Following the agreement last week between the UK and the EU to extend Article 50 until 31 October 2019 11pm GMT (see our earlier post), the FCA has now confirmed that it will extend the notification window for incoming EEA firms and fund managers to enter the UK Temporary Permission Regime (“TPR“) to the end of 30 May 2019. Fund managers that need to update their existing TPR notification as a result of the FCA’s extension should also notify the FCA that this is the case by 16 May 2019.
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.
Authors: Sarah Thomas, Cat Dankos and Hywel Jenkins
At the end of January, the UK Financial Conduct Authority (FCA) issued a further consultation paper (CP19/4, the CP) on the Senior Managers and Certification Regime (SMCR). Responses to the CP are requested by 23 April 2019. Alongside other minor proposed changes which seek to “optimise” the SMCR, the key proposals are:
- For all firms (banks, insurers, and all solo regulated firms), the legal function will not need to have a SMF Manager responsible for it.
- Responsibility still has to be allocated to someone, but that individual does not need to be a SMF Manager.
- The FCA expects the Head of Legal to be a certified function and that the conduct rules will apply to all legal staff.
- Banks and insurers need to think about whether to change their SMF Manager allocations in light of this confirmation (as well as statements of responsibility and responsibilities map), and how to depict the position of the legal function on their responsibilities map.
- For all firms (banks, insurers and solo regulated firms) the certification regime definition of the ‘client dealing’ function has been clarified (with a narrowing effect). It will exclude individuals who have no scope to exercise discretion.
- Insurers and banks may wish to cross-check their existing pool of client dealing staff against the proposed new definition in readiness for the final rules.
- For solo regulated firms, the FCA has expanded the scope of the forthcoming Enhanced regime to cover more intermediaries.
- For limited scope solo regulated firms, Manager Conduct Rule 4 (SC4) will be amended to cover non-approved executive directors.
On 21 February 2019, the FCA announced its first decision under its competition enforcement powers, finding three asset management firms have breached competition law. This decision is an important assertion of the FCA’s intention to use its competition powers – previous matters which involved the FCA were subsequently taken over by the European Commission under EU competition law. In its announcement, the FCA emphasised its commitment to taking enforcement action to protect competition, issuing a warning to the asset management industry to avoid undermining the proper process for setting the prices of shares in IPOs and placings and the potential impact failure to do so has on the UK’s capital markets.
To read our full briefing on the decision, please click here.
The UK FCA and PRA propose to implement the TPR if the UK leaves the European Union on 29 March 2019 without an implementation (or transitional) period, to ensure that EEA firms currently operating under an incoming passport (either from a UK branch or on a cross-border services basis into the UK) can continue to carry out regulated activities in the UK until they receive new direct authorisation by the UK regulators. For more information, please see our HSF briefing – UK Temporary Permissions Regime placemat
The former CEO of Saint Vincent-based Loyal Bank pleaded guilty and was convicted on 11 September of conspiring to defraud the US by failing to comply with the Foreign Account Tax Compliance Act (FATCA). This is the first conviction obtained by the US Department of Justice (DOJ) since FATCA came into effect in 2014 and was the result of a sting operation. The FBI worked with the US Internal Revenue Service (IRS), the US Securities and Exchange Commission, the City of London Police, the UK Financial Conduct Authority and the Hungarian National Bureau of Investigation. The offender’s sentencing date is yet to be scheduled and he is facing a maximum of five years in prison.
This conviction, on the heels of a US governmental report critical of the IRS’s limited use of FATCA, could mark a more active enforcement environment going forward. Under FATCA, certain foreign financial institutions (FFI) must report US citizens’ account information to the IRS and the US has intergovernmental agreements with Hong Kong and other Asian jurisdictions to facilitate this. The DOJ has indicated that financial institutions in Hong Kong and Singapore are on the US authorities’ priority list in terms of FATCA enforcement. As such, both US citizens and financial institutions in the region should remain cognisant of FATCA’s requirements and ensure compliance. For our full briefing on the conviction, please click here.
Almost a year after it was introduced, a key piece of UK domestic Brexit legislation has now been passed. The European Union (Withdrawal) Act 2018 (EUWA), which aims to provide a functioning statute book on the day the UK leaves the EU, completed its difficult passage through the UK Parliament and passed into law on 26 June 2018. Please refer to our briefing, “The UK’s new legal order post-Brexit: A new class of UK law” for a summary of the EUWA.
Following the passing of the EUWA, HM Treasury, the Bank of England, FCA and the Payment Services Regulator (PSR) have each published statements on their approaches to their role in preparing for Brexit, a summary of which is set out here.
The Financial Conduct Authority (FCA) has issued a joint consultation paper – Claims management: how we propose to regulate claims management companies (CP18/15) (the Consultation) with the Financial Ombudsman Service (FOS) setting out draft proposals on how the FCA intends to authorise and regulate claims management companies (CMCs).
This Consultation will be of interest to:
- CMC’s operating in England, Scotland and Wales.
- Organisations that are not CMCs but have the potential to be affected by them
Welcome to the May 2018 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.
We are proud to announce that the Corporate Crime and Investigations practice at Herbert Smith Freehills has been awarded Investigation Firm of the Year at the Who’s Who Legal Awards 2018. Continue reading