Worldwide: FinTech Global FS Regulatory Round-up – W/e 27 May 2022

CMA publishes findings of 'Lessons Learned' review into Open Banking

The Competition and Markets Authority (CMA) has published the findings and recommendations of a review by Kirstin Baker, one of its independent non-executive Directors, to identify lessons from Open Banking for the CMA's approach to designing, implementing and monitoring remedies in its market investigations. The review makes the following recommendations to the CMA:

• build more effective Board oversight and risk management of the end-to-end strategy for complex remedies;
• set out processes and governance for CMA Board and Executive oversight of the delivery and implementation of remedies;
• consider questions relating to implementation at the remedies design phase;
• ensure key factors are considered where a remedy establishes a new entity or large and enduring CMA function;
• include gateways in the remedy delivery and implementation process;
• implement effective and agile internal governance and stakeholder engagement in remedy delivery and implementation; and
• conduct an evaluation case study of complex market investigation remedies.

The CMA has committed to implementing the recommendations in full, and says that it will publish a further update next year on its progress in implementing the work programme on remedies. [27 May 2022]

New edition – Regulatory Initiatives Grid

The latest edition of the the Financial Services Regulatory Initiatives Forum's Regulatory Initiatives Grid has been released. The purpose of the Grid is to set out details of initiatives relevant to the financial services sector that are planned for the next 24 months, for example – Open Finance, machine learning, cryptoassets, CBDCs, etc. The Grid is prepared by the Forum members – the Bank of England, FCA, Prudential Regulation Authority, Payment Systems Regulator, the CMA, the Information Commissioner's Office, The Pensions Regulator, and the Financial Reporting Council (HM Treasury attends the Forum as an observer).

For each initiatives listed, the Grid provides details of the lead authority, key milestones, the indicative impact and the likely timetable. Where appropriate, it also specifies where the timings of an initiative have changed since the previous edition of the Grid and it also indicates where a new initiative has been added.

The Forum aims to publish the Grid at least twice a year to help firms manage the operational impact of implementing initiatives. [25 May 2022]

#OpenFinance

#CBDC

#Data

#Payments

PSR: Consultation paper on requirements for further participation in CoP

The PSR has published a consultation paper (CP22/2) on requirements for further participation in the Confirmation of Payee (CoP) service. In CP22/2, the PSR outlines its proposal to give a specific direction requiring approximately 400 payment service providers (PSPs) to implement a system to offer CoP to their customers (both as payers and payees).

Because of the volume of PSPs involved, the PSR proposes giving a direction that splits the requirements for PSPs to implement a system to provide CoP into two groups:

• The first group will be prioritised based on the complexity and size of the institution or firm where the adoption of CoP could have the biggest impact in preventing authorised push payment (APP) fraud. This group would need to have implemented CoP by 30 June 2023.
• The second group includes all other firms which use either unique sort codes, or that are building societies using a Secondary Reference Data (SRD) reference type. This group would need to have implemented CoP by 30 June 2024.

Comments on the proposals are requested by 8 July 2022. If the PSR decides to proceed with the proposed direction, it plans do to so around eight to ten weeks after the July deadline. [24 May 2022]

ECB article on financial stability risks in the crypto-asset market

The European Central Bank (ECB) has published an article on financial stability risks in the crypto-asset market. The article, which is a special feature for the forthcoming ECB Financial Stability Review, considers market developments in recent years and risks stemming from crypto-assets, including the role of leverage and crypto-lending. The articles reaches the following conclusions:

• The nature and scale of crypto-asset markets are evolving rapidly, and if current trends continue, crypto-assets will pose risks to financial stability.
• Systemic risk increases in line with the level of interconnectedness between the financial sector and the crypto-asset market, the use of leverage and lending activity. Based on the developments observed to date, crypto-asset markets currently show all the signs of an emerging financial stability risk. It is therefore key for regulators and supervisors to monitor developments attentively and coordinate at a global level to close regulatory gaps or arbitrage possibilities.
• It is important to close regulatory and data gaps in the crypto-asset ecosystem. [24 May 2022]

MAS and Swiss State Secretariat for International Finance issue statement on promoting data connectivity

MAS has published the Joint Statement of Intent between MAS and the Swiss State Secretariat for International Finance (SIF) to Promote Data Connectivity for Financial Services. The statement indicates both parties' recognition of the importance of data connectivity in financial services and confirms their intention to work together and with other countries and authorities to promote an environment which fosters growth and development. [24 May 2022]

BNM Assistant Governor addresses InsurTech conference

The Bank Negara Malaysia (BNM) has published the remarks delivered by the Assistant Governor at the InsurTech Leaders Summit on 18 May 2022. The Assistant Governor focused on three areas where further innovation and the boundary spanning role of the industry – that is its role as a connector with the ability to bridge information to unlock innovation value – are critical: narrowing the gap on insurance coverage and protection; redrawing the frontiers for greater efficiency; and expanding the horizons for the future of insurance beyond protection to prevention. [24 May 2022]

BSP Governor addresses ISOG forum on the metaverse and cybersecurity

The BSP has published the keynote delivered by Governor Benjamin E Diokno at the Metaverse: I am Secure cybersecurity virtual forum organised by the Information Security Officers Group (ISOG). The Governor spoke about the potential and the challenges presented by the metaverse, noting that as companies are working to build up a metaverse, cyber threat actors will similarly be working on their own capabilities. In response, the BSP will be vigilant, taking 'a comprehensive, agile, risk-based, and engaging approach to cybersecurity'. Governor Diokno highlighted four major initiatives which the BSP is currently working on:

• The BSP is developing a Financial Services Cyber Resilience Plan to serve as the primary framework covering strategies and plans to strengthen cyber resilience in the financial services industry. This is part of BSP's role as the lead in the Banking Sector Computer Emergency Response Team under the Department of Information and Communications Technology.
• The BSP is implementing the Advanced SupTech Engine for Risk-Based Compliance (ASTERisC*) which is a unified regtech and suptech solution to streamline and automate regulatory supervision, reporting, and compliance assessment of cybersecurity risk management for supervised institutions.
• The BSP is engaging with the banking industry through the Bankers Association of the Philippines Cyber Incident Database (BAPCID) – a web-based portal where participants can report incidents and threats anonymously, and receive threat intelligence feeds and BSP threat advisories.
• The BSP is currently coordinating with relevant government agencies and industry associations for a joint consumer protection campaign to amplify key messages and raise overall cyber awareness in the country. [18 May 2022]

#Metaverse

#Cybersecurity

#RegTech

#SupTech

CFTC charges Oregon and Illinois residents and Florida company in $44 million misappropriation in ongoing digital asset and commodity futures fraud

The CFTC has announced that it filed a civil enforcement action in the US District Court for the Northern District of Illinois, charging the defendants with fraudulently soliciting at least $44 million for participation interests in a so-called income fund invested in digital assets and other instruments. The enforcement action also charges the defendants with operating an illegal commodity pool and failing to register as a Commodity Pool Operator.

The complaint alleges that since at least January 2021, the defendants used a website, YouTube videos, and other means to solicit more than $44 million from at least 170 participants to purchase, hold and trade digital assets, commodities, derivatives, swaps and commodity futures contracts. The complaint further alleges that instead of investing the pooled participant funds as represented, the defendants misappropriated participant funds by distributing them to other participants, in a manner akin to a Ponzi scheme. The complaint also alleges that the defendants transferred some participant funds to other accounts under their control and for their benefit. The defendants also transferred millions of dollars to an off-shore entity that, in turn, may have transferred funds to a foreign cryptocurrency exchange. None of these funds were returned to the pool. [19 May 2022