UK regulators issue complaints policy statement
The PRA, Bank of England and FCA have set out their final changes to the Complaints Scheme, which was initially consulted on in 2020.
FCA’s Policy Statement 23/12 (PS10/23 from PRA) outlines a number of changes including:
- Removal of £10,000 compenastion limit in the event of a complainant’s financial loss.
- A commitment to review the appropriateness of the payment levels for non-financial loss every 2 years.
- Clarifying the timescales as to when a complainant can expect a response on their complaint.
The PS will affect anyone who is a potential complainant under the Complaints Scheme, ie someone who makes a complaint on or after the new Scheme comes into effect on 1 November 2023.
FATF publishes Dominica mutual evaluation
The Dominica mutual evaluation report represents a summary of anti-money laundering and countering the financing of terrorism (AML/CFT) measures in effect in Dominica at the time of the Caribbean Financial Action Task Force (CFATF) assessors’ mission to the country between 15th to 26th August, 2022). The report analyses Dominica’s AML/CFT system for compliance with the 40 FATF Recommendations and assesses its effectiveness. The report also contains recommendations for strengthening the existing AML/CFT regime.
The findings of this assessment have been reviewed and endorsed by the FATF.
PRA consultation CP16/23
The Prudential Regulation Authority (PRA) has issued CP 16/23 which outlines the proposed updates to the UK methodology for the identification of, and setting of a capital buffer for, global systemically important institutions (G-SIIs), to be in line with the changes implemented in the Basel Committee for Banking Supervision framework in 2022.
The proposals in the CP would result in changes to the UK Technical Standards for the methodology used to identify G-SIIs and sets out policy proposals to align the UKTS with updates made to the BCBS framework.
Responses are requested by Tuesday 29 August 2023
IRS charges lending business C-suite with fraud
Former Chairman of 1 Global Capital LLC, Carl R Ruderman, has been indicted for orchestrating a massive fraud scheme that affected more than 3,400 investors across 42 states. Four of Ruderman’s co-conspirators have already pleaded guilty for their roles in the fraud.
Among the co-conspirators, Alan G Heide, the former CFO of 1 Global, pleaded guilty to one count of conspiracy to commit securities fraud and was sentenced to 60 months in prison. He was also ordered to pay $57 million in restitution to the victims of the scheme.
Andrew Dale Ledbetter, who was involved in conspiracy to commit wire fraud and securities fraud, was sentenced to 60 months in prison and ordered to pay $148 million to the victims.
Steven Allen Schwartz pleaded guilty to conspiracy to commit wire fraud and securities fraud, resulting in a 24-month prison sentence and an order to pay over $36 million in restitution.
Jan Douglas Atlas, who was charged with conspiracy to commit wire fraud and securities fraud, received an eight-month prison sentence and was ordered to pay over $29 million in restitution.
According to the indictment, 1 Global Capital LLC was a commercial lending business based in Florida that provided high-interest “pay day” loans, termed merchant cash advance loans, to small businesses. Ruderman served as the chairman, Heide as the CFO, Schwartz as a director and consultant, and Ledbetter as an attorney with a fundraising role.
The indictment alleges that Ruderman and others made false and misleading representations to investors regarding the profitability of 1 Global’s business through marketing materials and account statements. Investors were deceived into believing the company had audited financials and could expect high returns on their investments. However, instead of using the investors’ money as promised, Ruderman misappropriated funds.
The operation of 1 Global faced questions about whether it was offering or selling a security, and whether it required registration with the Securities and Exchange Commission. These concerns were raised by investors, investment advisors, and regulators. Ruderman knew that if the investment offering were classified as a security, it would negatively impact the company’s ability to raise funds from retail investors and continue operating without additional expenses and reporting requirements. This classification would also undermine profits and fees for the principals at 1 Global, including Ledbetter.
The indictment further alleges that, at Ruderman’s request, Atlas authored opinion letters with false information in 2016, which were used by 1 Global to unlawfully operate its business. These letters omitted crucial details, such as the investment’s automatic renewal aspect and its targeting towards retail, non-sophisticated investors.
Ruderman and others at 1 Global relied on these deceptive opinion letters to continue raising money illegally from numerous investment advisors and investors.
Fed announces new capital requirements for large banks…
Following its stress test earlier this year, the Federal Reserve Board has announced the individual capital requirements for all large banks, effective from 1st October.
Under the capital framework for bank holding companies, covered savings and loan holding companies, and US intermediate holding companies with $100 billion or more in total consolidated assets, capital requirements are in part determined by the supervisory stress test results. The total common equity tier 1 (CET1) capital ratio requirement for each bank is made up of several components, including:
- a minimum CET1 capital ratio requirement of 4.5 percent, which is the same for each bank;
- the stress capital buffer (SCB) requirement, which is determined from the supervisory stress test results and is at least 2.5 percent; and
- if applicable, a capital surcharge for global systemically important banks which is at least 1.0 percent
…Whilst agencies request comment on proposed capital requirement changes
The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve Board), and the Federal Deposit Insurance Corporation (FDIC) is consulting on proposals to modify large bank capital requirements to better reflect underlying risks and increase the consistency of how banks measure their risks. The proposal included changes that would:
- Improve consistency of risk measurement in the capital rule for large banking organisations.
- Apply the capital standards for large banking organisations to a broader set of large banking organisations.
- Maintain stricter standards for the largest, most systemic banking organisations.
- Increase transparency of capital requirements across large banking organisations.
- Maintain two methodologies to determine risk-based requirements.
Comments on the proposal are due by 30th November.
MAS announces demise of corporate cheques
The Monetary Authority of Singapore (MAS) has announced that corporate cheques will be phased out by the end of 2025.
Individuals will still be able to use cheques but the move reflects the increasing use of alternative payment systems.
To help cover the increasing costs of fewer cheques being processed, banks will commence charging for Singapore Dollar (SGD)-denominated cheques from 1st November 2023.
Australia sees huge increase in consumer complaints
Financial stress and scams are taking a toll on Australian consumers, leading to a record surge in complaints. The Australian Financial Complaints Authority (AFCA) received an unprecedented 34% increase in complaints, with a total of 96,987 lodged in the past year.
According to AFCA’s Chief Ombudsman and CEO, David Locke, the rise in complaints reflects the growing financial strain in the community, the prevalence of scams, and ongoing issues with insurers’ claims handling.
Complaints in the banking and finance sector rose by 27%, reaching 53,638 in the 2022-23 period. Notably, complaints related to financial difficulty increased by 9% over the year and by 31% in the June quarter compared to the previous year. Home loan and credit card complaints also saw a spike in the final months of the year.
Buy now pay later (BNPL) complaints rose by a significant 57%, indicating that people are turning to alternative forms of credit to manage tight budgets. AFCA is supporting the federal government’s plan to regulate BNPL under the National Consumer Credit Act.
Scams remained a serious concern, with scam-related complaints rising by 46% last year, reaching 6,048. AFCA acknowledges the efforts of individual banks in combatting scams but urges a more consistent approach across the sector.
The most complained-about product shifted from credit cards to personal transaction accounts, with disputes up 86%. This change was partly due to the increase in scam-related complaints.
One of the top issues in complaints to AFCA was the delay in insurance claim handling, which saw a significant 76% rise. General insurance complaints rose by 50% overall, reaching 27,924.
A selected summary of key developments for regulated financial institutions
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