BoE Governor: Andrew Bailey appointed

HM Treasury has announced that Andrew Bailey has been appointed as the new Governor of the Bank of England (BoE). Mr Bailey will succeed Mark Carney from 16 March 2020. The appointment is for an eight-year term.

To ensure continuity, an interim Chief Executive of the Financial Conduct Authority (FCA) will be appointed ahead of Mr Bailey's departure to manage the organisation until a permanent successor is chosen by HM Treasury.

MLD5: Money Laundering and Terrorist Financing (Amendment) Regulations 2019

The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (SI 2019/1511) have been published, together with an explanatory memorandum. The Regulations amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (MLR 2017) to implement in the UK the amendments made to the Fourth Money Laundering Directive (MLD4) by the Fifth Money Laundering Directive (MLD5).

In addition, the Regulations amend the Terrorism Act 2000 and the Proceeds of Crime Act 2002 in order to align the definitions of the "regulated sector" in those Acts with the amendments made by MLD5. The Regulations also make amendments to the Companies Act 2006 and other companies legislation in order to implement requirements in the Amending Directive relating to companies.

Among other things, MLD5 makes the following changes:

  • increases information and transparency of beneficial ownership;
  • prepaid cards will have increased due diligence with the threshold of €250 reduced to €150;
  • virtual currency exchange platforms are now subject to AML laws as they too are included as "Obliged Entities"; and
  • the use of electronic identification for customer due diligence will be permitted.

The Regulations come into force on 10 January 2020 (except for regulation 5(5)(c) on anonymous prepaid cards, which comes into force on 10 July 2020, and regulations 6 and 12, which come into force on 10 September 2020).

It is expected that the Joint Money Laundering Steering Group Guidance Notes will be updated in due course.

The FCA has also published a webpage relating to the Regulations on which it highlights some specific new areas that firms need to comply with.

The FCA states that it expects firms to comply with the new obligations from 10 January 2020. In assessing its approach to firms that may not be compliant on that date, the FCA will take into account evidence that they have taken sufficient steps before that date to comply.

PRA supervision: firm feedback survey results 2018/19

The Prudential Regulation Authority (PRA) has published the aggregated results of its 2018/19 firm feedback survey. The annual firm feedback survey gives PRA-authorised firms the opportunity to comment on their experience of being supervised. The PRA also sets out on its supervision webpage a summary of the following new issues raised in 2019:

  • firms have more frequently expressed concerns about the timeliness of senior managers and certification regime (SMCR) approvals. Firms have commented that it would be helpful to have a better information flow throughout approvals, including what candidates could do while awaiting approvals, and improved coordination between the PRA and FCA. Poor quality applications are the main cause of the delays and the PRA says there are plans in place to work to improve the quality of the applications; and
  • firms have experienced difficulties using the BoE Electronic Data Submission (BEEDs) portal, including a short window of time to submit data and user-related issues, such as password problems, an absence of automatic calculation functions and guidance deficiencies. The BoE is monitoring the performance of the BEEDs portal to ensure its functionality.

The largest firms supervised by the PRA receive the survey every year. Some of them are also invited to follow-up meetings to discuss their views in more detail. Each year, a sample of small and medium-sized firms are also invited to complete the survey, and some of them are invited to participate in a follow-up roundtable meeting. The firms included in the sample for 2020 can expect to be notified on 6 May 2020.

Transforming data collection and analytics: BoE discussion paper

The FCA and the BoE have outlined plans to develop their data and analytics capabilities. Both authorities depend on access to high-quality data to fulfil their respective missions of maintaining monetary and financial stability, market integrity, effective competition and consumer protection.

The FCA's refreshed data strategy sets out a transformation plan to become a highly data-driven regulator. The strategy outlines the FCA's increased focus on the use of advanced analytics and automation techniques to deepen its understanding of how markets function and allow the FCA to efficiently predict, monitor and respond to firm and market issues. Alongside investment in new technology and increased use of external data, the FCA states that it will pursue a broader transformation, investing in skills and new ways of working to enable it to better understand and use data and innovative technology. The approach includes data science units being established in selected parts of the organisation and exploitation of new opportunities arising from the FCA's migration to cloud-based IT infrastructure.

The BoE has published a discussion paper on transforming data collection from the UK financial sector. The paper does not put forward a preferred solution, but rather sets out a framework for assessing the issues and an initial range of potential options. The options it discusses draw on ideas explored in the Future of Finance report, which recommended that the BoE develops a new digital data strategy, and the pilot on digital regulatory reporting (DRR).

Comments will be taken on the discussion paper until 7 April 2020.

The BoE will establish one or more industry working groups to explore the issues during 2020. Subject to responses to the paper, the BoE's aim for the working group(s) is to develop a collective vision for data collection reforms and proposals for immediate next steps that would move from pilots to live implementation. The BoE will also host a webinar covering the main aspects of the paper on 29 January 2020. It expects to publish an update on responses and proposed next steps during 2020.

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