and compliance management has moved into a new era. The significant level of regulatory change since the financial crisis, coupled with the slowing of economic growth and declining margins, has led organisations to seek opportunities to drive efficiencies. Many are turning to digitisation and automation with artificial intelligence (AI) as the solution.
Andrew Berry, Future of Risk and Compliance Lead shares ten key learnings from a recent collaboration with the European CRO of a global corporate bank to automate the client credit journey for wholesale clients.
The revised Wire Transfer Regulation (AKA Funds Transfer Regulation) is proving to be a challenge for many payment service providers (PSPs) to fully understand and implement.
Failure to implement this regulation properly can impact a PSPs ability to prevent, detect and investigate money laundering and terrorist financing, as well as breaches of financial sanctions.
Watch our short video to understand what it is and why you should take notice of it.