Corporate Crime Update – Winter 2019

Welcome to the Winter 2019 edition of our corporate crime update – our round up of developments in relation to corruption, money laundering, fraud, sanctions and related matters. Our update now covers a number of jurisdictions.

For the full update on each jurisdiction, please click on the name of the jurisdiction below. Below we provide a brief overview of what is covered in each update.

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Latest Shake-up of the Remuneration Provisions for Banks and Investment Firms Part 2: Banks and credit institutions

Authors: Mark Ife and Paul Ellerman

After over two years of debate, agreement has finally been reached on the proposed directive amending the Capital Requirements Directive (which is generally being titled CRD5), and the European Council has published its final text.

As detailed in our previous briefing, however, the proposed new prudential regime for investment firms, will remove most investment firms from the scope of CRD5 and subject them to the specific remuneration rules in the new Investment Firms Directive (IFD) and Investment Firms Regulation (IFR). Consequently, the revised CRD5 is likely only to apply to banks and “bank-like” investment firms.

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Anti-money laundering regulatory round-up

Author: Susannah Cogman

Late 2018 and early 2019 saw a flurry of regulatory developments and proposals relating to anti-money laundering. We have reported on these in brief in our regular corporate crime updates, but for those who have been – for example – too immersed in Brexit to read the underlying documents in detail, we have taken this opportunity to bring together an overview of, and commentary on, a number of recent anti-money laundering/counter-terrorist financing (“AML/CTF”) developments. In particular, we discuss in this briefing:

  • the FCA’s report on data submitted in the first annual financial crime data return;
  • recent developments in the EU’s list of high risk third countries;
  • amendments to compliance requirements in respect of anonymous safety deposit boxes;
  • the FCA’s thematic review on money laundering risks in the e-money sector;
  • a Decision Notice issued by the FCA to a CEO for failings in his oversight of his bank’s AML systems and inadequate supervision of the MLRO to whom he had delegated relevant responsibilities;
  • proposals relating to money laundering supervision in the EU;
  • the FATF’s Mutual Evaluation Review of the UK;
  • FATF guidance on a risk-based approach to the securities sector;
  • other FATF developments of interest, in particular in relation to virtual assets;
  • reform of the UK Suspicious Activity Reporting regime;
  • a recent RUSI paper on the scale of money laundering in the UK;
  • AML-related amendments to the Financial Crime Guide (FC), following consultation GC 18/1; and
  • an overview of the current position regarding AML compliance post-Brexit, in the event of a no-deal exit.

Please click here to read our full briefing.

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Latest Shake-up of the Remuneration Provisions for Banks and Investment Firms Part 1: Investment Firms

Authors: Mark Ife and Paul Ellerman

Agreement has now been reached between the European Parliament, the Commission and the Council on the final texts of two Directives which will impact on the remuneration provisions which apply to banks and investment firms. The first is the Investment Firms Directive (IFD), which will introduce a new prudential regime for investment firms. The second is the Directive which contains the fourth set of amendments to the Capital Requirements Directive (which is generally being titled CRD5). The European Parliament will consider both Directives in its plenary sessions between 15 and 19 April 2019.

This briefing sets out details of the remuneration provisions contained in the IFD and the related Investment Firms Regulation (IFR). A subsequent briefing will cover the revised provisions contained in CRD5.

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Time to Mobilise: EBA finalises Guidelines on Outsourcing Arrangements

Following consultation in the second half of 2018, the European Banking Authority (“EBA“) published its Final Report on Draft Guidelines on Outsourcing Arrangements (the “Guidelines“) on 25 February 2019.

Most provisions of the Guidelines will enter into force on 30 September 2019. At the same time, the Guidelines will replace those issued by the EBA’s predecessor organisation, the Committee of European Banking Supervisors (“CEBS“), in 2006 and will also incorporate the EBA’s 2017 Recommendation on Outsourcing to Cloud Service Providers which came into effect on 1 July 2018.

The Guidelines are intended to establish a more harmonised framework for all financial institutions that are within the scope of the EBA’s mandate. The Guidelines apply to credit institutions and investment firms which are subject to the Capital Requirements Directive (“CRD“) as well as payment and electronic money institutions.

The Guidelines are issued under Article 16 of Regulation (EU) No. 1093/2010, the Regulation establishing the EBA. Member States’ competent authorities and financial institutions “must make every effort to comply” with the Guidelines. However, the EBA has acknowledged the need for proportionality within the text of the Guidelines, so that a firm and its competent authority(ies) should have regard to the nature, scale and complexity of the firm’s activities when complying with (or in the case of competent authorities, monitoring compliance with) the Guidelines.

The Guidelines will apply to all outsourcing arrangements entered into, reviewed or amended on or after 30 September 2019. Institutions should review and amend their existing outsourcing arrangements for compliance accordingly. Where an institution has not completed a review of an outsourcing arrangement which relates to critical or important functions by 31 December 2021, this should be notified to the relevant competent authority, along with an explanation of the measures which the institution proposes to take to either complete the review or exit the arrangement.

For many firms, the finalisation of the Guidelines will be a catalyst for a significant programme to review (and potentially rationalise or change) existing outsourcing arrangements. Cross-functional working will be essential, as various control and business functions will have an interest in the use of third party suppliers. Programmes are likely to bring together legal, operational risk, regulatory, compliance, procurement, and audit expertise, while oversight within the three lines of defence approach will need to be allocated not only to business functions but also to appropriate senior management, risk committee and board level to provide good governance of the processes and to ensure that decisions are aligned with business strategy and risk appetite.

We are conducting a detailed review of the Guidelines and will publish a more comprehensive analysis shortly.

Corporate Crime update – December 2018

Welcome to the December 2018 edition of our corporate crime update – our round up of developments in relation to corruption, money laundering, fraud, sanctions and related matters.

This month, we would like to wish all of our regular readers a very happy, and hopefully corporate crime free, festive season! 

For the full update on each jurisdiction, please click on the name of the jurisdiction below.  Continue reading

EUROPEAN COMMISSION ANNOUNCES “NO DEAL” CONTINGENCY ACTION PLAN

The European Commission has announced that it has started implementing its Brexit “no deal” Contingency Action Plan given the continuing uncertainty regarding ratification of the Withdrawal Agreement in the UK. This follows the Commission’s communication of 13 November 2018 which provided details of the types of contingency measures that it intended to take in a variety of areas, as well as the 78 preparedness notices from Commission departments on how Brexit will change law and policy. Continue reading

Brexit Final Political Declaration: Nothing [new] to see here?

On financial services, the final political declaration contains essentially the same three points as in last week’s outline political declaration (the implications of which were discussed in our blog post of 15 November, available here), although there is some limited further clarification.  The three points on financial services are copied below with new substantive additions underlined: Continue reading

Brexit Outline Political Declaration: Initial indicators for the financial services industry

Yesterday’s announcements on the terms agreed for the UK’s withdrawal from the EU say relatively little about the future framework for cross-border trade in goods or services.  More detail is expected on this next week.

The draft withdrawal agreement provides that a transition period will continue until 31 December 2020. Although this was provisionally agreed in March 2018, yesterday’s statements make this a more likely reality. Continue reading

The FSB’s Crypto-assets framework: What does it mean for firms?

The Financial Stability Board (FSB) has published its framework to monitor crypto-assets as part of its wider report to the G20 on work by the FSB and standard-setting bodies on crypto-assets. The report is provided at the request of the G20 Finance Ministers and Central Bank Governors, and will be discussed at their meeting on 21-22 July 2018. Continue reading