The future of ABC
‘To some degree it matters who’s in office, but it matters more how much pressure they’re under from the public’, Noam Chomsky. It could be argued that it is worldwide public outcry that has been the trigger for governments around the globe to sit up, take notice and commit to actions to tackle bribery and corruption.
The 2017/18 business plan has made clear that the FCA intends to shift some of its focus from consumer issues to market structures, incentives and distribution in the GI and Protection sector. Whilst the regulator will continue to monitor and review the issues directly affecting individual and small and medium sized enterprise (SME) consumers, this is a sure sign that it intends to focus more directly on competition issues.
What is the current landscape for corruption and bribery?
Historically, there hasn’t been a large number of high profile enforcement actions in relation to bribery. The low numbers could be taken as a sign that regulators are not focusing on this risk or conversely that firms have improved systems and controls so much that bribery is a thing of the past.
How taxing are the new requirements for firms?
The Criminal Finances Act 2017 has received Royal Assent and will come into force this Autumn. It enshrines into law the new criminal offence for corporations that fail to prevent the facilitation of tax evasion. This is modelled on the ‘failure to prevent bribery’ offence in the Bribery Act 2010.
On Friday (12 May 2017) we saw what may very well be the highest profile “ransomware” attack to date. The impacts for many of the institutions involved will be costly. The impacts for their customers, or users, have ranged from inconvenience to ultimately being life threatening.
This month we are featuring the fifth 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 May MiFID Buster focuses on Costs and Charges.
The LIBOR and FX fixing scandals undermined the reputation of global financial markets. As a direct consequence, UK and European regulators have focused upon corporate governance and culture as a means of improving standards of conduct and restoring trust in financial markets. In addition, the administration of and submission to Benchmarks has become a regulated activity for the first time.
Weʼre raising £4,500 to help Young Futures provide financial capability training to young people leaving care in our local community.
One of the common problems we see in our wealth manager clients are firms that do not have a settled view of why they exist and what they offer to clients. Often we see firms who do not have a forensic approach to their position in the value chain or do not have defined boundaries within their proposition. As a consequence, daily we see muddled thinking that leads not only to variable client experience and outcomes, but in many cases unnecessary regulatory and operational risks.
The FCA published a consultation paper (CP 17/11) on 13 April 2017 explaining how it will implement the long awaited Payment Services Directive 2 (PSD2). As this is a maximum harmonising Directive, there is limited opportunity to diverge from the prescribed provisions, and HM Treasury have taken the approach of implementing these requirements through the Payment Services Regulations 2017 (PSRs 2017). The FCA’s consultation therefore focuses on its approach to interpreting and applying the regulations.
As events at Barclays have illustrated, where the CEO became entangled in a whistleblowing debacle, there’s no doubt that sound and effective whistleblowing procedures are a key tenet of good corporate governance and a reflection of a firm’s culture.
This month we are featuring the fourth 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 April MiFID Buster focuses on Algorithmic Trading.
The Mortgage Credit Directive (MCD) came into force 21 March 2016. At Bovill we helped a number of firms update their mortgage sales process and develop their policies and procedures to comply with the new requirements.
HM Treasury (HMT) released its second consultation.
Is the motor finance market in 2017 heading in the same direction as the US Sub-prime mortgage market in 2007? The size of the markets are very different, but there are certainly a number of similarities, which should prompt firms to review the adequacy of their risk controls, and assess their exposure.
In February 2017, the PRA took steps to dis-incentivise high-risk mortgage lending by consulting on refinements to the Pillar 2A capital framework for firms operating under the Standardised Approach for credit risk. After an interval of just a month, the PRA are further encouraging these firms to expand into lower risk mortgage lending by consulting on smoothing the route to obtaining approval to adopt the Internal Ratings Based Approach (IRB) for credit risk.
Many firms have now begun to experience CASS audits under the new FRC standards, with varying degrees of pain being felt. Others have their first audit under the new standards yet to come. If you’re in the latter camp, is there anything you can do to ease the pain when the time comes? There’s plenty you can do – preparation is the key to a smooth running CASS audit and a happy auditor and will also play a big part in how costly your CASS audit is.
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.
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.
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 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.