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Key Regulatory Topics Weekly Update 18 - 24 February 2022

25 February 2022

Allen & Overy publish weekly updates on key regulatory topics affecting the financial services sector. If you would like to receive this update by email and be added to our marketing mailing list please contact RegulatoryChange@allenovery.com.

Financial crime and sanctions

FATF adopts amendments to Recommendation 24 on prevention of misuse of legal persons

On 4 March, the FATF adopted amendments to Recommendation 24 which requires countries to prevent the misuse of legal persons for ML/TF and to ensure that there is adequate, accurate and up-to-date information on the beneficial ownership and control of legal persons. The FATF explains that this in response to FATF Mutual Evaluations showing a generally insufficient level of effectiveness of controls. The amendments explicitly require a multi-pronged approach for the collection of beneficial ownership information to ensure it is available to competent authorities in a timely manner. Countries should: (i) require companies to obtain and hold adequate, accurate and up-to-date information on their own beneficial ownership and make such information available to competent authorities in a timely manner; (ii) require beneficial ownership information to be held by a public authority or body functioning as beneficial ownership registry or may use an alternative mechanism if such a mechanism also provides efficient access to adequate, accurate and up-to-date beneficial ownership information by competent authorities; (iii) apply any additional supplementary measures that are necessary to ensure the determination of beneficial ownership of a company. These additional measures include holding beneficial ownership information obtained by regulated financial institutions and professionals, or held by regulators or in stock exchanges; (iv) follow a risk-based approach and consider the risks of legal persons in their countries. They must assess and address the risk posed by legal persons, including those based in third-countries, which have sufficient links with their country; (v) ensure that public authorities have access to beneficial ownership information of legal persons in the course of public procurement; and (vi) introduce stronger controls to prevent the misuse of bearer shares and nominee arrangements. The FATF will analyse the growing practical experience of implementing beneficial ownership registries, with a view to identifying best practices and supporting implementation by countries. 

Statement

Prudential regualation

ECB Decision on procedure to exclude staff members from presumption of having a material impact on supervised credit institutions’ risk profile published in OJ

On 4 March, the ECB Decision (EU) 2022/368 amending Decision (EU) 2015/2218 on the procedure to exclude staff members from the presumption of having a material impact on a supervised credit institution's risk profile was published in the OJ. Commission Delegated Regulation (EU) No 604/2014 established qualitative and quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution's risk profile. It also established a procedure whereby an institution may determine that although a staff member meets the quantitative criteria, their professional activities are not considered to have a material impact on the institution’s risk profile, and based on such determination may notify, or request authorisation from, the competent authority to exclude the relevant staff member from the presumption that their professional activities have a material impact on the institution’s risk profile. This Delegated Regulation has now been replaced, eliminating the notification procedure. The Amended Decision therefore establishes transitional measures to ensure legal certainty for credit institutions, which submitted notifications and applications or requests for prior approval. The Decision enters into force on 24 March (20 days after publication in the OJ).

Decision

Recovery and resolution

ITS on procedures, standard forms and templates for resolution plans under BRRD published in OJ

On 4 March, Commission Implementing Regulation (EU) 2002/365 amending Implementing Regulation (EU) 2018/1624 laying down ITS on procedures, standard forms and templates for the provision of information for the purposes of resolution plans under Article 11(3) BRRD was published in the OJ. The amendments reflect amendments introduced to the minimum requirement for own funds and eligible liabilities introduced by BRRD II. It comes into force on 23 March (20 days after publication in the OJ).

Implementing Regulation

Sustainable finance

EC study on feasibility, minimum standards and transparency requirements of ESG benchmark Label

On 4 March, the EC began a study exploring the possibility of introducing a new EU ESG benchmark label. The EC hopes that the study will provide an extensive view of the existing ESG-related benchmarks market, highlighting shortfalls and best practices. The study will inform the EC about possible features for a new EU ESG benchmark label that would become a key lever to align investments with long-term sustainability considerations. The EC has published three surveys to give stakeholders a say for administrators of ESG-related benchmarks, benchmark constituents and benchmark institutional investors / asset managers.

Webpage

Other developments

FCA quarterly consultation paper No. 35

On 4 March, the FCA began consulting on its 35th quarterly consultation paper. The FCA is proposing to: (i) make changes to chapters 2 and 13 of the Perimeter Guidance manual to clarify application of the MiFID II Ancillary Activities Test in the absence of overall market size data; (ii) amend the research and inducement rules for collective portfolio managers so they are subject to the same rules as investment managers; (iii) make changes to reflect amendments HMT has made to the UK MiFID delegated regulation in places where it is copied out in the Glossary and COBS; (iv) amend LR 14 to reflect the original policy position for investment entities other than OEICs prior to the amendments introduced in January 2021; (v) make changes to the approach to continuing professional development for retail investment advisers and pension transfer specialists; and (vi) extend the MIFIDPRU TP 7.4R(2)(b) self-certification notification deadline. The deadline for comments is 11 April.

Webpage

Consultation