HM Treasury (“HMT”) has published a consultation launching the second phase of the Future Regulatory Framework (FRF) Review (the “Review”). The purpose of the Review, which began in 2019, is to explore how the UK’s regulatory framework for financial services needs to change in order to be fit for the future, particularly in light of the UK’s exit from the EU. The aim is to achieve an agile and coherent approach to financial services regulation in the UK, with appropriate democratic policy input to support “a stable, innovative and world leading FS sector”.
On 21 October, the Financial Services Bill (FS Bill) was introduced to Parliament. Forming part of the Government’s wider Future Regulatory Framework (FRF) initiative, the FS Bill is the first step towards HM Government’s objective of maintaining the competitive position of the UK financial services industry and capitalising on new opportunities following the end of the Brexit transitional period.
In this article we summarise some of the key points arising from two important reports regarding economic crime in the UK which have been published in recent weeks.
On 8 March 2019, the House of Commons’ Treasury Committee published its “Economic Crime – Anti-money laundering supervision and sanctions implementation” report (the “Treasury Committee Report”), which suggests improvements to be made in order to tackle economic crime and develop anti-money laundering (“AML”) supervision.
On 14 March 2019, the House of Lords’ Select Committee on the Bribery Act 2010 (“UKBA”) published a report titled “The Bribery Act 2010: post-legislative scrutiny” (the “UKBA Report”) which considered whether the Act is achieving its intended purposes.
We outline some of the key conclusions and recommendations of the reports, including in relation to:
- Proposed Legislative Reform – including potential changes to corporate criminal liability and the Bribery Act Guidance in relation to the “adequate procedures” defence and corporate hospitality;
- Deferred Prosecution Agreements (“DPAs”) – suggested improvements including in relation to the court’s discretion, discounts, the prosecution of individuals and their application to smaller companies;
- AML Supervision – the risks of the current approach to AML supervision by multiple bodies and suggested improvements;
- Financials Sanctions – the effectiveness of sanctions for economic crime, including the possibility of introducing a discretion to block UK listings on the grounds of national security and the influence of e.g. Russian money in the UK;
- Derisking – recommend strategic action to combat derisking;
- Suspicious Activity Reports (“SARs”) – consideration of the SARs reform programme and suggested improvements;
- Information Flows – potential information flows at bank level and the National Economic Crime Centre’s (the “NECC”) role as a co-ordinator of law enforcement, regulators and the private sector; and
- Resources and Delays – the impact of delays and a lack of resources on combatting economic crime.
Please click here to read our full briefing.
The Financial Dispute Resolution Centre (FDRC) in Hong Kong has issued its conclusions to its consultation on proposals to significantly expand the jurisdiction of the Financial Dispute Resolution Scheme (FDRS), its alternative dispute resolution scheme for conflicts between financial institutions and their individual customers. The FDRC’s consultation met with mixed responses, with respondents from the banking and securities sectors opposing the proposed changes while other respondents, including the Department of Justice and consumer rights groups, supported the suggested reforms. Given this, the FDRC has chosen to implement a more moderate package of reforms than those it originally contemplated (as outlined in our October e-bulletin).
The key changes from the consultation paper include:
- raising the maximum claimable amount to HK$1,000,000. This is an increase from the current limit of HK$500,000, but significantly lower than the proposed increase to HK$3,000,000;
- extending the limitation period for lodging claims from 12 months to 24 months from the date of purchase of the financial instrument or date of first knowledge of loss, whichever is later, rather than the 36 months previously suggested; and
- that the FDRC will cease its current practice of providing case information such as application forms, mediated settlement agreements or arbitral awards, to the Securities and Futures Commission and Hong Kong Monetary Authority. However, it will continue to provide monthly reports regarding the number and type of disputes handled by the FDRC and information regarding systemic issues and suspected serious misconduct.
The FDRC also announced that it will enact a range of other reforms in a form largely unchanged from that proposed in its consultation paper. These include:
- expanding the scope of eligible claimants by allowing “small enterprises” to bring complaints against financial institutions (FIs);
- accepting applications for claims which are under current court proceedings without requiring the claimant to withdraw the case from court; and
- introducing a voluntary referral system.
These reforms amount to a sizeable expansion of the FDRC’s jurisdiction. As foreshadowed in our previous bulletin, FIs are likely to see an increase in claims being accepted by the FDRC once these reforms are enacted, though this increase is likely to be smaller than that which would have resulted from the enactment of the FDRC’s original proposals. The amended terms of reference for the FDRS are expected to take effect on 1 January 2018, with the exception of the reforms allowing small enterprises to bring claims, which will take effect on 1 July 2018.
Our recent e-bulletin sets out the reforms in more detail. If you wish to discuss these further, please do not hesitate to contact our Hong Kong team featured on the e-bulletin or your usual Herbert Smith Freehills contact.