The following posts provide a snapshot of selected UK, EU and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
-
Global alert portal launched to help reduce retail investment fraud
18 March 2025
The International Organization of Securities Commissions (IOSCO) has announced the launch of a new alert portal, which is aimed at strengthening the global fight against retail investment fraud. The International Securities & Commodities Alerts Network (I-SCAN) allows investors, online platform providers, banks and institutions to check if a financial regulator has a suspicious activity flag for a particular company or potential investment. I-SCAN is part of IOSCO's roadmap for retail investor online safety, which sets strategic initiatives for safeguarding retail investors worldwide from fraud, excessive risk and misinformation as digital trading and social media reshape the retail financial market. -
The Economic Crime and Corporate Transparency Act 2023 (Commencement No.4) Regulations
14 March 2025
The fourth commencement regulations made under the Economic Crime and Corporate Transparency Act 2023 (ECCTA) have been published. Regulation 2 brought into force on 18 March certain provisions in Parts 1 and 2 of the Act. Regulation 3 brings measures creating the new offence of failing to prevent fraud fully into force in all of the United Kingdom on 1 September. Regulation 4 amends the third set of commencement regulations which failed to comply with the requirement that guidance must be published before regulations bringing section 199 (failure to prevent fraud) of the Act into force are made. Guidance was published on 6 November 2024, the day after the third commencement regulations were made. Regulation 5 replaces references in certain regulations to the commencement of a provision with a reference to the actual date on which the provision came into force. The explanatory note also contains a table listing provisions of the ECCTA which have been brought into force by previous commencement regulations.Topic : Financial Crime and Sanctions -
UK FCA Primary Market Bulletin 54
14 March 2025
The Financial Conduct Authority (FCA) has published its Primary Market Bulletin 54 in which it discusses strategic leaks and unlawful disclosure. The FCA reports that it has seen an increase in instances where material information on live M&A transactions appears to have been deliberately leaked to the press. The FCA reminds issuers and advisers of best practice in mitigating unlawful disclosure and limiting market abuse as set out in Primary Market Bulletin 42, Primary Market Bulletin 52, Article 14 of the Market Abuse Regulation and Rule 2.1(a) of the Takeover Code. Anyone unlawfully disclosing inside information, deliberately or otherwise, risks being investigated for market abuse. The FCA stresses that written policies and procedures for identifying and handling inside information can have limited effectiveness if they are not accompanied by culture and practices which actively discourage leaks.Topic : Financial Crime and Sanctions -
EBA consults on draft RTS under EU's new AML package
6 March 2025
The European Banking Authority (EBA) has published a consultation on proposed regulatory technical standards (RTS) under the EU's 2024 anti-money laundering (AML) package. The AML package consists of a Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (AML Regulation), a Regulation establishing the Anti-Money Laundering Authority (AMLA) and the Sixth Money Laundering Directive (MLD6). The EBA is consulting on draft RTS that will inform its response to the European Commission's (EC's) call for advice, which it intends to submit to the EC on 31 October.
Read more.Topic : Financial Crime and Sanctions -
UK Register of Overseas Entities (Protection and Trusts) (Amendment) Regulations 2025
28 February 2025
The Register of Overseas Entities (Protection and Trusts) (Amendment) Regulations 2025 were published, alongside an explanatory memorandum. The Regulations amend the Register of Overseas Entities (Delivery, Protection and Trust Services) Regulations 2022 to allow anyone whose information could be published or disclosed by the registrar under Register of Overseas Entities (ROE) to apply to Companies House to have their information protected. The ROE was established in 2022 mainly to improve transparency regarding the beneficial ownership of overseas entities holding land in the UK. Overseas entities owning or buying property in the UK must provide information to the Registrar of companies and most of that information is publicly available. There is protection of information of those at serious risk of violence or intimidation. Prior to this amendment, only a registrable beneficial owner or managing officer could apply for protection if they, or anyone they live with, would be at serious risk of intimidation or violence if the information about them is published.
The Regulations also allow trust information that is currently not publicly available to be accessed by application if certain requirements are met. The Regulations enter into force from 28 February, except for the provisions relating to trusts which will enter into force on 31 August. Companies House has published guidance on how to apply to protect details on the ROE.Topic : Financial Crime and Sanctions -
FATF consultation on complex proliferation financing and sanctions evasion schemes
26 February 2025
The Financial Action Task Force (FATF) has published a consultation aimed at improving country and private sector understanding of current proliferation financing (PF) risks. This study will detail the evasion techniques used by those evading the targeted financial sanctions detailed in Recommendation 7 of the FATF Standards, as well as other national and supranational sanctions that are not covered by the FATF Standards. The resulting report will focus on providing a comprehensive up-to-date understanding of typologies in complex sanctions evasion schemes relevant to PF and identifying enforcement challenges and best practices, which helps to inform countries' PF risk assessment and risk mitigation.
The questions posed by the FATF include: (i) which unique products or services are most vulnerable to exploitation by sanctions evaders and PF actors; (ii) how risks related to vulnerable products or services and/or high-risk countries for sanctions evasion and/or PF activity are managed; (iii) measures (such as setting suspicious transaction report rules) that effectively detect potential sanctions evasion activity; (iv) best practices for information sharing with the public and/or private sectors; and (v) what public information the FATF can provide to assist the private sector and others in mitigating PF risk.
The deadline for responses is 21 March.Topic : Financial Crime and Sanctions -
UK FCA portfolio letter on supervision priorities for asset management and alternatives portfolios
26 February 2025
The UK Financial Conduct Authority (FCA) has published a portfolio letter explaining its current supervision priorities for asset management and alternatives. Firms must discuss this letter with their Board, Executive Committee and accountable Senior Managers to consider whether the risks of harm discussed exist in their firm and implement strategies for managing them.
The FCA's supervisory priorities include:- Supporting confident investing in private assets. The FCA will shortly be releasing its multi-firm review on private market valuation practices. The FCA will also start a multi-firm review on conflicts of interest at firms managing private assets.
- Market integrity and avoiding disruption. Informed by the vulnerabilities identified in the System Wide Explanatory Scenario, the FCA will focus surveillance on prudent risk management, liquidity management and operational resilience.
- Consumer outcomes. The FCA will publish its findings from the ongoing multi-firm review of unit linked funds later this year and will also start a multi-firm review of model portfolio services (MPS). This review of MPS will look at how firms are applying the Consumer Duty, to provide confidence that investors are receiving good outcomes from MPS.
Read more. -
UK Unauthorised Co-ownership Alternative Investment Funds (Reserved Investor Fund) Regulations 2025 published
26 February 2025
The Unauthorised Co-ownership Alternative Investment Funds (Reserved Investor Fund) Regulations 2025 have been published, along with an explanatory memorandum. The regulations support the Government's introduction of the reserved investor fund (RIF) which will be a new type of UK-based investment fund vehicle legally structured as an unauthorised co-ownership alternative investment fund. The regulations will apply, with modifications, sections 261M to 261O and 261P(1) and (2) of the Financial Services and Markets Act 2000, which currently apply to investors in investment funds that are authorised contractual schemes, to investors in UK-based RIFs (or funds that were RIFs). The Regulations were made on 25 February and come into force when the Co-ownership Contractual Schemes (Tax) Regulations 2025 which establish RIFs come into force, that is 19 March. -
ESMA guidelines on cryptoasset transfer services under MiCAR
26 February 2025
The European Securities and Markets Authority (ESMA) has published official translations of its guidelines on the procedures and policies, including the rights of clients, in the context of transfer services for cryptoassets under the Markets in Crypto-Assets Regulation (MiCAR) on investor protection. The guidelines apply to competent authorities and cryptoasset service providers (CASPs) that act as providers of transfer services for cryptoassets on behalf of clients within the meaning of Article 3(1)(26) of MiCAR. These guidelines aim to ensure the common, uniform and consistent application of the provisions in Article 82 of MiCAR. They include guidelines on: (i) the policies and procedures in the context of transfer services for cryptoassets; (ii) information requirements on individual transfers for cryptoassets; (iii) execution times and cut-off times; (iv) rejection or suspension of an instruction to transfer cryptoassets or return of cryptoassets transferred; and (v) the liability of the CASP.
The guidelines will apply from 27 April. National competent authorities must notify ESMA by 26 April whether they comply, do not comply but intend to comply or do not intend to comply with the guidelines. Cryptoasset service providers are not required to report whether they comply with the guidelines. -
Revised FATF AML and CTF standards to better promote financial inclusion
25 February 2025
The Financial Action Task Force (FATF) has published an updated version of its anti-money laundering (AML) and counter-terrorist financing (CTF) standards after the February FATF Plenary approved changes to Recommendation 1 and its Interpretive Note, with corresponding amendments to Interpretive Notes to Recommendations 10 and 15, as well as related Glossary definitions to better support financial inclusion. The amendments aim to better promote financial inclusion through increased focus on proportionality and simplified measures under the risk-based approach. Alongside this, the FATF also published a consultation document on updating its Guidance on AML/CFT measures and financial inclusion, to equip policy makers and regulators with practical examples. Responses must be submitted by 4 April.Topic : Financial Crime and Sanctions -
FATF second consultation on payment transparency
24 February 2025
The Financial Action Task Force (FATF) has published a second consultation on payment transparency, and in particular proposed revisions to recommendation 16 (R.16). The revisions adapt the FATF Standards to the changes in payment business models and messaging standards, as well as to the evolving risks and vulnerabilities. This consultation picks up the main issues raised in the first consultation during February to May 2024, and how these have now been addressed. It also provides more information on the questions of policy intent and proportionality which were raised as overarching issues during that consultation. The revised proposal is attached as an annex to the consultation.
The deadline for responses is 18 April. The FATF will finalise the revisions in June, following which it will develop a guidance paper on payment transparency to facilitate consistent implementation of the updated standards. -
Wolfsberg Group FAQs to help assess risks generated by the emergence of digital assets for AML and CTF purposes
21 February 2025
The Wolfsberg Group has published FAQs on defining digital assets. The FAQs propose definitions to be used by financial institutions, policymakers, supervisors and regulators to understand the characteristics of digital assets, money laundering, terrorist financing and operational risks they generate, as well as serve as an input to financial institutions developing policies and appropriate controls. The Wolfsberg Group intends to supplement these FAQs in future with guidance on the risks and associated controls for digital assets in line with the concepts developed in the FAQs.
The Wolfsberg Group has also published guidance on payment transparency roles and responsibilities to supplement the Wolfsberg Group Payment Transparency Standards. -
Financial Services and Markets Act 2023 (Digital Securities Sandbox) (Amendment) Regulations 2025 laid
January 30, 2025
The Financial Services and Markets Act 2023 (Digital Securities Sandbox) (Amendment) Regulations 2025 were laid before parliament, together with an explanatory memorandum. The Regulations relate to the Digital Securities Sandbox, which is a temporary supervisory regime allowing firms to test certain innovative financial market infrastructure activities that launched on September 30, 2024. The Regulations amend the Sandbox by modifying the application of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to Sandbox participants. This is to ensure that firms which may already be registered or authorized with the FCA for other activities need not register separately with the FCA as a cryptoasset business for the purpose of undertaking Sandbox activities. The explanatory memorandum accompanying the Regulations also confirms that a number of firms have successfully completed the approvals process for the Sandbox and passed through Gate 1 (the testing stage). The Regulations make certain other minor amendments, and come into force on March 3, 2025. -
UK Conduct Authority publishes report on assessing and reducing the risk of Money Laundering Through the Markets
January 23, 2025
The Financial Conduct Authority has published a report on assessing and reducing the risk of Money Laundering Through the Markets. Money Laundering Through the Markets is the use of capital markets to launder criminally generated cash so that it appears legitimately generated. The report renews the risk assessment of Money Laundering Through the Markets and risks documented in the FCA's June 2019 thematic review. It also sets out the findings of the FCA follow-up review, which it believes will assist brokers and other firms operating in the capital markets to continue to improve their controls and ensure they meet the required standards. The FCA's report provides further insights through practical case studies and examples of good and poor practice.
Overall, the FCA saw good practice and progress in several financial crime systems and controls across larger and smaller firms. However, relevant firms needed to more rigorously tackle the issues raised in the previous thematic review. Key challenges observed include: (i) transaction monitoring; (ii) knowledge of the U.K. Financial Intelligence Unit Money Laundering Through the Markets suspicious activity reporting glossary code; (iii) information sharing; and (iv) documenting customer risk-assessment methods in enough detail. The FCA would like firms to continue reviewing their systems, controls, Money Laundering Through the Markets awareness and training. Moving forward, the FCA will use its supervisory work, to make sure firms are considering Money Laundering Through the Markets risks, and the points raised in this report to drive improvements and reduce risk across the markets. It will also encourage firms and third-party providers to innovate more, to tailor transaction monitoring systems and alerts to capital markets.Topic : Financial Crime and Sanctions -
UK Financial Conduct Authority Policy Statement on Changes to Financial Crime Guide
November 29, 2024
The U.K. Financial Conduct Authority has published a policy statement on changes to its financial crime guide, following its consultation in April. The changes cover the following areas: (i) sanctions—to reflect information learnt from assessments of firms' sanctions' systems and controls following Russia's invasion of Ukraine in 2022; (ii) proliferation financing—to ensure that proliferation financing is explicitly referenced throughout the guide, where appropriate. This includes highlighting a 2022 change to the MLRs, which requires firms to conduct proliferation financing risk assessments; (iii) transaction monitoring—to provide further guidance on how firms can implement and monitor transaction monitoring systems. This includes supporting responsible innovation and new technological approaches; (iv) cryptoasset businesses—to make clear that cryptoasset businesses registered under the MLRs should refer to the guide; (v) Consumer Duty—to clarify that firms should consider whether their systems and controls are consistent with their obligations under the Duty; and (vi) consequential changes—includes replacing expired links, updating outdated references to EU rules and refreshing case studies based on more recent FCA enforcement notices.
Read more. -
UK Financial Conduct Authority Discusses Strategy for 2025 to 2030
November 26, 2024
The U.K. Financial Conduct Authority has published a speech by Emily Shepperd, FCA Chief Operating Officer, on the FCA's strategy for 2025 to 2030. In the speech, Ms. Shepperd sets out the four main themes of the FCA's strategy. Ms. Shepperd emphasises that trust in both the FCA and the financial services sector underpins these themes and will be crucial as the FCA looks to pursue growth, alongside ensuring proportionality in regulation and encouraging innovation. She also explains that the FCA has decided to set its ambitions on 2030, a five-year strategy, learning from its first 3-year strategy that it takes time to deliver and cement change.
Read more. -
UK Financial Conduct Authority Finalized Guidance for Payment Firms that Enables a Risk-Based Approach to Processing Suspected Fraudulent Payments
November 22, 2024
The Financial Conduct Authority has published finalized guidance for payment service providers that enables a risk-based approach to processing suspected fraudulent payments. Following the publication of the Payment Services (Amendment) Regulations 2024, the amount of time that a PSP has to process an outbound payment when there are reasonable grounds to suspect fraud or dishonesty was extended to up to four business days. To support these regulations, HM Treasury asked the FCA to issue guidance to explain how it expects PSPs to apply these legislative changes, taking into account feedback from stakeholders.
Following a consultation in September, the finalized guidance sets out:- the requirements for delaying outbound payments and determining whether the threshold for "reasonable grounds to suspect" has been met;
- how PSPs should use the payment delay window;
- obligations on PSPs if they delay an outbound transaction; and
- the treatment of suspicious inbound payments.
The FCA has amended its payment services and electronic money approach document to include the new finalized guidance. The guidance came into effect on November 22, 2024. -
International Organization of Securities Commissions Publishes Consultation Report on Pre-Hedging
November 21, 2024
The International Organization of Securities Commissions has published a consultation report on pre-hedging. The report assesses potential conduct and market integrity issues associated with the practice of pre-hedging. IOSCO proposes a definition of pre-hedging and a set of recommendations to guide regulators in determining acceptable pre-hedging practices and managing the associated conduct risks effectively.
IOSCO seeks feedback on the proposed definition, and a minimum set of recommendations as guidance which are broadly applicable in most circumstances. IOSCO additionally seeks feedback on whether the proposed recommendations need to be adapted to specific circumstances. For example, IOSCO particularly requests feedback in relation to the differences in the proposed recommendations between bilateral non-electronic transactions and pre-hedging in the context of electronic trading, including competitive requests for quotes. The deadline for comments is February 21, 2025. IOSCO anticipates providing a final report with recommendations to IOSCO members in 2025. -
UK Financial Conduct Authority Revises Market Cleanliness Statistic Methodology
November 19, 2024
The U.K. Financial Conduct Authority has announced that it is revising the market cleanliness statistic used in its annual report to measure insider trading. In future, the FCA will: (i) detect abnormal price movements that happen on the same day as an announcement because the price information used is more frequent; (ii) introduce a market comparison test to ensure the statistic is less affected by market volatility, for example, that caused by the Covid pandemic or Russia's invasion of Ukraine; and (iii) include more announcements from firms with multiple takeover offers. The revised measure is higher, reflecting the scope of the statistic now including potential insider trading on the day of an announcement. In addition, the new methodology makes the statistic more robust to periods of market volatility. Based on the insights received from reports, alerts, and market intelligence, the FCA has not seen an increase in market abuse. The FCA welcomes feedback from the public, industry and academic community on these changes.Topic : Financial Crime and Sanctions -
HM Treasury Updates High-Risk Third Countries List under Money Laundering Regulations
November 19, 2024
HM Treasury has updated its money laundering advisory notice on high-risk third countries. Under the U.K. Money Laundering Regulations, the U.K. regulated sector must apply enhanced customer due diligence in relation to high-risk third countries. This obligation is in addition to the requirement to apply enhanced customer due diligence where there is an assessed high risk of money laundering or terrorist financing, including geographic risk based on credible sources. High-risk third countries are those named by the Financial Action Task Force on either its "High-Risk Jurisdictions subject to a Call for Action" or "Jurisdictions under Increased Monitoring" lists. On October 25, 2024, the FATF published its most recent update to its lists of jurisdictions, which firms are advised to consider.Topic : Financial Crime and Sanctions -
EU Final Guidance on Implementation of EU And National Sanctions
November 14, 2024
The European Banking Authority has finalized two sets of guidelines setting common standards on the governance arrangements and the policies, procedures, and controls that financial institutions should have in place to be able to comply with EU and national restrictive measures. Restrictive measures applicable to financial institutions comprise targeted financial sanctions and sectoral measures, e.g., economic and financial measures. Both sets of guidelines will apply from December 30, 2025.
The first set of guidelines is addressed to all institutions within the EBA's supervisory remit, i.e., those regulated and supervised under the Capital Requirements Directive, the Payment Services Directive, and the Electronic Money Directive. These guidelines set out the governance and risk management systems that financial institutions should implement to address the risk of potentially breaching or evading restrictive measures.
The second set of guidelines is specific to restrictive measures under the Wire and Cryptoasset Transfer Regulation. The guidelines specify what payment service providers and crypto-asset service providers should do to be able to comply with restrictive measures when performing transfers of funds or crypto-assets.Topic : Financial Crime and Sanctions -
UK Home Office Publishes New Guidance on Failure to Prevent Fraud
November 6, 2024
The U.K.'s Home Office has published guidance on the new corporate criminal offense of failure to prevent fraud under the Economic Crime and Corporate Transparency Act 2023. Under the offense, large organizations may be held criminally liable where an employee, agent, subsidiary, or other "associated person" commits a fraud intending to benefit the organization. In the event of prosecution, an organization would have to demonstrate to the court that it had reasonable fraud prevention measures in place at the time that the fraud was committed. The offense applies to all large, incorporated bodies and partnerships (including partnerships that are not bodies corporate).
Read more.Topic : Financial Crime and Sanctions -
The UK Economic Crime and Corporate Transparency Act 2023 (Commencement No. 3) Regulations 2024 Published
November 6, 2024
The Economic Crime and Corporate Transparency Act 2023 (Commencement No. 3) Regulations 2024 have been published. The Regulations bring into force certain provisions of the Economic Crime and Corporate Transparency Act 2023. Regulation 2 brings measures relating to civil recovery of crypto-assets, which are already in force in England, Wales, and Northern Ireland, but only partially in force in Scotland, fully into force on November 7, 2024. Regulation 3 brings into force measures creating a new offense of failure to prevent fraud on September 1, 2025.
For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets. -
Financial Action Task Force Publishes Consultation on Changes to AML/CFT and Financial Inclusion Standards
October 28, 2024
The Financial Action Task Force has published a consultation paper on revisions to its anti-money laundering and counterterrorism financing standards relating to financial inclusion. The consultation is part of FATF's program of work to address the unintended consequences of AML/CFT measures.
The revisions focus on recommendation 1 (assessing ML/TF risks and applying a risk-based approach) and its Interpretive Note, with corresponding changes to recommendations 10 (customer due-diligence) and 15 (new technologies) and related Glossary definitions. The proposed revisions aim to better promote financial inclusion through increased focus on proportionality and simplified measures in the risk-based approach, and to give countries, supervisors, and financial institutions greater confidence and assurance when implementing simplified measures.
Read more.Topic : Financial Crime and Sanctions -
Outcomes from Financial Action Task Force Plenary: October 2024
October 25, 2024
The Financial Action Task Force has published the outcomes from its plenary meeting, which took place between October 23 and 25, 2024. Outcomes include:- the approval of the last two assessment reports in the FATF's fourth cycle of assessments. FATF will now focus on its new round which will deliver more focused, risk-based mutual evaluations;
- the release for public consultation of proposed revisions to the standards related to FATF's ongoing focus on financial inclusion (see update above). FATF also approved new guidance on national risk assessments to support countries to understand the illicit finance risks they face;
- discussing standards changes related to cross-border payment systems and progressing work to identify the latest terrorist financing and proliferation financing risks. FATF also commenced a project to review its processes to ensure that countries do not misuse the FATF requirements to restrict the activities of non-profit organizations;
- reporting on the value of the horizontal review of designated non-financial businesses and professional compliance related to corruption to support necessary reforms. FATF decided to continue discussing follow-up on this issue at its next meeting; and
- taking stock of actions taken to improve gender diversity in the FATF, discussing further proposals to strengthen this work. FATF plans to launch a second mentoring program to strengthen inclusivity and diversity within the FATF and Global Network, building on the WFGN initiative under the Singapore Presidency.
The next FATF plenary will be held in February 2025.Topic : Financial Crime and Sanctions -
UK Financial Conduct Authority Cracks Down on Illegal Financial Promotions by 'finfluencers'
October 22, 2024
The FCA has announced that it is interviewing 20 'finfluencers' under caution who may be touting financial services products illegally. 'Finfluencers' are social media personalities who use their platform to promote financial products and share insights and advice with their followers. Their target audience is often comprised of young people, who are increasingly being drawn into investment scams which may have been promoted on social media. The FCA states that it has also issued 38 alerts against social media accounts operated by finfluencers which may contain unlawful promotions. -
UK Joint Money Laundering Steering Group Finalizes Amendments to Guidance for Firms Operating in Wholesale Markets
September 30, 2024
The Joint Money Laundering Steering Group has published the amended version to Part II Sector 18 (wholesale markets) of its AML/CTF guidance for the financial services sector. Changes to the guidance include: (i) a new section relating to customer due diligence on authorized personnel acting on behalf of the customer. It includes a clarification that the identities of internal personnel who are authorized to sign contractual documents may be collected by a firm for AML/CTF purposes on a risk-based approach; and (ii) a new section on wholesale subscription finance in private capital funds. The revisions have been submitted to HM Treasury for Ministerial approval.Topic : Financial Crime and Sanctions -
UK Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024 Published
September 12, 2024
The Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024 (together with explanatory memorandum) have been laid in Parliament. The Regulations equip the soon to be launched Office of Trade Sanctions Implementation (OTSI) with its civil enforcement powers. Breach of trade, aircraft and shipping sanctions is already a criminal offence, but it is hoped the introduction of civil penalties will strengthen the U.K. government's enforcement capability. OTSI will be responsible for the civil enforcement of certain trade sanctions as they relate to U.K. services and overseas trade with a U.K. nexus. The office will be able to impose monetary penalties of up to £1 million, or 50% of the estimated value of the breach, whichever is higher. Where a civil monetary penalty can be imposed, breaches may be determined on a 'strict liability' basis. OTSI will also be empowered to make public disclosure of breaches. The Regulations introduce reporting obligations for relevant persons, and powers to request information. Failure to comply with either of these can amount to a criminal offence. The powers will come into effect on 10 October. To assist people in complying with the new regulations, the Department for Business and Trade has published statutory guidance. It covers the prohibitions and requirements imposed by the regulations and provides guidance on compliance, enforcement and the circumstances where they do not apply.Topic : Financial Crime and Sanctions -
UK Office of Financial Sanctions Implementation Annual Frozen Asset Review
September 11, 2024
The Office of Financial Sanctions Implementation has published a financial sanctions notice reminding firms of their annual frozen assets reporting requirement. Every year HM Treasury carries out a review to update its records to reflect any changes to these assets during the reporting period. As part of this review, HM Treasury requests all persons that hold or control funds or economic resources belonging to, owned, held, or controlled by a designated person, to provide a report to OFSI with the details of these assets. The deadline for submission is November 11, 2024. The report must include details of all funds or economic resources frozen in the U.K. as well as those overseas where these funds or economic resources are subject to U.K. financial sanctions legislation. Accounts blocked solely by other national authorities (e.g., Office of Foreign Assets Control) do not need to be reported. The report must include the value of all such assets as at close of business on September 30, 2024. Reports therefore must not be submitted before this date. Firms that submitted a report last year (other than a nil return) and no longer hold the frozen assets should submit a nil return.Topic : Financial Crime and Sanctions -
Financial Conduct Authority Talks about a Targeted and Outcomes-Based Approach to Tackling Financial Crime
September 5, 2024
The Financial Conduct Authority has published a speech by Sarah Pritchard, FCA Executive Director, Markets and International, on taking a targeted and outcomes-based approach to tackling financial crime. Points of interest in the speech include:- The FCA is using its powers more assertively than ever. In the last financial year, the FCA charged 21 individuals with financial crime offenses; the highest number of charges it has ever achieved in a single year.
- Using data and technology, the FCA has increased its ability to identify illegal financial promotions, including on social media.
- Using the FCA's own supervisory reach, the FCA has created a dedicated financial crime function within its Consumer Investments department—an area it has seen evolving threats of financial crime and fraud. Over the past 18 months the team has been out on unannounced spot visits, gathering evidence and intervening to prevent harm by, for example, imposing requirements on firm's permissions, compelling asset restrictions or banning firms from providing financial services.
Topic : Financial Crime and Sanctions -
EU Report on Payment Fraud
August 1, 2024
The European Central Bank and the European Banking Authority have published a joint report on payment fraud data. The report assesses payment fraud reported by the industry across the EEA and covers semi-annual data reported for the three reference periods H1 2022, H2 2022 and H1 2023, with a focus on the payment instruments of credit transfers, direct debits, card payments (from an EU/EEA issuing perspective), cash withdrawals and e-money transactions. Payment fraud amounted to EUR4.3bn in 2022 and EUR2.0bn in H1 2023.
The report examines the total number of payment transactions and the subset of fraudulent transactions in terms of value and volume. In addition to the aggregated values, the report also presents data based on volumes and sorted by type of payment instruments. The data shows that SCA-authenticated transactions featured lower fraud rates than non-SCA transactions, especially for card payments, both in terms of values and volumes. Furthermore, fraud shares for card payments, both in terms of values and volumes, were ten times higher when the counterpart is located outside the EEA, where the application of SCA is not legally required and may therefore not have been requested. The report considers this proof of the beneficial impact of the SCA requirements. The report also finds that losses due to frauds were distributed differently among liability bearers depending on the payment instrument.
The EBA and the ECB will continue to monitor fraud data and going forward will publish the aggregate data on an annual basis.Topic : Financial Crime and Sanctions -
UK Financial Markets Standard Board Publishes Spotlight Review on Pre-Hedging Practices
July 26, 2024
The Financial Markets Standard Board has published a spotlight review on pre-hedging practices. The FMSB is examining the practice as it considers, in principal markets, that there remains uncertainty as to how and when pre-hedging may be undertaken, the rationale and client benefits deriving from the activity as well as the distinction between inventory management, pre-hedging and front running. The spotlight review considers trading practices, across the size and liquidity spectrum, in fixed income, FX and exchange traded funds. It also considers evolving risk management practices around new issuances.
The spotlight review supplements existing FMSB guidance applicable to pre-hedging deriving from the FMSB's Standard for the execution of Large Trades in FICC markets with a series of considerations, derived from case studies, debated by FMSB's Pre-Hedging Working Group. The spotlight review is intended to advance the industry debate on pre-hedging but not codify standards of behavior. In due course, the FMSB will determine if standard-setting would be beneficial in this area, also taking into account international regulatory developments with regard to pre-hedging. -
UK Financial Conduct Authority Consults on Amendments to Guidance on Treatment of Domestic PEPs
July 18, 2024
The Financial Conduct Authority has published the findings of its multi-firm review into the treatment of Politically Exposed Persons and launched a consultation on proposed amendments to its related guidance. The review was required under the Financial Services and Markets Act 2023, following concerns from U.K. Parliamentarians that firms were not effectively applying the FCA's guidance. The FCA found that most firms in its review did not subject PEPs to excessive or disproportionate checks and none would deny them an account based on their status. However the FCA has identified areas for improvement and has called on firms to, among other things: (i) ensure their definition of a PEP, family member or close associate is tightened and in line with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (known as the MLRs) and the FCA's guidance; (ii) review the status of PEPs and their associates promptly once they leave public office; (iii) communicate to PEPs effectively and in line with the Consumer Duty, explaining the reasons for their actions where possible; (iv) effectively consider the actual level of risk posed by the customer, and ensure that information requests are proportionate to those risks; and (v) improve the training offered to staff who deal with PEPs. The FCA has provided detailed feedback to the firms that were reviewed and in a small number of cases, has instigated an independent and more detailed review of firms' practices.
Read more.Topic : Financial Crime and Sanctions -
European Banking Authority Announces Anti-Money Laundering Priorities for 2024/25
June 26, 2024
The European Banking Authority has published a press release welcoming the entry into force of the new EU framework establishing the Anti-Money Laundering and Countering the Financing of Terrorism Authority. The EBA also published a factsheet on how it is preparing for AMLA. Going forward, the EBA will retain its AML/CFT powers and mandates until December 2025 to minimize disruption and provide continuity, and it will also be working closely with AMLA. In particular, after transferring the powers that are specific to AML/CFT to AMLA, the EBA will remain responsible for addressing ML/TF risk across its prudential remit. The EBA will also be providing the European Commission with technical advice on important aspects of the future EU AML/CFT framework to ensure that AMLA can begin to operate efficiently and effectively as of its establishment. The EBA plans to provide this advice in October 2025. In the press release the EBA sets out its AML and CTF priorities for 2024/25, which include: (i) a methodology for selecting financial institutions for direct EU-level AML/CFT supervision; (ii) a common risk assessment methodology; (iii) information necessary to carry out customer due diligence; and (iv) criteria to determine the seriousness of a breach of AML/CFT provisions.Topic : Financial Crime and Sanctions -
Directive on Cross-Border Law Enforcement Access to Bank Account Registries Published in Official Journal of the European Union
June 19, 2024
Directive (EU) 2024/1654 has been published in the Official Journal of the European Union, amending Directive (EU) 2019/1153 regarding access by national regulators to centralized bank account registries through the interconnection system and technical measures to facilitate the use of transaction records. The amending Directive aims to ensure more effective investigations into illicit finance by making it easier to retrieve data across borders from centralized bank registries. It mandates EU Member States to ensure that the information from centralized registries is available through an access point to be developed and operated by the European Commission. The Directive enters into force on July 9, 2024, 20 days after publication in the Official Journal of the European Union. Member states are required to bring into force the laws, regulations, and administrative provisions necessary to comply with the Directive by July 10, 2027, with the exception of Article 1(4) and (5), which relates to the bank account registers interconnection system, in respect of which member states are required to bring into force the necessary measures by July 10, 2029.Topic : Financial Crime and Sanctions -
Package of EU Anti-Money Laundering Legislation Published
June 19, 2024
A package of anti-money laundering legislation has been published in the Official Journal of the European Union, which includes:- the Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (Regulation (EU) 2024/1624) (AML Regulation), which enters into force on July 9, 2024, 20 days after publication in the Official Journal of the European Union. It will apply from July 10, 2027, except in relation to football agents and certain transactions conducted by professional football clubs, to which it will apply from July 10, 2029;
- the Regulation establishing the Anti-Money Laundering Authority (Regulation (EU) 2024/1620) (AMLA Regulation), which enters into force on June 26, 2024, seven days after publication in the Official Journal of the European Union. It will apply from July 1, 2025, with the exception of Articles 1, 4, 49, 53 to 55, 57 to 66, 68 to 71, 100, 101, and 107, which will apply from June 26, 2024, and Article 103, which will apply from December 31, 2025.; and
- the Sixth Money Laundering Directive (MLD6) (Directive (EU) 2024/1640), which enters into force on July 9, 2024, 20 days after publication in the Official Journal of the European Union. Member states are required to bring into force the laws, regulations, and administrative provisions necessary to comply with MLD6 by July 10, 2027, with the exception of Article 74, for which the transposition deadline is July 10, 2025; Articles 11 to 13 and 15, for which the transposition deadline is July 10, 2026; and Article 18, for which the transposition deadline is July 10, 2029. MLD4 will be repealed with effect from July 10, 2027.
Topic : Financial Crime and Sanctions -
European Commission Report on Extension of Powers to Adopt Delegated Acts under the EU Market Abuse Regulation
June 17, 2024
The European Commission has published a report, addressed to the European Parliament and the Council of the European Union, on the delegation of power to adopt delegated acts conferred on the Commission under the EU Market Abuse Regulation. Under Article 35(2), the power to adopt delegated acts is conferred on the Commission for an initial period of five years, ending on December 31, 2024. In the report, the Commission explains why it considers that there is a clear need for the extension of this empowerment for a further period of five years. This is due to there being delegated acts that have not yet been adopted by the Commission—those under Articles 6(6) (extending the exemption from MAR to certain third-country designated public bodies that have entered into an agreement under the EU Emissions Trading Scheme Directive) and 38 (adjusting certain thresholds relating to reporting thresholds) of MAR. The Commission provides reasons as to why these have not yet been adopted and refers to the Listing Act legislative proposal for a Regulation containing amendments to MAR, in which co-legislators have agreed to renew the delegation of powers for a period of five years.Topic : Financial Crime and Sanctions -
European Securities and Markets Authority Statement on Good Practices for Pre-Close Calls
May 29, 2024
The European Securities and Markets Authority has published a statement on good practice in relation to "pre-close calls" (i.e. communication sessions between an issuer and analysts who generate reports on the issuer's financial instruments). The statement seeks to remind issuers about the applicable legislative framework for pre-close calls and encourages them to follow good practices when engaging in such calls, with the goal of maintaining fair, orderly, and effective markets. Following recent media reports suggesting a connection between episodes of high volatility in share prices and pre-close calls, ESMA reminds issuers that any disclosure of inside information should only take place in accordance with the EU Market Abuse Regulation. Consequently, issuers should only share non-inside information during these pre-close calls.
Read more. -
European Banking Authority Reports on Virtual IBANs
May 24, 2024
The European Banking Authority has published a report on the issuance of virtual IBANs (vIBANs). The report summarizes the EBA's observations from its fact-finding exercise on the issuance and use by payment service providers of vIBANs. It highlights risks and challenges that vIBANs may present to consumers, financial institutions, national competent authorities and to the integrity of the overall EU financial system, based on the six most common vIBAN use cases in the EU. Uses of vIBANs include the automation of payment reconciliation and overcoming IBAN discrimination by associating the vIBAN with a particular Member State's IBAN country code.
Read more. -
Court of Justice of the European Union Annuls Sanctions Measures
04/11/2024
The Court of Justice of the European Union has decided that the reasons for the EU sanctions measures designating Mr Fridman and Mr Aven (two of the shareholders of LetterOne) were not sufficiently substantiated and their inclusion on EU sanctions lists was not justified (Judgments T-301/22 and T-304/22). The ECJ has annulled the acts that subjected Mr Fridman and Mr Aven to sanctions for the period from February 28, 2022 to March 15, 2023.
Despite this judgment, these two individuals remain subject to EU sanctions. This is because they have also been sanctioned under Council Decision (CFSP) 2023/572 and Council Implementing Regulation (EU) 2023/571, which are more recent and so were not at issue in these proceedings. The two individuals have now separately challenged their designations under that legislation, but those cases remain to be heard (pending cases, Aven v Council, T-283/23, and Fridman v Council, T-296/23).
This ECJ judgment does not impact the U.K. sanctions regime, under which the two individuals remain sanctioned.Topic : Financial Crime and Sanctions -
HM Treasury Consults on Amending the Money Laundering Regulations
04/04/2024
HM Treasury has launched a consultation with proposals to improve the effectiveness of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (known as the MLRs). The consultation is wide-ranging, covering proposals to:- Ensure customer due diligence is more proportionate and effective.
- Strengthen system coordination to ensure continued coordination in the face of new and emerging threats, technological change and legislative changes.
- Clarify the scope of the MLRs, including as regards changing thresholds from Euro to Pound Sterling.
- Revise registration requirements for the Trust Registration Service to enhance transparency of higher risk trusts.
Topic : Financial Crime and Sanctions -
UK Legislates on Differentiating Risk of Domestic Politically Exposed Persons
12/22/2023
The Money Laundering and Terrorist Financing (Amendment) Regulations 2023, which amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (known as the MLRs), come into force on January 10, 2024. The Financial Services and Markets Act 2023 imposed on HM Treasury a duty to use its powers under the Sanctions and Anti-Money Laundering Act 2018 to amend the MLR customer due diligence measures required where a customer is a domestic (U.K.) politically exposed person (i.e., a PEP entrusted with prominent public functions by the U.K. government, as opposed to a foreign government). The Amendment Regulations fulfil that obligation, providing that unless there are other enhanced risk factors, the due diligence measures applicable to a domestic PEP are reduced compared to those applicable to a non-domestic PEP. The change follows concerns by many members of Parliament that banks and other financial institutions were imposing overly burdensome requirements for information and, in some instances, denying accounts to U.K. politicians and their family members, and also follows the furore over the de-banking by NatWest Bank of the prominent U.K. politician Nigel Farage, which led to the resignation of its CEO.
Read more.Topic : Financial Crime and Sanctions -
Draft UK Legislation on Revised Payment Service Contract Termination Rules Expected Before 2024
10/13/2023
HM Treasury has published a further policy statement on payment service contract termination rule changes, setting out its approach to implementation, timing and next steps. This latest policy statement follows the government's July policy statement in which it confirmed that it would bring forward legislation to enhance the requirements governing payment account terminations. This issue has become topical in light of the "de-banking" of higher risk or less profitable clients by several institutions and recent scandals in the U.K. involving account terminations of some politicians. The main changes being brought forward are:- A requirement for payment account providers to provide clear and tailored explanatory reasons to an account user for the termination. The requirement would not apply where it would be unlawful to provide such information, for example, under U.K. financial crime and anti-money laundering legislation.
- A 90-day notice period before a payment account is terminated by a provider, subject to situations where there is a serious and uncorrected breach by the payment user of the terms applying to the account. It would also be clarified that reasons such as brand protection would not be sufficient justification for a shorter notice period.
Read more. -
UK Joint Money Laundering Steering Group Publishes Guidance on Travel Rule for Cryptoasset Exchange Providers and Custodian Wallet Providers
09/14/2023
The Joint Money Laundering Steering Group has published revisions to its Sector 22 Guidance on Cryptoasset exchange providers and custodian wallet providers along with a new Annex I, setting out guidance on the U.K. Travel Rule for cryptoassets. The Travel Rule was introduced under the Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022, amending the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and requires certain identification information on the sender and recipient to accompany a transfer of a cryptoasset. The Travel Rule requirements have applied since September 1, 2023.
Read more. -
FCA Reviews Treatment of Politically Exposed Persons
09/14/2023
The U.K. Financial Conduct Authority has launched a review of the treatment by regulated financial services firms of Politically Exposed Persons based in the U.K. Firms are currently obliged, under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations, to conduct enhanced due diligence when dealing with PEPs. The FCA has existing Guidance on the treatment of PEPs for these purposes, which makes clear (amongst other things) that firms should adopt a proportionate and risk-based approach to the application of the MLRs. The FCA has been mandated to review this guidance under the Financial Services and Markets Act 2023, including an investigation into how firms are applying the guidance and consideration as to whether any amendments are needed. We discuss this mandate and the FSMA 2023 more generally in our client note, A Boost for UK Financial Services: The UK Financial Services and Markets Act 2023.
Read more. -
UK Joint Money Laundering Steering Group Proposed Cryptoasset Travel Rule Guidance
08/14/2023
The U.K. Joint Money Laundering Steering Group opened a consultation on July 28, 2023 on guidance on the U.K. travel rule for cryptoasset transfers. The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 introduced the cryptoasset travel rule by amending the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, and firms will need to comply with the requirements from September 1, 2023. The travel rule requires certain identification information on the sender (originator) and recipient (beneficiary) to accompany a transfer of a cryptoasset. The JMLSG is proposing to add a new annex setting out guidance on the U.K. travel rule for cryptoassets, covering scope, information requirements, batch transfers, returns, unhosted wallet transfers, wallet attribution, linked transactions and use of a layer-2 solution such as the Lightning Network. The guidance also states that firms should consider communications from the Financial Conduct Authority on the sunrise issue, which refers to the impact of jurisdictions implementing the travel rule at different times. Firms may encounter issues when dealing with counterparties in jurisdictions that have not implemented the travel rule for cryptoassets, for example, when dealing with EU counterparties for which the EU travel rules for cryptoasset transfers will only apply from December 30, 2024. Responses to the JMLSG consultation may be submitted until August 25, 2023. -
UK Publishes Insider Dealing Offence Legislation
06/05/2023
On May 25, 2023, the final Insider Dealing (Securities and Regulated Markets) Order 2023 and its related explanatory memorandum were published. The Order will enter into force on June 15, 2023.
The legislation aligns the scope of trading venues covered by the U.K.'s criminal insider dealing regime under the Criminal Justice Act 1993 with the civil regime under the U.K.'s Market Abuse Regulation, and updates the criminal regime. Details of the amendments are discussed in our separate blog.Topic : Financial Crime and Sanctions -
UK Criminal Insider Dealing Offence Legislation to be Updated
05/10/2023
On April 20, 2023, the draft Insider Dealing (Securities and Regulated Markets) Order 2023 was published (the draft Order). The draft Order will generally align the scope of the U.K.'s criminal insider dealing regime under the Criminal Justice Act 1993 with that of the civil regime under the U.K.'s Market Abuse Regulation and update the criminal regime. The draft Order, which will come into effect 21 days after it is made, will revoke the outdated Insider Dealing (Securities and Regulated Markets) Order 1994 (the 1994 Order).
Read more.Topic : Financial Crime and Sanctions -
EU Travel Rule for Crypto-Assets Set to Apply from January 2025
05/02/2023
On April 20, 2023, the European Parliament announced that it had formally endorsed the draft Regulation on information accompanying transfers of funds and crypto assets (referred to here as the EU Travel Rule Regulation). The draft Markets in Crypto-Assets (MiCA) Regulation has also been adopted.
The existing EU Wire Transfer Regulation (EU WTR) requires EU Payment Service Provider to ensure that information on the payer and the payee accompanies a transfer of funds. The funds can be in any currency, and comprise banknotes and coins, scriptural money and electronic money.
The EU Travel Rule Regulation will extend the requirements to crypto assets and crypto-asset services providers (CASPs), (both as defined under the draft MiCA Regulation) with information on the originator and the beneficiary being required to accompany any transfers in crypto assets, regardless of whether they are domestic or cross-border. The requirements will not apply to person-to-person transfers of crypto assets where a CASP is not involved, or when both the originator and the beneficiary are providers of crypto-asset transfers acting on their own behalf.
The EU Travel Rule Regulation must still be published in the Official Journal of the European Union before it comes into effect. This is likely to be around July this year. At that time, the EU Travel Rule Regulation will repeal the EU WTR, however, the existing requirements on information accompanying transfers of funds will carry over to the new Regulation. The EU Travel Rule Regulation will apply from the same date that the MiCA Regulation applies, which is expected to be January 2025. -
UK Money Laundering Regulation Changes Announced for September 2022
06/15/2022
Following its 2021 consultation on targeted amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs), the U.K. government has published a consultation response which summarises the feedback to the consultation and sets out the government's approach to making changes to the statutory instrument. The amendments will be made in the draft Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022, which are intended, for the most part, to take effect from September 1, 2022. A summary of the changes is set out below. The government will also soon publish its response to the call for evidence on the U.K.'s anti-money laundering and counter terrorist financing regulatory and supervisory regime, which covered the overall effectiveness and extent of the regime, whether key elements operate as intended, and the structure of the supervisory regime.
Read more.