In this week's newsletter, we provide a snapshot of the principal U.S., European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructure providers, asset managers and corporates.
AML/CTF, Sanctions and Insider Trading
UK Office of Financial Sanctions Implementation Publishes First Annual Review
On October 5, 2018, the U.K. Office of Financial Sanctions Implementation published its Annual Review for the period from April 2017 to March 2018. OFSI was established in March 2016 with the objective of raising awareness of financial sanctions, assessing and addressing suspected sanctions breaches and providing a professional service to the public and industry. The Annual Review provides an overview of: I. UN and EU financial sanction regimes implemented by OFSI; II. OFSI's work on asset freezing and a breakdown of funds frozen; III. action taken by OFSI following reports of suspected breaches of financial sanctions; IV. licenses issued by OFSI during the period; and V. awareness-raising activities. The Annual Review also outlines OFSI's forward plans in the above areas. This includes: (i) a plan to improve searchability of OFSI's Consolidated List of financial sanctions targets; (ii) potentially imposing monetary penalties in 2018 – 19; (iii) further activities to raise awareness, including the publication of more targeted guidance on financial sanctions compliance and on changes to the legal framework for sanctions; and (iv) Brexit preparations.
The Annual Report is available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/746207/OFSI_Annual_Review_2017-18.pdf.
UK Regulator Finds E-Money Firms Have Effective Anti-Money Laundering Controls
On October 3, 2018, the Financial Conduct Authority published a report on the outcome of its thematic review into money laundering and terrorist financing risks in the e-money sector. The report focuses on e-money products, including prepaid cards and digital wallets. The FCA assessed the anti-money laundering and counter-terrorist financing controls of 13 authorized Electronic Money Institutions and registered small EMIs. The review included consideration of business models that involve distributing e-money through agents and distributors. The FCA's review did not cover activities that are not regulated by the FCA (for instance, gift cards that can be used only within a limited network or prepaid products denominated in a cryptocurrency) or money remittance services provided by the EMIs. The FCA found that the majority of EMIs had effective AML and CTF controls in place and had implemented the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. In addition, transaction monitoring was considered to be effective and mostly based on automated technological solutions. Where EMIs had outsourced distribution of e-money through agents, the FCA found that most of the EMIs had adequate governance and audit measures to manage the risks. Nonetheless, the FCA noted that, despite progress in AML and CTF controls, certain weaknesses had been identified and that firms should remain vigilant.
The report is available at: https://www.fca.org.uk/publication/thematic-reviews/tr18-3.pdf.
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