The Financial Conduct Authority published a Policy Statement and final changes to rules on delaying the disclosure of inside information in the Disclosure Guidance and Transparency Rules. Minor changes have been made since the FCA's consultation last year. The Market Abuse Regulation requires issuers publicly to disclose inside information which directly concerns them as soon as possible. MAR obliges the European Securities and Markets Authority to prepare Guidelines which further specify when an issuer might delay disclosure of inside information. ESMA's Guidelines, published on November 20, 2016, explain what would be considered a "legitimate interest", allowing an issuer to delay disclosure of inside information. It also provides a non-exhaustive indicative list of legitimate interests of the issuer that are likely to be prejudiced by the immediate disclosure of inside information and the situations in which delay of disclosure is likely to mislead the public, which include situations where the inside information which the issuer intends to delay disclosure of is materially different from the issuer's previous public announcement. ESMA's Guidelines have applied directly across the EU since January 10, 2017. The FCA has confirmed that it will comply with ESMA's Guidelines and the changes to the FCA's rules ensure that compliance. The final rules have been in force since February 24, 2017.

View the Policy Statement and final rules.

View ESMA's Guidelines.

The European Supervisory Authorities published a joint Opinion on the risks of money laundering and terrorist financing affecting the EU’s financial sector. The ESAs - the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority - are required by the Fourth Money Laundering Directive to prepare the Opinion. The Opinion is intended to inform the European Commission's assessment of the AML and CFT risks affecting the EU financial market, inform the ESA's work on enhancing supervisory convergence and assist national regulators applying the risk-based approach to AML/CFT supervision. The Opinion sets out the AML/CFT risks that the EU financial sector is exposed to which include, amongst other things, ineffective systems and controls, regulatory arbitrage, lack of access to intelligence on terrorist suspects and the movement of high-risk transactions out of the regulated sector. The ESAs conclude that more is needed to ensure that the EU's AML and CFT defenses are effective, particularly as Member States move to a more risk-based AML/CFT regime. Some existing initiatives will help to address the risks, such as the proposed amendments to the Fourth Money Laundering Directive and the relevant Guidelines issued by the ESAs. However, the ESAs consider that enforcement agencies could assist by ensuring that financial institutions have timely access to relevant information, that national regulator could proactively raise awareness of supervisory expectations, including by providing targeted guidance, that national regulators should collect AML/CFT data in a more consistent manner to facilitate comparisons and track progress and that the EU authorities should identify ways to ensure that the EU's AML/CFT laws and guidelines are implemented effectively and consistently across the EU.

View the Opinion.

The Joint Committee of the European Supervisory Authorities launched a consultation on proposed Regulatory Technical Standards on the criteria for when a central contact point is appropriate and the functions of the central contact point. The Fourth Money Laundering Directive requires electronic money issuers and payment service providers with their headquarters in one EU member state and one or more establishments in other EU member states (other than as a branch) to appoint a central contact point in those other member states to ensure compliance with anti-money laundering and counter-financing terrorism rules and to facilitate supervision by the national authorities, including by providing documents and information on request. The ESAs (comprised of the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority) have published a proposed draft RTS which supplements those requirements by setting out the criteria that member states should consider when deciding whether a central contact point should be established and what functions it should carry out. If a member state does not require a central contact point to be established, the draft RTS would not apply. Each member state will be required to decide who the central contact point should be and how it should be set up. 

View the consultation paper. 

The European Securities and Markets Authority published a Report on the application of Distributed Ledger Technology to the securities markets. Distributed ledgers, sometimes referred to as blockchains, are essentially records or ledgers of electronic transactions that are maintained by a shared or distributed network of participants instead of a centralized entity. ESMA consulted in late 2016 on how DLT applies to securities markets. The Report provides ESMA's analysis of the key risks and benefits of DLT as applied to securities markets and how DLT maps to existing EU regulation.

ESMA is of the view that DLT could provide a number of benefits to securities markets but is also concerned that it may introduce new risks or magnify existing risks. Benefits of DLT include more efficient clearing and settlement services, enhanced reporting and supervision functions at firms and regulators for data sharing and risk management purposes, reduced costs related to the development of recovery plans in a cyber-attack or system breakdown scenario, reduced counterparty risk and enhanced collateral management. ESMA is concerned with a variety of risks, in addition to the well-documented issues of cyber security and fraud, such as the possible ramifications for market fairness and competition as well as financial instability. 

Read more.

The Policing and Crime Act 2017 was enacted. The Act has wide reaching implications, including for the financial services industry.  Among other things, the Act creates new civil monetary penalties and increases the maximum term of imprisonment for breaches of financial sanctions in the UK. The new monetary penalties regime will be administered by the Office of Financial Sanctions Implementation, which was established on March 31, 2016 and sits within HM Treasury. The OFSI may impose a monetary penalty if it is satisfied, on the balance of probabilities, that a breach has been committed and the offending person knew or had reasonable cause to suspect that their actions would be in breach of the obligations under the financial sanctions legislation. The maximum term on conviction for indictment has been set at seven years, and at six months for summary conviction.

Read more.

State financial regulators released a new, voluntary tool designed to help banks and non-depository financial institutions better manage Bank Secrecy Act/Anti-Money Laundering risk. The BSA/AML Self-Assessment Tool was developed by the Conference of State Bank Supervisors and state regulators and aims to help institutions better identify, monitor and communicate BSA/AML risk. In this way, the tool is intended to reduce uncertainty surrounding BSA/AML compliance and encourage greater transparency within the financial sector.

View the CSBS press release regarding the BSA/AML Self-Assessment Tool.

The European Securities and Markets Authority published translations of the final Guidelines on information expected or required to be disclosed on commodity derivatives markets or related spot markets under the Market Abuse Regulation in the official languages of the EU. MAR replaced the current Market Abuse Directive and its implementing legislation from July 3, 2016. The publication of the translations triggers the application of the Guidelines from March 17, 2017. The Guidelines are relevant to national regulators and to commodity derivatives market participants such as investors, financial intermediaries, operators of trading venues and persons professionally arranging and executing transactions in commodity derivatives. National regulators have until March 17, 2016 to advise ESMA whether or not they intend to comply with the final Guidelines.

Read more.

The US Office of Foreign Assets Control issued a guidance document regarding the provision of certain legal and compliance services by US attorneys and compliance personnel respect to US Sanctions laws. Contemporaneous with the issuance, the US Treasury Department also published new FAQs on the guidance. In the press release accompanying the issuance of the guidance, OFAC made clear that the guidance does not reflect a change in OFAC’s policy, but is published in order to respond to inquiries received by OFAC.

View text of the OFAC guidance.

The New York State Department of Financial Services (NYSDFS) Superintendent Maria T. Vullo announced that the Department’s transaction monitoring and filtering program regulation took effect as of January 1st. Under the final regulation, institutions regulated by the NYSDFS must: maintain programs to monitor and filter transactions for potential Bank Secrecy Act and anti-money laundering violations and suspicious activity reporting; maintain a filtering program to prevent transactions that are prohibited by the Office of Foreign Assets Control; and submit a confirmation to the NYSDFS regarding compliance with the final rule.

View Shearman & Sterling client alert on the final rule.

View press release.

OFAC published updated regulations on Iranian Transactions and Sanctions Regulation. The amended regulation narrows the definition of “goods of Iranian origin” and “Iranian-origin goods,” allowing for the export and reexport of medical devices and agricultural commodities to Iran. Further, the amended regulation expands the definition of “non-Iranian goods” to include goods transported on a vessel or aircraft through Iranian territorial waters or stopped at a port or place in Iran en route to a destination outside of Iran that have not otherwise come into contact with Iran.

View text of the OFAC regulation.

View FAQs on the regulation.

The Joint European Supervisory Authorities published an open letter notifying the European Commission that they would be unable to meet the deadline of December 26, 2016 for submitting final draft Regulatory Technical Standards supplementing the Fourth Anti-Money Laundering Directive. The 4AMLD mandates the ESAs (made up of the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority) to draft RTS on the measures that banks and other financial institutions should undertake to manage the potential risks of money laundering and terrorist financing where they have branches or majority-owned subsidiaries in third countries that prohibit the implementation of AML and CTF measures consistent with those required by 4AMLD. The delay is attributed to the ESAs' prioritization of other mandates under the 4AMLD for the Joint Committee Work Programme 2016. The ESAs deprioritized the draft RTS as enquiries with regulators and ESA stakeholder groups suggested that there were no countries that prohibited the requisite implementation of AML and CFT measures. Consequently, unlike under other mandates under the 4AMLD, the draft RTS would have limited application in practice. The ESAs intend to start working on the mandate in 2017 and expect to be able to submit final draft RTS by December 31, 2017.

View the letter.

The European Commission published a legislative proposal for a Directive on countering money laundering by criminal law. The proposed Directive is intended to harmonize and establish minimum rules concerning the definition of criminal offenses and sanctions in the area of money laundering. The proposed Directive would implement international obligations such as the Warsaw Convention and Financial Action Task Force recommendations. 
 
The proposed Directive provides for three specific money laundering activities that, when conducted intentionally, would be punishable as a criminal offense. Member States would be able to impose more stringent rules, for example, by making money laundering committed recklessly or by serious negligence a criminal offense. 

Read more.

The Financial Stability Board published an updated progress report outlining its action plan to assess and address the decline in correspondent banking. Correspondent banking relationships enable banks to access financial services in different jurisdictions and provide cross-border payment services to their customers. There has been an increasing concern about the decline in the number of correspondent banking relationships because the ability to send and receive international payments could be impacted, which may have repercussions on growth and the stability and integrity of the financial system. The FSB presented a four point action plan to the G20 in November 2015. The progress report describes the progress that has been made and outlines the deliverables for 2017 to further address the issues. 

Read more.

US Financial Crimes Enforcement Network (FinCEN) announced that it is granting a further extension of time for certain Report of Foreign Bank and Financial Accounts (FBAR) filings. The extension was announced in light of the notice of proposed rulemaking FinCEN issued on March 10, 2016, which proposes to revise regulations implementing the Bank Secrecy Act regarding FBARs. Specifically, one of the proposed amendments in the notice would expand and clarify the exemptions for certain US persons with signature or other authority but no financial interests over foreign financial accounts. On December 8, 2015 FinCEN issued Notice 2015-1 to extend filing date for FinCEN Form 114 - FBAR for some individuals with signature authority over but no financial interest in one or more foreign financial accounts to April 15, 2017 (and has granted identical extensions that applied to similarly situated individuals since 2011). FinCEN is now further extending the filing due date to April 15, 2018, for individuals whose filing due date for reporting signature authority was previously extended by Notice 2015-1. This extension applies to reporting of signature authority held during the 2016 calendar year, as well as all reporting deadlines extended by previous Notices 2015-1, 2014-1, 2013-1, 2012-1 and 2012-2, along with Notices 2011-1 and 2011-2. For all other individuals with an FBAR filing obligation, the filing due date remains April 15, 2017.

View FinCEN Notice.
 

The Office of Financial Sanctions Implementation (OFSI), which is a part of HM Treasury, published the UK Government's proposed approach to imposing financial penalties for breach of financial sanctions. OFSI was established earlier in 2016 and has responsibility for ensuring that sanctions are "properly understood, implemented and enforced in the UK". Financial sanctions may include prohibitions on the transfer of funds to a sanctioned country, freezing of the assets of a government, corporate entities or citizens of a particular country or targeted freezing of assets of individuals or legal entities. Provisions in the Policing and Crime Bill, currently going through Parliament, outline new administrative penalties, civil monetary penalties and an increase in the maximum custodial sentence for breaching financial sanctions to seven years on conviction on indictment (or six months' imprisonment on summary conviction) for breach of financial sanctions. OFSI is seeking feedback on its proposed Guidance on the circumstances in which it may consider that a monetary penalty is suitable and how it will set the penalty amount as well as the process for imposing a penalty and the circumstances in which details of any penalty may be published. The consultation closes on January 26, 2017. OFSI has stated that either interim or final Guidance will be published before the power to impose penalties comes into effect in April 2017. The proposed Guidance is based on the current version of the Bill and may need to be amended as appropriate once the final legislation is published.

View the consultation paper. 

The Financial Conduct Authority published a consultation paper on proposed changes to its Disclosure Guidance and Transparency Rules sourcebook in the Handbook on delaying the disclosure of inside information. The Market Abuse Regulation requires issuers to inform the public as soon as possible of inside information which directly concerns them. MAR mandates the European Securities and Markets Authority to prepare Guidelines which further specify when an issuer might delay disclosure of inside information. ESMA's Guidelines, published on November 20, 2016, outline the legitimate interests of issuers to delay disclosure of inside information and provide a non-exhaustive indicative list on the legitimate interests of the issuer that are likely to be prejudiced by the immediate disclosure of inside information and the situations in which delay of disclosure is likely to mislead the public. ESMA's Guidelines will apply directly across the EU from January 10, 2017. The FCA has confirmed that it intends to comply with ESMA's Guidelines and is consulting on the consequential changes to its rules. The consultation closes on January 6, 2017. 

Read more.

The Basel Committee on Banking Supervision launched a consultation on proposed revisions to the correspondent banking and account opening annexes of its Committee Guidelines on sound management of risks related to money laundering and financing of terrorism. The Guidelines describe how banks should include money laundering and financing of terrorism risks within their overall risk management. The Basel Committee is seeking to confirm regulatory expectations on the assessment of money laundering and financing of terrorism risks in correspondent banking and its proposals follow the publication by the Financial Action Task Force of its Guidance on correspondent banking on October 21, 2016. The proposed revisions to the Guidelines develop the application of the risk-based approach for correspondent banking relationships, including recognizing that not all correspondent banking relationships carry the same level of risk. The proposed revisions also clarify expectations regarding the quality of payment messages and the conditions for using “know your customer” (KYC) services. Responses to the consultation are requested by February 22, 2017.
 
View the consultation paper.

View the Sound Management of Risks Related to Money Laundering and Financing of Terrorism.

View the FATF's Guidance.

The Joint Committee of the European Supervisory Authorities published joint Guidelines on the characteristics of a risk-based approach to anti-money laundering and terrorist financing supervision. The ESAs consist of the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. The Guidelines build on the ESA’s previous “Preliminary report on anti-money laundering and counter financing of terrorism Risk Based Supervision” that was published in October 2013. The Guidelines outline steps to be taken by regulators when conducting AML/CTF supervision on a risk-sensitive basis. The Fourth Anti-Money Laundering Directive, amongst other things, aims to bring European legislation in line with the Financial Action Task Force’s International Standards on Combating Money Laundering and the Financing of Terrorism. The ESAs emphasize that AML-and CFT-related risk-based supervision is ongoing and cyclical and the Guidelines outline four requisite steps that national regulators should apply. Step 1 involves the regulator identifying the money laundering or terrorist financing risk factors by obtaining information of both domestic, foreign and sector-wide threats. Step 2 requires the information to be used by the regulator to conduct a risk assessment and obtain a holistic view of the risks associated with each firm. Step 3 requires the allocation of supervisory resources factoring in issues such as the required focus, depth, duration and frequency of the on-site and off-site activities and supervisory staffing needs. Step 4 requires regulators to ensure that the risk assessment and level of allocated supervisory resources remains commensurate to AML/CFT risks through ongoing monitoring and reviewing processes. The Guidelines will apply one year after the Guidelines have been issued.
 
View the joint Guidelines.

The US Financial Crimes Enforcement Network published technical amendments to anti-money laundering (AML) regulations implemented pursuant to the Bank Secrecy Act (BSA). The final FinCEN rule, which became effective November 4, 2016, removes and replaces outdated references to obsolete BSA forms, removes references to outdated forms of recordkeeping storage media and replaces other outdated terms and references.

View text of the final rule.

The UK Government Department for Business, Energy & Industrial Strategy launched a consultation on the requirement to maintain a central register of beneficial ownership information of corporate and other legal entities under the Fourth Money Laundering Directive. The Fourth Money Laundering Directive requires member states to hold information on beneficial ownership of corporate and other legal entities incorporated in their territory in a central register and that the information should be available to specific EU authorities and organizations. Since April 6, 2016, the UK has required UK companies, limited liability partnerships and societates europaeae to establish and maintain a register of persons with significant control over them and since June 30, 2016, those entities have been required to file such information with Companies House where it is publicly available. The BEIS is consulting on amendments and additions to the UK's current PSC regime that are needed to properly implement the 4MLD requirements, including, requiring entities to update information in the PSC register every six months of a change (instead of every 12 months) and making the proportion of suppressed PSC information which is not publicly available through Companies House available to banks and investment firms. BEIS also propose that the determination of whether an entity is in scope of the Directive is that is must be UK-incorporated and constitutionally capable of having a beneficial owner. The consultation closes on December 16, 2016. Member states are required to transpose 4MLD by June 26, 2017.

View the Discussion Paper.

You may like to view our client now on the current UK PSC Regime.

The European Securities and Markets Authority issued detailed reporting instructions and XML schema under its Financial Instruments Reference Data System. FIRDS covers the requirements under both the Markets in Financial Instruments Regulation and the Market Abuse Regulation for reference data collection, transparency reporting obligations, submission of the Double Volume Cap data and the transaction exchange reporting mechanism.

View ESMA's announcement.

On October 25, 2016, FinCEN issued an Advisory and related Frequently Asked Questions (FAQs) regarding the reporting of cyber-events, cyber-enabled crime and cyber-related information through Suspicious Activity Reports (SARs).

According to FinCEN, while suspicious transactions may not always involve a cyber-event, relevant cyber-related information should still be included in SARs when available (e.g., Internet Protocol (IP) addresses and accompanying timestamps associated with fraudulent wire transfers being reported). Similarly, the FinCEN guidance provides that when suspicious transactions do involve cyber-events, a financial institution should include in SARs all relevant and available information regarding the suspicious transactions and the cyber-event - including the type, magnitude and methodology of the cyber-event as well as signatures and facts on a network or system that indicate a cyber-event. The advisory also encourages collaboration between in-house BSA/AML and cybersecurity units and sharing information with other financial institutions to the extent permitted under Section 314(b) of the USA PATRIOT Act.

Read more
 

The Financial Action Task Force published Guidance on correspondent banking services, which it has developed in collaboration with the Financial Stability Board. The Guidance is in response to increased concerns about so-called "de-risking", whereby financial institutions avoid, rather than manage, the risks associated with money laundering or terrorist financing by terminating business relations with entire regions or classes of customers. The FATF considers that de-risking is inconsistent with FATF Recommendations, that it has negatively impacted correspondent banking and that it may result in financial transactions being directed into less regulated areas which would reduce transparency and increase exposure to money laundering and terrorist financing risks.

Read more.

The Financial Action Task Force published Guidance to assist countries on the content required to comply with the obligation to criminalize terrorist financing. The Guidance builds on FATF Recommendation 5, which provides measures to assist countries in fulfilling their legal requirements under the International Convention for the Suppression of the Financing of Terrorism 1999 and relevant United National Security Council Resolutions. The Guidance outlines various aspects that offenses relating to terrorist financing must cover when implemented by national legal systems. For example, a terrorist financing offense must cover all types of willful terrorist financing activity. The Guidance specifies that the requirement of willful conduct is largely based on the Terrorist Financing Convention and requires a mental element or mens rea, such that the conduct is deliberately committed with an unlawful intention. The Guidance also sets out the bases and rationale of the Convention and Resolutions to assist countries in the implementation of such requirements. The Guidance focuses on the specific elements of the Recommendation that have most commonly been identified as creating particular implementation challenges and provides examples of how such requirements have been implemented by differing legal systems.

View the Guidance.

View the FATF Recommendations.

The European Securities and Markets Authority published updated translations of its final Guidelines on the implementation of the Market Abuse Regulation for persons receiving market soundings and on delayed disclosure of inside information. ESMA had published the translations on October 20, 2016 but due to a linguistic issue with the Polish version had to re-publish all of the translations. The substantive content of the Guidelines is unchanged. The publication of the translations triggers the application of the Guidelines and so the Guidelines will now apply from January 10, 2017 instead of December 20, 2016. ESMA consulted on the draft Guidelines in January 2016 and published final versions of the Guidelines in July 2016.

Read more.

The Financial Action Task Force published a report to the G20 Finance Ministers and Central Bank Governors updating them on the steps being taken by the FATF on implementation of international standards on transparency and beneficial ownership. In April 2016, the G20 Finance Ministers and Central Bank Governors requested the FATF and the Global Forum on Transparency and Exchange of Information for Tax Purposes to make initial recommendations by October 19, 2016 on ways to improve the implementation of the international standards on transparency, including on the availability of beneficial ownership information, and its international exchange. The report states that many countries still do not implement the beneficial ownership requirements effectively. Therefore, the FATF has committed to focus on beneficial ownership in the FATF peer review follow-up process, to deliver recommendations on how countries can improve their implementation of beneficial ownership requirements and to improve cooperation between the FATF and the Global Forum to improve transparency on beneficial ownership. The FATF will be considering the initial recommendations further at its meeting on October 19, 2016. The FATF is also calling on the G20 members to issue a public commitment to meet the FATF standards on beneficial ownership because, in the FATF's view, prevention of the abuse of corporate vehicles can only be remedied by individual countries. 

View the report on beneficial ownership. 

The European Securities and Markets Authority published a Final Report and final Guidelines on information expected or required to be disclosed on commodity derivatives markets or related spot markets under the Market Abuse Regulation. This follows the consultation that ESMA undertook in March 2016. MAR replaced the current Market Abuse Directive and its implementing legislation from July 3, 2016. One of the changes that MAR will introduce is the expansion of the definition of inside information relating to commodity derivatives to cover price sensitive information relevant to the related spot commodity contracts as well as the derivative. This means that transactions in commodity derivatives based on inside information relating to underlying spot transactions will be expressly prohibited. In addition, the market manipulation prohibitions will include transactions in derivatives markets that manipulate the related spot commodity transaction and transactions in spot commodity markets that manipulate the related derivative. 

Read more.

The US Comptroller of the Currency, Thomas J. Curry, spoke at a conference of the Association of Certified Anti-Money Laundering Specialists about the OCC’s role in the BSA/AML regulatory regime and the risks the regime is meant to curtail. Curry noted that risks in the BSA and AML space are increasing and that banks must have effective systems for BSA and AML management and timely reporting. He cautioned against overly reactionary “de-risking,” where institutions shrink their exposure to high risk geographies and customers, warning that it can lead to entire regions being excluded from the global financial system.

Curry noted that regulators can work with banks they supervise to help them maintain and enhance risk-management systems by communicating expectations clearly. He highlighted specific actions regulators have recently taken, including the joint fact sheet published by the US Treasury on the BSA and AML examination process regarding foreign correspondent banking. He also highlighted upcoming OCC guidance that will clearly lay out the risk management expectations for banks regarding their foreign correspondent portfolios, including best practices for banks on governance, communications and risk mitigation regarding correspondent accounts. Curry closed by reiterating the key points from the joint fact sheet, namely that the OCC, like its fellow federal regulators does not follow a “zero-tolerance” approach to enforcement, and that a decision to terminate a banking relationship or exit a line of business lies solely with a bank.

View Comptroller Curry's speech.

The G20 published its Anti-Corruption Action Plan for 2017-2018 and called on countries to implement the United Nations Convention against Corruption. The G20 established the Anti-Corruption Working Group in 2010, a body which is guided by rolling two-year action plans. The new Action Plan outlines areas of priority for the G20 and the Working Group, which amongst other things, include seeking to promote concrete and practical action to achieve enforcement of anti-corruption laws by taking steps to improve co-operation between law enforcement and other relevant authorities within and between member countries, implementing the Financial Action Task Force Recommendations on Transparency and Beneficial Ownership of Legal Persons and continuing to focus on combatting bribery and exploring the possible adherence of all G20 countries to the OECD Anti-Bribery Convention. The Working Group has been tasked with preparing a more detailed implementation plan, so that progress with the priorities can be tracked. It will report in 2017, on progress in implementing the commitments.

View the Action Plan.

A Commission Delegated Regulation identifying high-risk third countries with strategic deficiencies under the Fourth Money Laundering Directive was published in the Official Journal of the European Union, based on deficiencies identified by Financial Action Task Force. 

The Regulation lists high-risk third countries which have provided a written high-level political commitment to address identified deficiencies and have developed an action plan with the FATF; countries listed: Afghanistan, Bosnia and Herzegovina, Guyana, Iraq, Lao PDR, Syria, Uganda, Vanuatu and Yemen. The Regulation identifies Iran as a high-risk third country that has provided a written high-level political commitment to address identified deficiencies and has decided to seek technical assistance in the implementation of the FATF action plan. The Regulation also identifies the Democratic People's Republic of Korea (DPRK) as high-risk third country which presents ongoing and substantial money-laundering and terrorist-financing risks, having repeatedly failed to address identified deficiencies.

View the Regulation.

The US Department of Treasury, the US Federal Reserve Board, the US FDIC, the US OCC and the National Credit Union Administration released a joint fact sheet on foreign correspondent banking that sets forth supervisory and enforcement processes with respect to anti-money laundering and sanctions in the area of correspondent banking. Among other things, the fact sheet notes that while US depository institutions that maintain correspondent accounts for foreign financial institutions (FFIs) are not required to conduct due diligence on an FFI’s customers, US depository institutions must establish appropriate, specific and risk-based due diligence policies, procedures and processes that are reasonably designed to assess and manage the risks inherent with these relationships. The release further provides that while the regulators are not adopting a zero tolerance philosophy that mandates the strict imposition of formal enforcement action regardless of the facts and circumstances of the situation, the regulators are taking the threats posed by criminals, money-launderers and terrorist financers very seriously and continue to use their authorities to safeguard the US financial system against abuse.

View fact sheet.

The US Financial Crimes Enforcement Network issued a notice of proposed rulemaking pursuant to Section 326 of the USA PATRIOT Act that would lay out minimum standards for anti-money laundering programs and remove the AML program exemption for banks that lack a Federal functional regulator. The proposed rule would amend 31 CFR Chapter X to broaden the application of the AML requirements, customer identification programs and beneficial ownership requirements to cover all banks, not just those subject to regulation by a Federal functional regulator, including, but not limited to, private banks, non-federally insured credit unions and certain trust companies. Comments must be submitted to FinCEN by October 24, 2016.

View FinCEN’s release.

The European Banking Authority published an Opinion on the Commission’s proposed amendments to the Fourth Anti-Money Laundering Directive and its application to virtual currencies. The Commission is proposing to bring custodian wallet providers (CWPs) and virtual currency exchange platforms (VCEPs) within the scope of the 4MLD so that they would, among other things, have to apply customer due diligence controls when exchanging virtual currencies for real currencies, and put in place policies and procedures to detect, prevent and report money laundering and terrorist financing. 

Read more.

The OCC released a second notice soliciting comments on the expansion of the Bank Secrecy Act/Anti-Money Laundering Risk Assessment System to all OCC-supervised institutions. As noted in the original OCC proposal, published on January 4, 2016, the current information collection system applies only to community banks. Pursuant to the notice, the OCC continues to seek comments on, among other items, the accuracy of the OCC’s estimate of the burden of the collection of information, and ways to enhance the quality and utility of the information to be collected, and ways to minimize the burden of the collection on respondents, including through the use of automated collection technologies. Comments on the MLR System were due by September 7, 2016.

View text of the OCC notice.

The Financial Conduct Authority published final rules on financial crime reporting, which will introduce obligations for banks, large investment firms, building societies, mortgage lenders, large electronic money institutions, certain large consumer credit firms, life insurers and retail investment and mortgage intermediaries. Relevant firms will be required to provide details annually on, among other things, the jurisdictions and types of customers as well as the number of suspicious activity reports to the FCA. The reporting obligation will only apply to a firm's business that is subject to the Money Laundering Regulations 2007. The FCA is introducing the new requirement so that it can adopt a more risk-sensitive supervisory approach. Due to the feedback it received to its consultation on the implementation timeline, the FCA has extended the remittance deadline by 60 days so that firms with an accounting year end of December 31 will need to submit the data by late March the following year. The FCA is also allowing firms to complete the first Financial Crime Report on a best endeavors basis. 

View the FCA's Policy Statement and final Rules.

The European Securities and Markets Association published a final report on draft implementing technical standards concerning the procedures and forms for submitting information regarding administrative and criminal investigations, sanctions and other administrative measures under the Market Abuse Regulation. The technical standards relate to requirements under MAR for national member state regulators to submit two types of information to ESMA: (i) aggregated information on all administrative and criminal sanctions and other administrative measures imposed, and criminal investigations undertaken, under relevant provisions of MAR; and (ii) administrative and criminal sanctions and other administrative procedures that are disclosed to the public by regulators, which must  be simultaneously reported to ESMA.

ESMA submitted the draft technical standards to the European Commission for endorsement on July 26, 2016.

View the final report.

The OCC, Department of the Treasury, Federal Reserve Board and FDIC jointly published a notice proposing to extend, with revision, the Country Exposure Report (FFIEC 009) and the Country Exposure Information Report (FFIEC 009a). The revisions would (i) require that institutions provide their Legal Entity Identifier on both reporting forms, if applicable and (ii) add Intermediate Holding Companies to the Federal Reserve Board’s respondent panel. The agencies had previously requested comments on these changes. The proposed revisions have now been submitted to the Office of Management and Budget for approval. The changes would take effect September 30, 2016.

View notice.

The US Department of the Treasury’s Financial Crimes Enforcement Network issued guidance in respect of its May 2016 final rule governing Customer Due Diligence requirements for financial institutions in the form of responses to frequently asked questions. In particular, FAQ #5 highlights amendments to AML program requirements by clarifying that the CDD rule creates a specific obligation for covered financial institutions to implement and maintain risk-based procedures for conducting ongoing customer due diligence, which procedures should include (i) understanding the nature and purpose of the customer relationship; and (ii) conducting ongoing monitoring to identify and report suspicious transactions, as well as to maintain and update customer information on a risk basis.

View FinCEN FAQs.

A Decision by the European Central Bank on the disclosure of confidential information in the context of a criminal investigation was published in the Official Journal of the European Union. Pursuant to the Single Supervisory Mechanism, the ECB and/or national regulators can receive requests from national criminal investigation authorities for the disclosure of confidential information created or received in the course of their supervisory tasks and responsibilities. EU law has implications for the conditions under which confidential information held by regulators within the SSM, including the ECB, may be disclosed to national criminal investigation authorities. “Confidential information” includes information covered by data protection rules, by the obligation of professional secrecy, including those in the Capital Requirements Directive. The Decision sets out the processes and conditions under which confidential information will be provided to criminal investigation authorities.

The decision entered into force on August 5, 2016.

View the decision.

The European Commission published proposed revisions to the EU Fourth Money Laundering Directive. The Commission is proposing to bring virtual currency exchange platforms and custodian wallet providers within the scope of 4MLD so that they would, among other things, be required to apply customer due diligence and establish place policies and procedures to detect, prevent and report money laundering and terrorist financing. The Commission is also proposing to lower, from EUR 250 to EUR 150, the thresholds for non-reloadable pre-paid payment instruments to qualify for the exemption from customer due diligence requirements. It further proposes to require all EU member states to set up automated centralised mechanisms to enable swift identification of holders of bank and payment accounts and to harmonize the regime on enhanced customer due diligence for countries that have weak AML & CFT regimes. Public access to information on beneficial ownership of companies and trusts engaged in commercial activities is also proposed and Financial Intelligence Units are to be given greater powers to request information from entities that are subject to 4MLD. 
 

A Commission Delegated Regulation in the form of Implementing Technical Standards on the means for appropriate public disclosure of inside information and for delaying the public disclosure of inside information was published in the Official Journal of the European Union. The Market Abuse Regulation requires an issuer to inform the public as soon as possible of information which directly concerns the issuer. An issuer may delay disclosing the information in certain circumstances, for example, if immediate disclosure is likely to prejudice the legitimate interests of the issuer. The ITS set out the technical means for issuers to publicly disclose inside information and the means for delaying the public disclosure of inside information. The ITS also requires an issuer bank or investment firm that wishes to delay disclosure of inside information to notify its regulator in writing to obtain the regulator's consent to the delay. The ITS applied from July 3, 2016.

View the RTS on Disclosing or Delaying Disclosure of Inside Information.

A Commission Delegated Regulation in the form of Implementing Technical Standards on the means for appropriate public disclosure of inside information and for delaying the public disclosure of inside information was published in the Official Journal of the European Union. The Market Abuse Regulation requires an issuer to inform the public as soon as possible of information which directly concerns the issuer. An issuer may delay disclosing the information in certain circumstances, for example, if immediate disclosure is likely to prejudice the legitimate interests of the issuer. The ITS set out the technical means for issuers to publicly disclose inside information and the means for delaying the public disclosure of inside information. The ITS also requires an issuer bank or investment firm that wishes to delay disclosure of inside information to notify its regulator in writing to obtain the regulator's consent to the delay. The ITS applied from July 3, 2016.

View the RTS on Disclosing or Delaying Disclosure of Inside Information.

The New York State Department of Financial Services issued its Transaction Monitoring and Filtering Program Requirements and Certifications final rule, which includes several notable departures from the proposal issued by DFS on December 1, 2015. The issuance of the final rule is another example of DFS enforcing anti-money laundering and sanctions requirements applicable to banks under US federal law. Like the proposed rule, the final rule requires covered institutions to maintain a transaction monitoring program for potential Bank Secrecy Act/anti-money laundering violations and suspicious activity reporting, maintain a filtering program to prevent transactions prohibited by the Office of Foreign Assets Control and submit to the DFS annually a confirmation regarding compliance with the DFS’ transaction monitoring and filtering program requirements.

Perhaps most significantly, and apparently in recognition of serious concerns raised by the industry during the comment period, the final rule does not include the proposed “annual certification” by an institution’s chief compliance officer attesting to a covered institution’s compliance with the rule, nor does it include a reference to criminal penalties for filing an incorrect or false certification. Instead, the final rule requires an annual board resolution or senior officer compliance finding confirming that the covered institution is in compliance with the regulation “to the best of the [individual’s] knowledge.” The final rule also introduced “reasonably designed” standard into the transaction monitoring and filtering programs that institutions must establish.

View DFS final rule.

The European Securities and Markets Authority published its Opinion on the proposed requirements for Emission Allowance Market Participants to disclose inside information under the Market Abuse Regulation. ESMA's Opinion is in response to the European Commission's notification that it intended to endorse, subject to certain amendments, ESMA's Implementing Technical Standards on the public disclosure of inside information by issuers and EAMPs and on the means for delaying public disclosure of inside information. The European Commission is concerned that the ITS will lead to EAMPs being subject to duplicative disclosure requirements under the EU Regulation on wholesale energy market integrity and transparency, known as REMIT. The Commission's view is that the ITS should deem the REMIT disclosure requirements sufficient for the purposes of disclosure requirements under MAR, so as to avoid imposing duplicative requirements on EAMPs.

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An EU Delegated Regulation containing Regulatory Technical Standards on investment recommendations under the Market Abuse Regulation was published in the Official Journal of the European Union. MAR will apply from July 3, 2016 except for those concepts that will be introduced by the revised Market in Financial Instruments Directive and the Market in Financial Instruments Regulation, which will apply from 3 January 2018.

The RTS set out the technical arrangements for objective presentation of investment recommendations and for disclosure of particular interests or conflicts of interest.  The RTS require that a firm producing a recommendation must disclose its identity, as well as the names and identities of the individuals involved in preparing a recommendation. Firms that disseminate recommendations will be subject to similar disclosure obligations and must also indicate on a recommendation the date on which it was first disseminated. Firms producing recommendations must also disclose relevant interests or conflicts of interest.

View the RTS on investment recommendations.

An EU Delegated Regulation containing Regulatory Technical Standards on preventing market abuse and reporting suspicious transactions under the Market Abuse Regulation was published in the Official Journal of the European Union. MAR will apply from July 3, 2016 except for those concepts that will be introduced by the revised Market in Financial Instruments Directive and the Market in Financial Instruments Regulation, which will apply from 3 January 2018.

The RTS impose requirements on operators of trading venues and persons professionally arranging or executing transactions to monitor for and report insider dealing or market manipulation. A template suspicious transaction and order report (known as a STOR) will need to be used for reporting suspicious transactions. The RTS also impose a requirement on operators of trading venues and persons professionally arranging or executing transactions to provide adequate training for their staff involved in monitoring detection and identification of orders and transactions that might be insider dealing or market manipulation, including for staff involved in processing orders and transactions.

View the RTS on preventing market abuse and reporting suspicious transactions.

Two EU Delegated Regulations containing technical standards on the requirements relating to market soundings under the Market Abuse Regulation were published in the Official Journal of the European Union. MAR will apply from July 3, 2016 except for those concepts that depend on the entry into effect of the revised Market in Financial Instruments Directive and the Market in Financial Instruments Regulation, which will apply from January 3, 2018.

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A Commission Delegated Regulation supplementing the Market Abuse Regulation was published in the Official Journal of the European Union. The Regulation lays down Regulatory Technical Standards for the content of notifications to be submitted to regulators and the compilation, publication and maintenance of the list of notifications. 

The Markets in Financial Instruments Regulation requires on-going submissions of reference data for financial instruments admitted to trading. By contrast, the MAR requires trading venues to notify regulators only once of details of financial instruments which are the subject of a request for admission to trading, admitted to trading or traded and where a financial instrument ceases to be traded or admitted to trading. The Regulatory Technical Standards require that notifications of financial instruments pursuant to the reporting obligations in MAR include all of the data set out in table 2 annexed to the Regulatory Technical Standards, such as the instrument identification code, instrument full name and trading venue.

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A Commission Delegated Regulation supplementing the Market Abuse Regulation was published in the Official Journal of the European Union. The Regulation lays down Regulatory Technical Standards on the criteria, procedures and requirements for regulators when establishing an accepted market practice and the requirements for maintaining it, terminating it or modifying the conditions for its acceptance. The RTS are made pursuant to MAR, which exempted the application of the prohibition of market manipulation to certain activities, provided that, amongst other things, the person's behavior confirms with an accepted market practice established by a regulator, in compliance with RTS.

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The US Financial Crimes Enforcement Network, pursuant to authority contained in the USA PATRIOT ACT, found “reasonable grounds” to conclude that the Democratic People’s Republic of Korea is a jurisdiction of primary money laundering concern. In its notice, FinCEN cited several factors that contributed to this conclusion, including evidence that organized criminal groups, international terrorists or entities involved in the proliferation of weapons of mass destruction have transacted business in North Korea, evidence that North Korea has been found to have repeatedly failed to address the deficiencies in its AML regime and the extent to which North Korea has demonstrated high levels of institutional and official corruption. 

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