SEC approves revised privacy act rule
The Securities and Exchange Commission has approved a rule to revise the Commission’s regulations under the Privacy Act, which is the principal law governing the handling of personal information in the federal government. The final rule clarifies, updates, and streamlines the Commission’s Privacy Act regulations. In addition, the final rule revises procedural and fee provisions and eliminates unnecessary provisions. The final rule also allows for electronic methods to verify one’s identity and submit Privacy Act requests.
Due to the scope of the revisions, the final rule replaces the Commission’s current Privacy Act regulations in their entirety. The new rule comes into effect 30 days after its publication in the Federal Register.
FinCEN’s compliance guide for smaller entities
From 1st January 2024, US reporting companies will need to adhere to new beneficial reporting requirements. To help with this process, the Financial Crimes Enforcement Network (FinCEN) has published a guide for those companies. The guide includes the following chapters:
- Does my company have to report its beneficial owners?
- Who is a beneficial owner of my company?
- Does my company have to report its company applicants?
- What specific information does my company need to report?
- When and how should my company file its initial BOI report?
- What if there are changes too? Or inaccuracies in reported information?
FinCEN defines reporting companies required to submit beneficial ownership information as follows:
- Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
- Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.
FCA’s Dear CEO letter to insurers
In a lengthy Dear CEO letter to the insurance sector, Matt Brewis, Director of Insurance, has outlined a number of key points and priorities for the sector leading up to 2025.
Brewis noted that the sector had seen significant failings, citing a few including:
- the continued sale of products not providing fair value
- discriminatory pricing practices
- undervaluation of motor claims
Adding that there is concern boards are not doing enough to ensure good outcomes. He went on to outline four market wide priorities:
- Putting customers’ needs first including the focus on implementing the Consumer Duty
- Embedding environmental, social, and governance (ESG) priorities
- Minimizing the impact of operational disruption through operational resilience and managing reliance on third parties.
- Improving the oversight of Appointed Representatives.
The letter ges on to highlight the following areas which the FCA will focus on:
- Ensuring fair value for consumers and compliance with the Consumer Duty, particularly in terms of price and value.
- Supporting consumers in financial difficulty
- Settling claims fairly and promptly.
- Addressing issues related to access to insurance
- Ensuring fair sales practices.
- Enhancing governance, culture, and non-financial misconduct prevention within firms.
The letter concludes by reminding the recipient that they are responsible for ensuring their firm meets the regulator’s requirements, including the obligations and expectations. It adds: “You should take all necessary action to ensure these are met and that you are prepared for the additional requirements that the Consumer Duty brings to these priority areas. We will use the Senior Managers & Certification Regime to engage directly with accountable individuals on areas of concern. A significant part of our activity over the next 2 years will be to test firms against our priorities and expectations. We will also continue to use data to identify outliers and, where firms are not meeting our rules and expectations, we will take action.”
ECB looks to AI to help supervision
Elizabeth McCaul, Member of the Supervisory Board of the ECB, in a speech at the Supervision Innovators Conference has outlined the ECB vision of a supervisory ‘cockpit’ that would provide supervisors with all their IT applications and tools in one place to “receive alerts and data notifications from relevant internal and external data sources and have an advanced search and query function, leveraging artificial intelligence (AI).”
McCaul suggests this approach could provide early warning indicators to help steer the supervisory focus to where it is most needed. The combination of technology, data and innovation, which McCaul outlines as the three components of the Single Supervisory Mechanism digital strategy, will be critical in ensuring that the ECB can continue to “to enhance our ability to understand risks in the institutions we supervise” whilst at the same time allowing the ECB to gain ”a greater understanding of how our institutions are deploying the same technology, which in turn will help us hone our supervisory skills”.
ASIC sues crypto exchange
The Australian Securities and Investments Commission (ASIC) has commenced civil proceedings against Bit Trade Pty Ltd, the provider of the Kraken crypto exchange in Australia, for failing to comply with design and distribution obligations for its margin trading product.
ASIC alleges that Bit Trade failed to make a target market determination for the product before offering it to Australian customers, as required by law. A target market determination is a process that financial firms must go through to identify the target market for their products and to ensure that the products are appropriate for those consumers.
ASIC also alleges that Bit Trade’s margin trading product is a credit facility, as it offers customers credit for use in the sale and purchase of certain crypto assets on the Kraken exchange. Customers can receive an extension of credit of up to five times the value of the assets they use as collateral.
MAS issues responses to amend Notice 637 on risk-based capital adequacy requirements
Following a number of consultation papers aimed at Basel III implementation for Singapore-based banks, the Monetary Authority of Singapore has now issued a new collective response incorporating all of the responses and feedback to amend MAS Notice 637. The publication, on draft standards on Credit Risk, Market Risk, Operational Risk, Output Floor, Leverage Ratio, and Public Disclosure Requirements, combines feedback from four separate consultations dating back to December 2020. The revised MAS Notice 637 will be effective from 1st July 2024.
ASIC publishes licensing update
The Australian Securities & Investments Commission has issued Licensing and professional registration activities: 2023 update Report 772, which provides an update on licensing and professional registration activities in 2023, including information and data on licensing and registration applications from the 2022-23 financial year. It also outlines the financial accountability imposed under the licensing framework. The report notes that during the financial year period, AISC:
- received 1,272 Australian financial services (AFS) license and Australian credit license (credit license) applications;
- finalized 1,464 AFS and credit license applications;
- granted 332 new AFS licenses and 149 new credit licenses;
- approved 867 AFS and credit license variation applications from existing licensees; and
- approved the registration of 118 company auditors, 44 SMSF auditors and supported the approval of 29 liquidators.
HKMA speech on innovative financial regulation
At the Pan Asian Regulatory Summit, Carmen Chu, Executive Director (Enforcement and AML), Hong Kong Monetary Authority, spoke about innovative financial regulation to deal with the challenges of financial crime and associated money laundering.
Chu identified fraud as a leading challenge, with many cases and severe effects on victims. She emphasized the importance of setting high benchmarks for firms, based on international standards, and active engagement in international forums.
In addressing the balance between fostering innovation and ensuring market safety, Chu stressed the need to protect financial institutions and systems from criminal exploitation while supporting technological advancements. She acknowledged the role of regulators in educating consumers, making payment systems less vulnerable, and combating money laundering related to financial crimes.
Chu also discussed efforts by the HKMA to adapt regulatory approaches and encourage the adoption of Regtech by engaging with the industry, reminding the audience that the HKMA has shared case studies illustrating the use of Network Analytics in AML and anti-fraud. She noted the regulator’s efforts to encourage the broader adoption of innovative solutions to enhance the AML/CFT eco-system’s effectiveness.
Information sharing and the application of analytics were emphasized as essential in combating fraud and financial crime. Chu highlighted the need for collaboration and a more holistic approach within the AML eco-system.
Looking ahead, Chu mentioned the upcoming fifth round of mutual evaluations by FATF, focusing on the effectiveness of systems. She reminded the audience too of FINEST, a bank-to-bank information sharing platform recently launched in Hong Kong, and highlighted the further importance of collaboration to protect financial systems, firms, and citizens from crime.
Concluding, Chu noted: “this is a challenging but also an exciting time to be a regulator, and so should it be for regulatee. I would reiterate that collaboration within our respective eco-systems has never been more important.”
A selected summary of key developments for regulated financial institutions
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