1 Legal & Regulatory
1.1 UCITS and AIFMD Update
On 26 March 2024, Directive (EU) 2024/927 amending AIFMD 2011/61/EU and the UCITS Directive 2009/65/EC relating to delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services, and loan origination by alternative investment funds ("AIFs") was published in the Official Journal of the EU ("OJ"). Known as AIFMD II, the directive will enter into force on 15 April 2024 and will have to be transposed by EU Member States by 16 April 2026.
The changes introduced aim to strengthen investor protection; improve access to finance from sources other than banks; tackle greenwashing; and help complete the capital markets union by limiting national approaches when it comes to marketing AIFs. One of the major enhancements under AIFMD II is the introduction of a pan-European loan origination regime for AIFs.
1.2 ELTIF 2.0
On 10 January 2024, Regulation (EU) 2023/606 which revised the European Long-Term Investment Fund ("ELTIF") framework, came into effect across the EU. Commonly referred to as 'ELTIF 2.0', it aims to make ELTIFs more attractive by removing several regulatory obstacles. ELTIFs are EU AIFs managed by AIFMs that invest in long-term investments and can be distributed on a cross-border basis to both professional and retail investors.
On 6 March 2024, the European Commission communicated its intention to adopt the draft ELTIF regulatory technical standards ("RTS") proposed by the European Securities and Markets Authority ("ESMA") with certain amendments and sent a letter to ESMA on the proposed amendments. The Commission believes that ESMA's draft RTS do not sufficiently cater for the individual characteristics of different ELTIFs. Therefore, the Commission considers it needs to take a more proportionate approach to the provisions of the RTS, particularly on the calibration of the requirements relating to redemptions and liquidity management tools.
For more information please see ELTIF 2.0 – A Welcome Communication on the Draft RTS from the European Commission
The Central Bank (Individual Accountability Framework) Act 2023 enhances the regulation and governance of regulated financial service providers ("RFSPs") in Ireland. One aspect of the new regime imposes obligations on all RFSPs with respect to expected standards of conduct ("Business Standards"); expected standards of conduct for every person within the fitness and probity regime ("Common Conduct Standards"); and additional standards of conduct for certain senior persons ("Additional Conduct Standards"). The Conduct Standards have applied since 29 December 2023 except for the Business Standards which will not be effective until the revised Consumer Protection Code ("Code") is implemented.
On 7 March 2024, the Central Bank published a consultation (CP158) on its proposals to revise the Code. Annexed to CP158 are two draft set of regulations which will replace the Code and two sets of draft guidance (Guidance on Securing Customers' Interests and Guidance on Protecting Consumers in Vulnerable Circumstances). In addition, new digital tools, explainers and guides to support consumers and firms in accessing the information that they need will be developed.
The first set of regulations will contain Standards for Business complemented by Supporting Standards for Business (giving further detail on firms' obligations under the Standards for Business). These will replace and expand the Code's existing General Principles.
The second set of regulations containing "General Requirements" will include new and existing requirements and protections set out on a cross-sectoral and a sector specific basis. It will also consolidate several existing Central Bank conduct regulations and codes (such as the Code of Conduct on Mortgage Arrears). The key changes to the Code include measures on: digitisation; informing effectively; mortgage credit and switching; unregulated activities; frauds and scams; vulnerability, and climate risk.
Comments are requested by 7 June 2024. The new regulations are to be finalised in early 2025, following which there will be a 12-month transition period. This means that the new framework is expected to apply from 2026.
1.4 Sustainable Finance Update
Ireland
Published on 8 March 2024, the 2024 Ireland for Finance Action Plan looks to further establish Ireland as the recognised global location of choice for specialist international financial services and focused on 13 key deliverables under the five themes including sustainable finance and contains a special edition on sustainable finance.
Luxembourg
On 22 March 2024, the Commission de Surveillance du Secteur Financier ("CSSF") outlined its supervisory priorities for sustainable finance. Regarding asset managers the CSSF will continue to monitor compliance with the Sustainable Finance Disclosure Regulation (EU) 2019/2088 ("SFDR"), Commission Delegated Regulation (EU) 2022/1288, which supplements the SFDR regarding RTS on content and presentation of information ("SFDR Delegated Regulation") and the Taxonomy Regulation and focus on the below items on a risk-based approach:
- organisational arrangements of investment fund managers ("IFMs"), including the integration of sustainability risks by financial market participants;
- verification of the compliance of pre-contractual and periodic disclosures;
- verification of the consistency of information in fund documentation and marketing material;
- verification of the compliance of product website disclosure; and
- portfolio analysis.
EU
On 29 January 2024, the EU Platform on Sustainable Finance published a report containing a compendium of market practices, looking at how the EU taxonomy and sustainable finance framework are helping financial and non-financial actors transition to net zero.
On 5 February 2024, the Council of the EU announced that it has reached provisional political agreement with the European Parliament on the proposed Regulation on the transparency and integrity of environmental, social and governance ("ESG") rating activities. The rules aim to introduce a common regulatory approach to enhance the integrity, transparency, responsibility, good governance, and independence of ESG rating activities, contributing to the transparency and quality of ESG ratings. This political agreement is subject to approval by the Council and the Parliament before going through the formal adoption procedure.
1.5 AML / CTF Developments
Ireland
On 28 March 2024, the Anti-Money Laundering Compliance Unit ("AMLCU") of the Department of Justice published Anti-Money Laundering & Countering the Financing of Terrorism ("AML / CFT") – Guidelines for Designated Persons supervised by the Anti-Money Laundering Compliance Unit to assist Designated Persons in understanding their obligations under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010. The AMLCU welcomes feedback on the guidelines.
Luxembourg
On 29 February 2024, the CSSF published Circular 24/854 'Guidelines for the collective investment sector on the AML / CFT Summary Report RC'.
Each Luxembourg investment fund and IFM authorised by the CSSF must appoint an AML / CFT compliance officer, referred to in the French version of the Luxembourg law of 12 November 2004, as the responsable du contrôle du respect des obligations ("RC").
Each IFM and Luxembourg investment fund with a foreign IFM or which has not appointed an IFM, must file with the CSSF, an AML / CFT summary report prepared by the RC ("SRRC"), on an annual basis. The CSSF has now introduced a template SRRC which must be completed on the CSSF's online eDesk portal.
The SRRC must be filed with the CSSF within five months of the year-end of the supervised entity. For SRRCs covering the year which ended on 31 December 2023, an extended seven month filing deadline applies. Further information is available in the CSSF's FAQ and Practical and technical guidance on the SRRC.
EU and International
On 16 January 2024, the European Banking Authority ("EBA") published a final report with amending guidelines on customer due diligence ("CDD") and the factors credit and financial institutions should consider when assessing the money laundering ("ML") and terrorist financing ("TF") risk associated with individual business relationships and occasional transactions under Articles 17 and 18(4) of the Fourth Money Laundering Directive (EU) 2015/849 ("MLD4"). These amending guidelines extend the original guidelines to cryptoasset service providers ("CASPs"), highlighting the ML and TF risk factors and mitigating measures that CASPs need to consider. The revised guidelines will apply from 30 December 2024 and will be translated and published on the EBA's website. The deadline for competent authorities to report whether they comply with the guidelines will be two months after the publication of the translations.
On 27 February 2024, the Financial Action Task Force ("FATF") published a consultation on draft revisions to FATF recommendation 16: Wire transfers. Responses are requested by 3 May 2024. Commission Delegated Regulation (EU) 2024/595, which supplements Regulation (EU) 1093/2010 with regard to RTS specifying the materiality of weaknesses, the type of information collected, the practical implementation of the information collection and the analysis and dissemination of the information in the AML / CFT central database known as EuReCa referred to in Article 9a(2) of that Regulation came into force on 7 March 2024.
On 11 March 2024, FATF published the final version of its risk-based guidance on the transparency and beneficial ownership of legal arrangements. The new guidance on recommendation 25 aims to help countries and the private sector better understand how transparency requirements apply to legal arrangements. It provides guidance on how to assess the money laundering and terrorist financing risks associated with trusts and similar legal arrangements.
On 12 March 2024, the EBA published a call for advice from the European Commission regarding RTS and guidelines under the future AML and CTF framework.
The Commission is seeking the EBA's technical advice on certain draft RTS and guidelines that should be developed by the future Anti-Money Laundering Authority ("AMLA") (to be based in Frankfurt) and adopted by the Commission.
The request for advice is provisional as the new framework has not yet entered into force. Following provisional agreement reached in January 2024 on the AMLA Regulation, the AML Regulation and the Sixth Money Laundering Directive ("MLD6") these acts are subject to legal revision prior to formal adoption by the European Parliament and the Council of the EU. Their publication in the Official Journal of the European Union ("OJ") is expected in summer 2024.
On 28 March 2024, FATF published the implementation status of recommendation 15 by all FATF members plus 20 jurisdictions (including Ireland and Luxembourg) with materially important virtual asset service provider ("VASP") activity. It notes that many countries have yet to fully implement recommendation 15 on regulating and supervising virtual assets and VASPs to prevent their misuse for illicit finance.
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