AML/CTF, Insider Trading and Sanctions
UK Serious Fraud Office Charges Former Banker With Conspiracy to Defraud for Manipulation of Euro Interbank Offered Rate
On October 21, 2018, the U.K. Serious Fraud Office charged a former banker with conspiracy to defraud, as part of its investigation into the manipulation of the Euro Interbank Offered Rate.
The former banker was arrested in Italy in August 2018 after his trip to the country activated a European Arrest Warrant that had been secured by the SFO in 2016. Italian authorities ruled on October 12, 2018 that he should be extradited to the U.K. and he was charged with conspiracy to defraud at Westminster Magistrates' Court on October 20, 2018.
The next hearing was scheduled to take place at Southwark Crown Court on October 24, 2018.
The SFO's announcement is available at: https://www.sfo.gov.uk/2018/10/21/sfo-charges-andreas-hauschild-with-euribor-manipulation
Financial Action Task Force Publishes Final Guidance on a Risk-Based Approach for the Securities Sector
On October 25, 2018, the Financial Action Task Force published the finalized version of its Guidance on a Risk-Based Approach for the Securities Sector. The finalized Guidance was adopted at the FATF's plenary meeting held on October 17–19, 2018. The FATF has developed the Guidance in conjunction with the private sector, to assist governments, regulators, Financial Intelligence Units and participants in the securities sector to adopt a risk-based approach to anti-money laundering and countering the financing of terrorism.
The final Guidance sets out the key principles involved in applying a risk-based approach to AML and CTF. Separate sections provide specific guidance to securities providers and intermediaries and to securities supervisors on the effective implementation of a risk-based approach. Annexes provide examples of supervisory practices that have been adopted and examples of suspicious activity indicators relevant to securities.
The Guidance is non-binding. It should be read in conjunction with the International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation and the 2009 Report on Money Laundering and Terrorist Financing.
The consultation on draft Guidance is available at: http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/RBA-Securities-Sector.pdf.
Bank Prudential Regulation & Regulatory Capital
EU Supervisory Authorities Propose Revisions to Implementing Technical Standards for Mapping of External Credit Ratings
On October 26, 2018, the Joint Committee of the European Securities Authorities (that is, the EBA, ESMA and EIOPA) published a consultation paper setting out proposed revisions to Implementing Technical Standards on the mapping of External Credit Assessment Institutions' credit assessments under the Capital Requirements Regulation.
The proposed revisions will amend the existing Implementing Regulation ((EU) 2016/1799), which sets out how ECAIs' credit assessments should be "mapped" to credit quality steps for the purposes of calculating capital requirements. The proposed amendments reflect the result of a monitoring exercise on the adequacy of mappings, which necessitates amendments related to: (i) the re-allocation of the credit quality steps for two ECAIs; and (ii) changes in credit rating scales/types for ten ECAIs. The consultation webpage also contains mapping reports for each of the 11 ECAIs concerned.
Comments on the consultation are invited by December 31, 2018. Respondents are asked to provide comments via the "Send your comments" button on the EBA's consultation webpage.
The consultation paper and supporting documents are available at: https://www.eba.europa.eu/news-press/calendar?p_p_id=8&_8_struts_action=%2Fcalendar%2Fview_event&_8_eventId=2416230.
European Banking Authority Sets Out Its Work Priorities for 2019
On October 23, 2018, the EBA published its Work Programme for 2019, setting out details of, and planned main outputs from, 37 separate work streams across the following five key strategic priorities:
- Leading the Basel III implementation in the EU.
- Understanding risks and opportunities arising from financial innovation.
- Collecting, disseminating and analyzing banking data.
- Ensuring a smooth relocation of the EBA to Paris.
- Fostering the increase of the loss-absorbing capacity of the EU banking system.
The EBA also confirms that work related to Brexit will remain a horizontal priority for the EBA in 2019 and explains that the EBA's other activities may be affected in the future by Brexit-related developments. Should that be the case, any substantial change in the Work Programme will be communicated in due time, in order to seek steering and approval from its Management Board and Board of Supervisors.
The EBA's 2019 Work Programme is available at: http://www.eba.europa.eu/documents/10180/2410831/EBA+2019+Work+Programme.pdf.
Bank Structural Reform
UK Ring-Fencing Regime to Remain Unchanged in a 'No Deal' Brexit Scenario
On October 22, 2018, HM Treasury published explanatory guidance on potential changes to the U.K.'s laws on ring-fencing in preparation for a "no deal" scenario in which the U.K. leaves the EU on March 29, 2019. The draft Ring-Fenced Bodies (Amendment) (EU Exit) Regulations 2018 have not yet been published. HM Treasury intends to publish the draft Regulations in due course and to lay them before Parliament before exit day.
From January 1, 2019, the U.K. ring-fencing laws will require U.K. banks and banking groups that hold more than £25 billion in core deposits to separate their core retail banking business from their investment banking business. Restrictions will limit the products that a ring-fenced bank can offer and where it can conduct business. In particular, a ring-fenced bank will not be able to own a banking subsidiary or branch that is established outside of the EEA. The U.K. legislation defines the activities that a ring-fenced bank may or may not undertake by reference to definitions in EU legislation.
HM Treasury is proposing to continue to allow ring-fenced banks to own an EEA bank subsidiary or branch to minimize the disruption to U.K. banks as a result of Brexit. In addition, the draft Regulations will amend the definitions used in the U.K. legislation to ensure that the ring-fencing regime continues to operate as it should when the U.K. leaves the EU.
The explanatory guidance notes that a statutory review of the ring-fencing regime is due in 2020-2021 and states that this may be an appropriate juncture at which to assess the ring-fencing regime.
The full text of the explanatory guidance is available at: https://www.gov.uk/government/publications/draft-ring-fenced-bodies-amendment-eu-exit-regulations-2018/ring-fenced-bodies-amendment-eu-exit-regulations-2018-explanatory-information.
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