UK: Financial Regulatory Developments (FReD) - 5 July 2013

Last Updated: 9 July 2013


Government publishes consumer credit responses
Prosecutors Consult on DPAs
FCA makes AIFMD rules
FCA holds financial crime conference


Council of the European Union (Council)

Council publishes RRD general approach: The Council has published the text of the general approach it agreed last week on the Recovery and Resolution Directive (RRD). Some of the elements of this general approach, as summarised in a note by the Council, include:

  • claims of the deposit guarantee scheme ranking higher in a bail-in than deposits of natural persons and small and medium-sized enterprises (SMEs) that are not covered by the guarantee scheme. These uncovered deposits would have preference over ordinary unsecured creditors;
  • interbank liabilities with an original maturity of less than seven days would be excluded from bail-in;
  • national authorities can exclude liabilities from the bail-in on the basis of practicality, continuity of critical functions and avoidance of contagion or value destruction;
  • there would be an exemption to setting up ex-ante separate resolution funds where national arrangements allow financing to be raised and made available immediately upon the resolution authority's request. Member States would also decide whether to merge funds for resolution and deposit guarantee schemes;
  • flexibility to exclude liabilities and use the fund to recapitalise an institution would only be available after losses equal to 8% of total liabilities have been imposed on shareholders and creditors; and
  • a review in 2016 will enable the introduction of harmonised minimum requirements for own funds and eligible liabilities.

The EP plenary vote has been pushed back to 19 November, probably in expectation of lengthy trilogue negotiations. (Source: Council Agrees Position on Bank Resolution, Council General Approach and OEIL File on RRD)

Contact: Rosali Pretorius or Andrew Barber

Council wants better AML compliance: The MONEYVAL Committee within the Council says Member States have made improvements in implementing their anti-money laundering prevention laws. But it says law enforcement and prosecutors must do more to get convictions and confiscation orders. It stressed the importance of financial institutions knowing who they are dealing with and the source of funds they handle. (Source: Council Wants Better AML Compliance)

Contact: Howard Cohen or Emma Radmore

European Commission (Commission)

Commission progresses in CDS market antitrust investigation: The Commission has sent a statement of objections to several investment banks, Markit and ISDA in the context of its antitrust investigations on whether they jointly prevented exchanges from entering the credit default swaps (CDS) market between 2006 and 2009. Allegedly, investment banks instructed Markit and ISDA not to provide licences for the data and index benchmarks needed to launch exchange-traded CDSs. The Commission has reached the preliminary conclusion that investment banks feared exchange trading of CDSs would reduce their revenues in the OTC markets. (Source: Statement on CDS Investigation and Antitrust: Commission Sends Statement of Objections in CDS Investigation)

Contact: Rosali Pretorius or James Brennan

European Parliament (EP)

EP votes on UCITS 5, FTT and bank structural reform: On 3 July the EP plenary approved:

  • its position on the UCITS V Directive, which still needs to be agreed by the Council and in trilogue negotiations. The main features of EP's position are the mandatory use of a depositary and rules on remuneration of UCITS managers. Depositaries would have to ensure the segregation of investors' money would be liable for any loss of assets. EP's position also requires partial deferring of part of UCITS managers' variable remuneration;
  • its non-legislative report on the Financial Transactions Tax (FTT), with the elements already discussed in recent issues of FReD; and
  • its own-initiative resolution on bank structural reform, in advance of Commission proposals due in September

Source: EP Votes on UCITS 5, EP Votes on FTT, Parliament sets out Priorities for Overhauling EU Banks and Texts adopted at the sitting of 3 July)

Contact: Rosali Pretorius or Kam Dhillon

European Supervisory Authorities (ESAs)

ESAs hold Consumer Protection Day: The Joint Committee of the ESAs has held its first Consumer Protection Day. It included a panel discussion on the proposal for a Regulation on the Key Information Document (KID) for packaged retail investment products (PRIPs) (KID Regulation) and sessions on consumer trends, sales incentives and product intervention. In his opening speech, Gabriel Bernardino, chairman of EIOPA, announced the creation of a Joint Sub-Committee on Consumer Protection and Financial Innovation comprising three sub-groups:

  • PRIPs. This sub-group is already working on the level 2 measures foreseen in the KID Regulation proposal, such as on tailoring the KID to different products while retaining as much standardisation as possible for risks, costs and performance indicators.
  • Product oversight and governance. This sub-group aims at producing best practice on financial institutions' product approval process.
  • General consumer protection. This sub-group will extend EIOPA's guidelines on complaints-handling to the banking and securities sectors, and will carry out work on cross-selling.

Gabriel Bernardino also referred to regulatory, supervisory and enforcement consistency, and to the need to bring about a new paradigm on transparency and fairness towards consumers. (Source: Joint Committee of the ESAs Holds its First Consumer Protection Day and ESAs: Our Joint Effort in Enhancing Consumer Protection in Europe)

Contact: Josie Day or Emma Radmore

European Banking Authority (EBA)

EBA consults on interest rate risk in the banking book: EBA has launched a consultation on amendments to its guidelines on the supervision of interest rate risk in the banking book. The amendments seek to improve firms' review and supervisory assessment of interest risk, including stress testing, risk management and the allocation of internal capital. (Source: Consultation on Management of Interest Rate Risk Arising From Non-Trading Activities)

Contact: Rosali Pretorius or James Brennan

European Insurance and Occupational Pensions Authority (EIOPA)

EIOPA concerned at PPI: EIOPA has written to national competent authorities in Member States asking them to review their national markets to assess consumer protection issues regarding payment protection insurance (PPI). Its particular focus is mis-selling, cross-selling, product design, information asymmetry and market imperfections. It wants regulators to report back to it with a view to deciding what possible further supervisory or regulatory action might be needed. (Source: EIOPA Concerned at PPI)

Contact: Emma Radmore or Andrew Barber

EIOPA consults on comparison websites and distributors' competence: EIOPA is consulting on two Good Practice reports on the supervision of, respectively, insurance comparison websites and insurance distributors' knowledge and ability. The report on commercial comparison websites looks at the disclosure of information about the products offered, the sites' market coverage, the criteria used to produce rankings and about potential conflicts of interests due to relationships with certain product providers. The report on distributors' knowledge and ability includes high-level principles and also guidance on a minimum level of distributors' continuous professional development. (Source: EIOPA Consults on Good Practices Reports in the Area of Consumer Protection)

Contact: Emma Radmore or Andrew Barber


ESMA pleased with MAD compliance: ESMA has published the results of a peer review of supervisory practices within the EEA in enforcing the Market Abuse Directive (MAD). The review identified several good practices and ESMA found that most authorities had implemented MAD correctly. ESMA now urges authorities to learn from each others' experiences and review and adjust their practices where appropriate. (Source: ESMA Pleased With MAD Compliance)

Contact: Rosali Pretorius or James Brennan

ESMA publishes AIFMD remuneration guidelines translations: ESMA has published the official translations of its guidelines to national authorities on sound remuneration policies under the AIFMD. It finalised the guidelines in February 2013 (see FReD 15 February 2013). The guidelines take effect from 22 July. (Source: ESMA Publishes AIFMD Remuneration Guidelines Translations)

Contact: Rosali Pretorius or Kam Dhillon

ESMA publishes "retailisation" report: ESMA has published a report on the sale of complex alternative UCITS and structured products to retail investors. The report highlights the levels of understanding necessary to appreciate the risks these products pose, and concludes most retail investors will not have the requisite understanding. As a result, there is significant potential for regulatory compliance failure when retail investors buy the products. (Source: ESMA Retailisation Report)

Contact: Josie Day or Emma Radmore



Government holds payday lending summit: The Government has held a summit with regulators and industry and consumer representatives to discuss the payday lending industry. The Government says payday loans are not right for a majority of people and it is concerned payday lenders are not complying with their codes of practice and customer charter. (Source: Government and Regulators Quiz Payday Industry at Summit)

Contact: Andrew Barber or Emma Radmore

HM Treasury (Treasury)

Government publishes consumer credit responses: Treasury and the Department for Business Innovation and Skills have published a summary of the responses they received to their joint consultation on transfer of consumer credit regulation from OFT to the Financial Conduct Authority (FCA). Respondents broadly welcomed the plans, although many felt the implementation period would be too challenging and asked for further measures to smooth the transition. The Government, however, feels it could be detrimental to consumers to allow any longer transition or not to have key measures in force from "day one". It has, however, made a few changes from its original proposals, including:

  • giving FCA power to designate as rules certain Consumer Credit Act (CCA) secondary legislation;
  • the inclusion broking of vehicle leasing and Green Deal brokers within the limited permission regime;
  • allowing lenders which do not apply interest and charges to be appointed representatives;
  • excluding from the scope of regulation peer to peer activities where the lender is not an individual or a "relevant person" and the borrower is an individual acting for business purposes and borrowing over £25,000.

The Government has also clarified how firms with interim permissions are able to act as principals for appointed representatives. The Government has laid before Parliament, in draft, the two statutory instruments that will enable the transfer which are subject to the affirmative resolution procedure. One further instrument, subject to the negative resolution procedure, will be published soon and the Government hopes the legislative framework to effect the transfer will be in place before the summer. Its intention is to allow firms to register for interim permissions based on existing consumer credit licences from 2 September. FCA is to consult on its rulebook for consumer credit in the autumn. (Source: Government Responds on Consumer Credit Transfer and Draft RAO Amendment Order)

Contact: Andrew Barber or Howard Cohen

Treasury updates sanctions: Treasury has updated the sanctions lists in respect of Al-Qaida. (Source: Treasury Updates Sanctions)

Contact: Emma Radmore or Andrew Barber

Bank of England (BoE)

BoE publishes stress-testing anchor scenario: BoE has published its recommended stress-testing anchor scenario, which firms can use as guide to calibrate their own scenarios for Pillar 2 capital planning stress tests. This anchor scenario is designed to encourage comparability and senior management engagement, and to avoid "disaster myopia". (Source: Anchor Scenario)

Contact: Rosali Pretorius or Andrew Barber

Office of Fair Trading (OFT)

OFT refers payday lending to Competition Commission: OFT has announced a Market Investigation Reference of payday lending to the Competition Commission. OFT is concerned about:

  • the uneven playing field created by variations in the level of regulatory compliance by payday lenders;
  • lack of cost transparency, which hinders comparison, and barriers to switching at point of rollover; and
  • weak price competition due to borrowers' limited access to other forms of credit and their pressing needs, which leads to competition being based on speed of approval and rollovers.

(Source: OFT Refers Payday Lending Market to Competition Commission)

Contact: Andrew Barber or Howard Cohen

OFT publishes annual report: OFT has published its annual report 2012/2013. It has highlighted that it revoked or refused 44 consumer credit licences and that 50 payday lenders were put on notice, with five of them having decided to leave the payday market. (Source: OFT Publishes Annual Report 2012-13)

Contact: Andrew Barber or Emma Radmore

Serious Fraud Office (SFO)

Prosecutors Consult on DPAs: SFO and the Director of Public Prosecutions (DPP) are consulting on the Code of Practice required under the Crime and Courts Act that the prosecutors must use when considering deferred prosecution agreements (DPAs). A prosecutor will have regard to existing codes of practice and guidance, including the Code for Crown Prosecutors, the Corporate Prosecution Guidance, the Joint Prosecution Guidance on the Bribery Act and also the DPA Code. The consultation covers:

  • how to apply the two-stage test relating to evidence and public interest in order to establish that a DPA would be appropriate. In relation to the evidential test, the consultation proposes that either the conditions of the "Full Code Test" which prosecutors must apply are already met, or, if not, that there is at least a reasonable suspicion that the commercial organisation has committed the offence, and there are reasonable grounds for believing that a continued investigation would provide further evidence within a reasonable period of time, so that all the evidence together would be capable of establishing a realistic prospect of conviction in accordance with the Full Code Test. To satisfy the public interest test, the prosecutor must prove the public interest would be better served by a DPA than a full prosecution;
  • suggested indicative factors that may determine whether or not a full prosecution is in the public interest. The consultation stresses it will often be better to prosecute, and that no-one has the right to request a DPA over a prosecution. Additional public interest factors in favour of prosecution include a history of similar conduct; evidence the conduct is part of the established business practices of the company; the company having an ineffective corporate compliance programme; previous warnings or worse to the company which it has failed to action; failure to report wrongdoing properly or at all; or severe economic harm to the victims. Additional public interest factors against prosecution include a genuinely proactive approach from management, involving self-reporting and remedial actions, including the compensation of victims; lack of a history of similar conduct; the company having a genuinely proactive and effective corporate compliance programme; the offence being an isolated incident; the company and/or its procedures having changed significantly for the better since the offence; or a conviction being likely to have unduly adverse consequences for the company under the law of another jurisdiction;
  • the process for negotiating a DPA;
  • how the prosecutor can use in a subsequent prosecution information it obtains in the course of DPA negotiations;
  • the treatment of material obtained during DPA negotiations but not used;
  • the statement of facts and terms of the DPA;
  • the court hearings;
  • process on breach or variation of a DPA;
  • discontinuance of a DPA;
  • guidance on whether hearings should be in public or in private; and
  • factors for consideration when publishing DPAs as permitted under the Crime and Courts Act.

Consultation closes on 20 September. (Source: Consultation on Code of Practice for DPAs)

Contact: Howard Cohen or Emma Radmore


Financial Conduct Authority (FCA)

FCA makes statement on CRD4: FCA confirmed the application of the fourth Capital Requirements Directive and Regulation package (CRD4 and CRR) from 1 January 2014 was in line with its expectations. It says it will consult in the summer on changes it needs to make to its rules to implement CRD4 and remove provisions which are in CRR. It will also consult on transitioning existing waivers under the CRD4 package. (Source: FCA Makes Statement on CRD4)

Contact: Rosali Pretorius or Juan Jose Manchado

FCA makes AIFMD rules: At its June Board meeting, FCA made its rules implementing the Alternative Investment Fund Managers Directive (AIFMD) into its rulebook. The rules, and accompanying Policy Statement, reflect the two consultations on implementation. The rules also take account of transposition, also on 22 July, of the EU Regulations on Venture Capital Funds (EUVeCa) and Social Entrepreneurship Funds (EUSEF). These, like the AIFMD Level 2 Regulation, did not have to be implemented into UK laws, so are not reproduced in FCA's rules, but the rules refer to them as appropriate. The rules amend many parts of the Handbook, some fundamentally.

Key areas covered by the rules include:

  • a new Investment Funds Sourcebook (FUND) applying to all UK Alternative Investment Fund Managers (AIFMs), whether "full-scope" or "small", branches of EEA AIFMs and depositaries of funds managed by full-scope AIFMs. FUND is not yet complete, but sets out requirements on different types of AIFM in terms of reporting, investment, restrictions on business, risk management, leverage, prime brokerage selection, delegation, marketing and cross-border issues. It contains specific rules on depositary functions and liabilities. It also contains a list of transitional provisions;
  • many new definitions in the Glossary;
  • amendments to the Senior Management, Systems and Controls Sourcebook (SYSC) to reflect the extent to which it applies to AIFMs and to introduce the AIFM Remuneration Code;
  • amendments to the Fees Manual (FEES) to reflect the AIFMD fee structure;
  • amendments to the prudential sourcebooks to reflect new definitions (particularly that of a "collective portfolio investment management firm" and AIFMD requirements and to reflect that the UCITS Managers Prudential Sourcebook (UPRU) will be deleted in its entirety on 22 July 2014;
  • changes to the Conduct of Business Sourcebook (COBS) to reflect which rules apply to which type of AIFM or UCITS Management Company;
  • changes to the Client Assets Sourcebook (CASS) in respect particularly of depositaries and trustees;
  • changes to the Supervision Manual (SUP) in respect particularly of controlled functions, passporting and reporting;
  • changes to reflect application of the Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme; and
  • changes to the Perimeter Guidance (PERG) to include a new section on marketing AIFs and a new chapter on the scope of the AIFMD. The scope chapter includes FCA's views on what is an AIF and what managing an AIF means, as well as guidance on what regulated activities are relevant.

The Dispute Resolution: Complaints (Alternative Investment Fund Managers Directive) Instrument 2013 also amends the definition of "eligible complainant".

FCA has not yet consulted on some aspects of implementation, where it did not have to put rules in place for 22 July. It is likely to consult on many of these later in 2013. These include:

  • consequential changes for all parts of the FCA and PRA Handbooks
  • rules on fees for managers of EUSEFs and EUVeCas;
  • rules for the eventual implementation of European passports for non-EEA AIFMs managing EEA AIFs and for non-EEA AIFs being marketed in the EEA;
  • integration into the Handbook of ESMA guidelines on key concepts of the AIFMD, remuneration of key personnel, and reporting by AIFMs;
  • guidance on a proportionality framework for remuneration requirements; and
  • the transition of rules and guidance affecting UK-authorised funds from the Collective Investment Schemes Sourcebook (COLL) to FUND.

(Source: Policy Statement 13/5)

Contact: Rosali Pretorius, Kam Dhillon or Tom Harkus

FCA updates on AIFMD: FCA's AIFMD webpage now notes it expects to publish final forms during the week of 8 July. It also says it will publish forms for EUSEF and EUVeCa before 22 July. In the meantime, it has published versions of forms for (i) an authorised full scope UK AIFM and Full Scope EEA AIFM, (ii) a "Third Country Above Threshold AIFM", and (iii) a Third Country National Private Placement Regime (NPPR) form. (Source: FCA Updates on AIFMD, Authorised Full Scope UK AIFM and Full Scope EEA AIFM (Article 36) form, Third Country Above Threshold AIFM (Article 42) form and AIFMD NPPR Small Third Country form)

Contact: Kam Dhillon or Tom Harkus

FCA makes periodic fees and authorised contractual schemes rules: At FCA's June Board meeting, in addition to the rules on AIFMD implementation summarised above, it made:

  • the Authorised Contractual Schemes (Handbook Amendments) Instrument 2011: this amends several modules of the Handbook (most significantly COLL) from 1 July to reflect FCA's new ability to authorise co-ownership schemes and limited partnership schemes as authorised collective investment schemes;
  • the Periodic Fees (2013/2014 and Other Fees) Instrument 2013: this takes effect from 1 July and sets out FCA's regulatory fees and levies rules for the 2013/14 year. The rules cover FCA, the FOS general levy and the levy to the Money Advice Service;
  • the Dispute Resolution: Complaints (Amendment No 6) Instrument 2013: this is an instrument made by FOS and approved by FCA and amends the scope of FOS to reflect legislative changes; and
  • the Handbook Administration (No 30) Instrument 2013: this also amends several modules of the Handbook to amend minor inaccuracies and to update references. It also takes effect from 1 July.

(Source: FCA Handbook Notice Number 3)

Contact: Emma Radmore or Juan Jose Manchado

FCA holds financial crime conference: FCA's first financial crime conference since its inception featured speeches from, among others, Martin Wheatley and Tracey McDermott of FCA. Recurring themes included:

  • the UK's desire to make itself a "hostile place" for money launderers;
  • increased use of the need for "attestations" by CEOs or senior managers to attest compliance with requirements, which would enable FCA to work towards taking action where merited against senior individuals within firms; and
  • the need for the UK to work hard towards its next FATF evaluation due in a couple of years.

FCA also announced the results of its thematic review on banks' control of financial crime risks in trade finance. Its sample of banks reviewed generally had good controls to ensure they did not deal with sanctioned persons. But FCA found weaknesses in:

  • policies, procedures and controls to counter money-laundering risk, especially in high risk areas; and
  • often poor systems and controls over dual-use goods.

It found large US banks tended to mitigate these risks better than the other banks in its sample. FCA has published examples of good and poor practice and now wants banks to ensure that high-risk customers and transactions are identified and senior management take appropriate action. It also says banks must improve management information so senior management can assess developing risks. FCA says it is considering whether it needs to take any action against any particular bank beyond highlighting areas for improvement. It has also issued a guidance consultation on good and poor practices in banks' control of financial crime risks in trade finance, which it proposes to include as a new chapter in its Financial Crime Guide. It asks for comments by 4 October. (Source: FCA Holds Financial Crime Conference and FCA Publishes Trade Finance and Financial Crime Review and Guidance Consultation: Trade Finance and Financial Crime)

Contact: Howard Cohen or Emma Radmore

FCA reminds banks on cancellation of continuous payment authorities: FCA has reminded banks of their agreement that a request from a customer to end a continuous payment authority (CPA) will be enough to cancel the arrangement. The provider must arrange cancellation and not require their customer to contact the merchant recipient of the payment, and must refund customers immediately should a payment go through after the customer has cancelled the CPA. The biggest high street banks and mutuals have also agreed to review all complaints about non-cancellation of CPAs received since November 2009 (when the Financial Services Authority began regulating retail payments) and make redress where appropriate. (Source: FCA Reminds on CPAs)

Contact: Andrew Barber or Josie Day

Up next from FCA: FCA's latest policy development update notes the following documents it plans to publish imminently:

  • policy statement on consumer credit in July (originally June);
  • policy statement on recovery and resolution plans (still scheduled for June);
  • consultation on payments for referrals to discretionary investment managers and reporting of retail investment complaints (July); and
  • client assets review (including on EMIR indirect client clearing) (July).

In September and October, planned consultations include papers on the consumer credit rules and on investment-based crowd-funding and peer to peer lending. (Source: Up Next From FCA)

Contact: Emma Radmore or Juan Jose Manchado

FCA publishes mobile phone insurance review: FCA has published the results of its thematic review of mobile phone insurance. It found several issues that created what it described as a gap between what firms deliver and what customers have been led to expect. Specifically, FCA found instances of:

  • ineffective product governance;
  • product design that did not meet customers' needs;
  • lack of fairness and clarity in terms and conditions;
  • poor sales practices;
  • slow, unfair claims handling; and
  • failure to comply with complaints handling rules.

Firms have assured FCA they will review their practices and deliver better quality. FCA will use its findings as part of its wider work on general insurance add-ons and will take action if firms cannot prove they are treating their customers fairly. (Source: FCA Publishes Mobile Phone Insurance Review)

Contact: Andrew Barber or Emma Radmore

FCA confirms insurance broker fine and ban: FCA has confirmed the decision of the Upper Tribunal to uphold FCA's decision to fine Andrew Jeffery £150,000 and ban him for insurance fraud. FCA found Mr Jeffery had kept clients' premiums without passing them to the underwriter so the clients either did not have, or risked not having, appropriate cover. He also wrote to insurers purporting to be his clients, deceiving them into meeting claims for which he had not sent them a premium. Further, he sought to evade FCA's requests for information. His firm had its permission cancelled in January 2010. (Source: FCA Confirms Insurance Broker Fine and Ban)

Contact: Howard Cohen or James Brennan

FCA fines insurance administrator for poor complaints handling: FCA has imposed a fine of £2.8 million on Policy Administration Services Limited (PAS) for poor complaints handling relating to mobile phone insurance policies it administered. It failed to record complaints and investigate their root cause. Following the regulatory investigation, PAS has mitigated its failings by employing a third party professional services firm to review its processes and by conducting a separate review aimed at paying compensation to customers who had suffered a loss. (Source: FCA Fines Policy Administration Services for Poor Complaints Handling)

Contact: Andrew Barber or Emma Radmore

FCA speaks on wealth management: Clive Adamson spoke on FCA's approach to supervising wealth management and private banking firms. He highlighted FCA's focus on putting the needs of the customer first and explained FCA's plan to conduct a series of individual firm risk assessments. The assessments will look at business models, rather than internal controls and FCA will carry out increasing thematic reviews. He said FCA would launch its Wealth Management and Private Banking Department on 15 July. He moved on to look at work already completed, such as preparatory work for the Retail Distribution Review, the focus on management of money laundering risks and safeguarding the integrity of client assets. Finally, he noted as areas firms should focus on:

  • oversight arrangements;
  • ensuring customer information is recorded and kept up to date;
  • management of conflicts of interest;
  • delivering the services customers sign up for;
  • ensuring customers' funds are legitimate;
  • checking customers' portfolios are consistent with their investment objectives; and
  • sending out clear periodic reports.

(Source: FCA Speaks on Wealth Management)

Contact: Andrew Barber or Josie Day

Prudential Regulation Authority (PRA)

FCA publishes PRA liquidity modification letter: FCA has published on its website the letter it expects overseas firms applying for a Whole-Firm Liquidity Modification in respect of their UK branch to send to PRA. (Source: FCA Publishes PRA Liquidity Modification Letter)

Contact: Rosali Pretorius or Tom Harkus

PRA publishes fees for 2013/14: Like FCA, PRA has published its final fee arrangements for 2013/2014. It explains its annual funding requirement and how it has allocated the requirement to fee blocks. It also looks at its final periodic fee policy and cost recovery rules and its financial penalty scheme. Finally, it explains its Solvency II special project fees. (Source: PRA Publishes Fees for 2013/14)

Contact: Rosali Pretorius or James Brennan


Bank for International Settlements (BIS) / Basel Committee for Banking Supervision (Basel Committee)

BIS consults on AML/CFT guidelines: BIS has opened a consultation on the sound management of risks related to money laundering and the financing of terrorism. The guidelines are intended to be consistent and supplement the FATF standards. It asks for comments by 27 September. (Source: Sound Management of Risks Related to Money Laundering and Financing of Terrorism - Consultative Document)

Contact: Emma Radmore or Andrew Barber

Basel Committee consults on capital for exposures to counterparties and CCPs: The Basel Committee has opened consultations on derivatives-related reforms to capital adequacy. The first seeks to improve the non-internal model method for capitalising counterparty credit risk exposures. It differentiates between margined and unmargined trades, reflects the possibility of greater volatility and better recognises the benefits of netting. The second sets out the final proposals for the capital treatment of bank exposures to central counterparties (CCPs), addressing concerns that the interim proposals would discourage central clearing and the maintenance of generous CCP default funds. Both consultations are open until 27 September. (Source: The Non-Internal Model Method for Capitalising Counterparty Credit Risk Exposures and Capital Treatment of Bank Exposures to CCPs)

Contact: Rosali Pretorius or James Brennan

Basel Committee updates G-SIBs assessment methodology: The Basel Committee has published an updated version of the methodology for identifying global systemically important banks (G-SIBs) and their additional loss absorbency requirements, which will be phased in between 1 January 2016 and 1 January 2019. (Source: G-SIBs Updated Assessment Methodology and the Higher Loss Absorbency Requirement)

Contact: Rosali Pretorius or Andrew Barber

European Banking Federation (EBF)

EBF publishes position on payment accounts proposals: EBF has published a document setting out key issues on the Commission's proposals for a Directive on transparency, switching and access to payment accounts. It calls for greater consideration of the principles of subsidiarity and proportionality, given that there is no evidence of major obstacles for consumers accessing an account and that the low demand for cross-border accounts does not justify the imposition of switching mechanisms. (Source: EBF Key Considerations on Proposal on Payment Accounts)

Contact: Andrew Barber or Emma Radmore

European Payments Council (EPC)

EPC publishes White Paper on mobile wallet payments: EPC has published a White Paper on the use of mobile wallets to initiate mobile payments. It asks for comments by 30 September. (Source: White Paper Mobile Wallet Payments)

Contact: Andrew Barber or Emma Radmore

Financial Action Task Force (FATF)

FATF publishes guidance and best practice papers: Following its plenary meeting last week (see FReD 28 June), FATF has published:

  • guidance on politically exposed persons (PEPs): this includes guidance on the relationship between customer due diligence and PEP requirements, use of different sources of information and measures applicable to different types of PEP;
  • international best practices for targeted financial sanctions related to terrorism and terrorist financing: this looks at procedures for identifying and designating persons or entities, due process and post-designation issues. It also considers compliance requirements;
  • guidance for a risk-based approach on prepaid cards, mobile payments and internet-based payment services: this paper looks at the roles of various entities in these markets, how to identify and mitigate risks, relevant laws and the risk-based approach; and
  • guidance on the implementation of financial provisions of United Nations Security Council Resolutions to counter the proliferation of weapons of mass destruction: this guidance looks at targeted financial sanctions, activity-based financial prohibitions and vigilance measures.

Russia has now assumed the FATF plenary and has set out its objectives for the next year, which include working better with the Egmont group of financial intelligence units. (Source: FATF Guidance on PEPs, FATF Best Practice on Terrorist Sanctions, FATF Guidance on Prepaid Cards etc, FATF Guidance on Proliferation and Russia Takes Over FATF Plenary)

Contact: Howard Cohen or Andrew Barber

Federal Reserve System (Fed)

Fed adopts Basel 3 changes: In the US, the Fed and Office of Comptroller of the Currency have adopted the final rule incorporating the Basel 3 standards to the US regulatory framework. This follows the consultation on three notices of proposed rulemaking published on 30 August 2012. (Source: Regulatory Capital Rules)

Contact: Jerome Walker or Rosali Pretorius

Global Financial Markets Associations (GFMA)

GFMA publishes large exposures response: GFMA and other industry associations have submitted a joint response to the Basel Committee's consultation on large exposures. They say the proposed framework is not sufficiently risk sensitive and that it appears to be driven by the desire to limit shadow banking and systemically important institutions, rather than to accurately measure and control large exposures. (Source: Comments to Framework for Measuring and Controlling Large Exposures)

Contact: Rosali Pretorius or Juan Jose Manchado

International Organisation for Securities Commissions (IOSCO)

IOSCO Board announces progress in reform agenda: IOSCO's Board has met in Montreal, where it participated in a round table on behavioural economics and social media. It also announced that the final version of the "Principles for margin requirements for non-centrally cleared derivatives", which IOSCO is developing with the Basel Committee, will be finalised during July. A new Task Force on Cross-Border Regulation and a new Committee on Retail Investor education and protection were also established in the course of IOSCO Board's meeting. (Source: IOSCO Board Focuses on Behavioural Economics and Social Media)

Contact: Rosali Pretorius or James Brennan

Joint Money Laundering Steering Group (JMLSG)

JMLSG consults on guidance changes: JMLSG is consulting until 16 September on proposed changes to its guidance. The changes reflect omissions from previous drafts, revisions of areas which were difficult to implement in practice and provisions that do not reflect current practice. The major change is in a redrafted chapter 4 of Part 1. JMLSG decided it should not at this stage anticipate the fourth money laundering Directive, but has used some recent FATF material. (Source: JMLSG Consults on Guidance Changes)

Contact: Emma Radmore or Andrew Barber


Financial Crime

Deferred Prosecution Agreements: Emma Radmore has written an article for Financial Regulation International on the introduction of Deferred Prosecution Agreements in the UK. (June 2013)

Anti-Bribery and Corruption Laws in Key Jurisdictions: Lawyers from Dentons offices in six jurisdictions prepared a table comparing key provisions of anti-corruption laws for Thomson Reuters Compliance Complete. (May 2013)

Preventing Financial Crime: Emma Radmore has written an article for Financial Regulation International on recent developments in financial crime prevention. (April 2013)

The Evolving Financial Sanctions Landscape – UK and US Perspectives: Emma Radmore, Thomas Laryea, Michael Zolandz and Peter Feldman have written an article for Financial Regulation International on financial sanctions under the UK and US regimes. (November 2012)

The Bribery Act – Has It Made A Difference?: We have updated our previous overview of the Bribery Act to take into account the Serious Fraud Office's latest guidance. (October 2012)

Dealing with Anti-Corruption Laws – the Bribery Act and FCPA in Context: This article summarises the effects of the Bribery Act and US Foreign Corrupt Practices Act. For further information, please contact Emma Radmore or Dominic Sedghi (London), or Michelle Shapiro (New York). (May 2012)

Investment Services and Markets Reform

Taking the Credit - the Transfer of Consumer Credit Regulation: Andrew Barber, Emma Radmore and Juan Jose Manchado have written an article for Compliance Monitor on the transfer of consumer credit regulation to FCA. (April 2013)

Last Lap to Legal Cut-Over: Emma Radmore has written an article for Compliance Monitor on FSA's first two consultations on preparing for the new regulatory regime. (January 2013)

A New Handbook for a New Era?: Emma Radmore has written an article for Thomson Reuters Compliance Complete on FSA's proposals to update the General Provisions Sourcebook for legal cut-over. (October 2012)

Treasury Publishes Banking Reform Bill: Read our summary of the Bill implementing the Vickers reforms into FSMA. (October 2012)

RDR: How Long Can it Last?: Emma Radmore and Andrew Barber have written an article for Compliance Monitor on the future of the Retail Distribution Review. (October 2012)

What's next for LIBOR? Summary of the Wheatley Review Recommendations: We have written a summary of the Wheatley 10-point plan for the reform of the LIBOR process. (September 2012)

Rate Setting and Regulation: In Everyone's Interests?: Rosali Pretorius and Katharine Harle wrote an article for Financial Regulation International on the background to LIBOR setting and potential regulatory action. (August 2012)

Money through your mobile – regulation of m-payments:Andrew Barber and Emma Radmore have written an article for Compliance Monitor on the regulatory aspects of mobile payments. (May 2012)

MiFID 2 – Prescription and Change: Emma Radmore wrote an article for Compliance Monitor on the breadth of the proposals to amend the Markets in Financial Instruments Directive (MiFID 2). (January 2012)

Prudential Regulation

UK Treasury Publishes Banking Structure Reform Plans: This article summarises the June 2012 White Paper on implementation of structural change to UK banking (as covered in FReD 15 June). For more information, please contact Rosali Pretorius, Emma Radmore or Andrew Barber. (June 2012)

EU Living Wills Plans – the Key Proposals: This article is the latest in our suite of articles about Living Wills and Recovery and Resolution Plans looks at the European Commission's proposals. For further information, please contact Rosali Pretorius or Andrew Barber. (June 2012)

Living Wills update: We have produced an update on FSA's current plans for Recovery and Resolution Plans. For further information, please contact Rosali Pretorius or Andrew Barber. (May 2012)

Asset management

The Alternative Investment Fund Managers Directive – Theory Becomes Reality: Rosali Pretorius and Emma Radmore wrote an article on implementation of the AIFMD for the Global Asset Management & Servicing Review 2013/14 published by Euromoney Yearbooks.

Product Regulation

More Protection for Retail Markets – the EU's PRIPs Package: We have written a detailed summary of the PRIPS, IMD2 and UCITS V proposals. (July 2012)

Another Stable Door?: Emma Radmore and Katharine Harle wrote an article for Thomson Reuters Complinet on IOSCO's proposals for complex product distribution. (April 2012)

Enforcement and Litigation

Having Your Cake and Eating It: FOS Award is no Bar to Issuing Proceedings: Katharine Harle has written an article for Compliance Monitor on the High Court award in Clark and another v. In Focus Asset Management & Tax Solutions Ltd. (January 2013)

The Not So Remote Risks of Recommendations: Richard Caird, Sam Coulthard and Kattalin Truman have written an article on the case of Rubenstein v. HSBC Bank plc. (September 2012)

The Long Arm of FSA: Overseas Firms and Senior Management Beware: Emma Radmore and Katharine Harle have written an article for Compliance Monitor on the lessons from recent FSA enforcement cases involving overseas firms and their approved persons. (August 2012)

More Confusion on Client Money: Rosali Pretorius and Josie Day have written an article on the Supreme Court decision in the Lehman client money case. (March 2012)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Events from this Firm
28 Sep 2017, Seminar, London, UK

On 26 July the FCA published its long-expected consultation paper on the extension of the SMCR to all FCA-authorised firms. The so-called "core regime" introduces the key concepts of regulator-approved senior managers, firm-approved certification staff and conduct rules applicable to virtually all staff.

3 Oct 2017, Conference, Zurich, Switzerland

As the founding Partner of the Europe-Iran Forum, Dentons Europe will once again support this year’s event. This compelling event which explores all Iran-related topics will take place in Zürich on 3rd and 4th October.

4 Oct 2017, Conference, Munich, Germany

Dentons Global Real Estate Group is delighted to be exhibiting once again at EXPO REAL, the International Trade Fair for Property and Investment which takes place on 4-6 October, 2017 in Munich, Germany.

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