Many were surprised when they saw the FCA’s recent announcement that investment managers are still failing to meet their Best Execution obligations. That firms are failing to hit the required standard wasn’t the source of the surprise – it was the timing of the announcement. MiFID II already notes weaknesses in the current regime. So, why are the FCA causing a fuss about MiFID I now, with a life of only nine months left?
Bovill publishes its study into how foreign banks are assessing customer risk as part of their overall financial crime framework.
The Own Risk and Solvency Assessment (ORSA) has effectively become a key component of the European regulatory framework for insurance (including the Lloyd’s market) since Solvency II was implemented on 1 January 2016. While ORSA can be considered a new backbone of enterprise risk management in insurers, it is not a novel concept in the financial regulatory landscape since banks and investment firms’ Internal Capital Adequacy Assessment Process (ICAAP) rests on broadly similar principles.
Sam Woods, the CEO of the PRA, talked about the future of insurance regulation in the UK and the PRA’s response to an independent review of their approach to the objective of protecting policyholders.
The Financial Conduct Authority recently ran its’ third TechSprint event on the theme ‘Financial Regulation and Mental Health’. The TechSprint is a two-day industry-wide development challenge introduced by the Regulator as a regulatory tool to catalyse innovation in the industry.
Governance issues made headlines last month when Bank of Tokyo (Bank of Tokyo-Mitsubishi UFJ) were fined by the PRA for not being open and honest with the regulator, raising issues of organisational structure and accountability in relation to regulatory responsibilities. Additionally the Bank of England itself faced embarrassment when its Deputy Governor failed to disclose a conflict of interest.
This month we are featuring the third in a series of MiFID Busters. Each edition will explore a MiFID II theme, setting out the key changes and practical implications for financial institutions. The March MiFID Buster focuses on the requirements around product governance.
‘Accredited investor’ is one of the most important definitions in all of United States securities law as it essentially determines whether a person/entity will be permitted to invest in non-publicly offered investments. Qualifying as an accredited investor is significant because accredited investors may participate in investment opportunities that are generally not available to non-accredited investors, such as investments in private companies and offerings by hedge funds, private equity funds and venture capital funds.
Since the economic crisis and most recent Brexit decision, regulatory reporting and compliance have been two of the top risk management priorities for most of our financial services clients. Despite this, we have seen a delay in digital investment within these areas as they are not typically revenue generating functions.
MiFID II implementation challenges for medium sized wealth firms
Both the PRA and Competition and Markets Authority (CMA) are concerned that mortgage lenders operating under the Standardised Approach (SA) for credit risk are being incentivised to specialise in riskier exposures, thereby undermining the safety and soundness of these firms.
Bovill is expanding its global footprint by entering the US market and has appointed Andra Purkalitis as a Partner and Head of Americas to lead the US initiative.
This month we are featuring the second in a series of MiFID Busters. Each edition will explore a MiFID II theme, setting out the key changes and practical implications for financial institutions. The February MiFID Buster focuses on the rules governing telephone and electronic recording.
In January, the Wolfsberg Group, the Banking Commission of the International Chamber of Commerce, and the Bankers Association for Finance and Trade published updated principles for managing money laundering and terrorist financing (ML/TF) risks in trade finance. Reacting to an uptick in regulatory expectation, coupled with industry feedback that Wolfsberg’s 2011 Trade Finance Principles were more appropriate for large global banks than smaller local banks, the three international bodies teamed up to redraft existing guidelines. It should serve as a reminder of the risks that trade finance can pose to the financial system, and how financial institutions (FIs) can help prevent trade-based money laundering (TBML).
2017 should be the year when financial services firms put consumer protection at the heart of their operations and governance. It makes good business sense, but if that’s not enough of an incentive then the fact that 2018 is going to be a bumper year for consumer protection regulations should provide additional incentive. A number of new European laws, which are either wholly or partly aimed at improving consumer protection, will come into force in 2018.
Following its investigation into the payday lending market, the Competition and Markets Authority (CMA) published the Payday Lending Market Investigation Order 2015. The Order implements part of the package of remedies which the CMA recommended following its investigation.
The recent fine (£163m in the UK, $425m in the US) of Deutsche Bank AG (Deutsche Bank) emphasised some key messages for firms to take heed of. The fine related to facilitating a scheme of suspicious securities trading, termed as ‘mirror trading’, which enabled customers to transfer $10 billion out of Russia into overseas bank accounts. In addition to the fine, which is the largest of its kind ever levied by the UK regulator, Deutsche Bank must engage an independent monitor selected by the New York Department of Financial Services under the Consent Order, to conduct a comprehensive review of its anti-money laundering (AML) framework.
The outsourcing arrangements of firms, particularly the outsourcing of critical or important operational functions, have come under increasing regulatory scrutiny from both the FCA and PRA over the last couple of years. The key themes of this attention have been concerns about the resilience and oversight of outsourcing arrangements: where resilience concerns the adequacy of the contingency plans in place to deal with a failure of the outsourced service provider. And oversight is concerned with the risk that the firm won’t have adequate oversight arrangements over the outsourced service provider.
Under the new Senior Managers & Certification Regime, from 7 March this year, dual-regulated firms (i.e. Banks, Building Societies, Credit Unions, Insurers and PRA Designated Investment Firms) will be required to request Regulatory References covering the previous 6 years of employment history for all Senior Managers and Certified Individuals they are considering for employment.
The use of an external Monitor is not a new regulatory tool, with the US regulators employing independent monitors for 15 years. However, since HSBC’s then record AML fine in 2012 for laundering the proceeds of crime from Mexican drug cartels through the US financial system, financial services monitorships have become increasingly popular with regulators. Other institutions such as BNP Paribas, Commerzbank and Mega International Commercial Bank have been ordered to install independent Monitors in recent years for AML and Sanctions violations. In these cases Monitors were installed to help financial institutions implement stronger AML systems and controls. They are usually enabled in combination with a deferred or non-prosecution agreement with a mandate to assess, oversee and examine a financial institution’s progress against the agreement, and to ensure compliance with laws and regulations.
We are delighted to announce that Bovill has won the award for Best EIS Regulatory Adviser 2016 at the Enterprise Investment Scheme Association Awards.
The FCA made the treatment of existing customers one of its key priorities in its 2016/17 Business Plan. It is focused on achieving an appropriate degree of protection for customers taking into account their financial capability and vulnerability and is particularly concerned about circumstances which could lead to firms taking advantage of vulnerable customers. The publication of FG16/8 (Fair Treatment of Long-standing Customers in the Life insurance Sector), in December 2016, means this focus is unlikely to change over the coming months and possibly years. The non-Handbook guidance is targeted at improving the behaviours identified in thematic report TR16/2.
David Brain, Partner & Head of Assurance and Michael Knight-Robson, Consultant in the Assurance team, have written an article that is featured in the January – March 2017 issue of Risk & Compliance magazine. The article discusses the new Criminal Finances Bill. The Bill is intended to produce three main outcomes:
The uncertainty over a delay to MiFID II, finally concluded in June, now seems an age ago. At the time, regulators emphasised that the delay was essential to give firms sufficient time to prepare. However, from the moment the possibility of a delay was first suggested, some firms had already begun to reallocate resources and focus attention elsewhere.
The new Policing and Crime Bill 2017 provides new powers of civil enforcement and penalties, to be administered by Office of Financial Sanctions Implementation (OFSI) at HMT, in relation to failure to comply with, financial sanctions. OFSI has published a consultation paper laying out draft guidance that sets out the circumstances under which a penalty is suitable and how the amount will be calculated. Bovill has responded to this consultation paper and firms have until 26 January 2017 to get their responses in.
This month we are launching the first in a series of MiFID Busters. Each edition will explore a MiFID II theme, setting out the key changes and practical implications for financial institutions. The January MiFID Buster focuses on the much discussed investment research requirements, and is an essential read for firms who issue investment research in the UK and Europe.
The FCA has recently completed a Thematic Review into Consumer Credit firms’ arrears and forbearance practices. It examined a range of different unsecured lending products, across a sample of firms – large and small. In particular, looking at firms’ practices from the point of identification of customers in potential difficulty, through to formal default.
Things are finally starting to move in the P2P world, with a trickle of authorisations steadily coming through after Lending Works started the trend in October last year, closely followed by one of Bovill’s clients Folk2Folk. It would be presumptuous however to think that this is the start of smooth regulatory sailing for P2P firms either seeking authorisation or those already authorised.
Earlier this month, the Financial Action Task Force (FATF) published the output of their recent mutual evaluations, of the United States and Switzerland. Mutual evaluations are peer reviews by FATF to assess the ongoing implementation of FATF recommendations by its member countries. They adopt a two-pronged methodology, assessing members’ technical compliance (their legal and institutional framework, and powers/procedures of relevant authorities) and effective compliance (the extent to which the framework is meeting the desired outcome).
Just as Member States were preparing to implement the 4th Anti-Money Laundering Directive (4MLD), the compromise text of the 5th Money Laundering Directive (5MLD) was released late October 2016, which amends the 4MLD and is to be implemented by June 2017.