Prudential Regulation Authority on solvency package 

Sam Wood, CEO of the PRA spoke at an he ABI dinner in the City of London and outlined some reforms the PRA are pursuing as part of the Solvency UK package including:  

• significant cuts to reporting requirements 

• a significant streamlining of the rules for internal model approvals. 
• plans to widen the range of assets that are eligible for the Matching Adjustment – including to allow assets with prepayment options and construction phases.  
• for smaller or newer players a proposal to raise the threshold at which firms are required to enter the Solvency UK regime (to triple the threshold for gross written premiums to £15m and double the threshold for technical provisions to £50m).  
• plans to remove capital requirements for branches of international insurers operating in the UK, reducing barriers to entry and enhancing competition and the international competitiveness of the UK market. The PRA also proposes to allow greater flexibility in the calculation of group capital requirements; which has the potential to lower merger and acquisition costs, increasing the UK’s competitiveness whilst maintaining capital adequacy. 

Wood also mentioned “we have taken steps in parallel to the Solvency II Review to simplify and clarify expectations around the UK ISPV regime, which should make it easier for firms to participate in this market and allow new ways of raising capital – we shall continue to engage with market participants to see what other steps may be necessary to improve access even further.” 

Australian bank facing criminal charges   

Members Equity Bank Limited (ME Bank) has appeared before the Federal Court, facing criminal charges for allegedly making false and misleading representations in letters to its home loan customers and allegedly failing to provide written notice about annual interest rate and repayment amount changes. 

A total of 62 charges have been laid against ME Bank. 44 charges relate to letters issued by ME Bank to home loan customers between September 2016 and September 2018, which ASIC alleges made false and misleading representations about: 

• customers’ relevant annual interest rates, and/or  
• the minimum repayment to be paid after the fixed-rate period expired, and/or 
• the minimum repayment to be paid after the interest-only rate period expired. 

On 17 February 2023, the Court listed the matter for a sentencing hearing on 31 August 2023 and made other timetabling orders. 

Russian sanctions: 12 months on 

UK Finance has published a helpful blog summarising the last 12 months of sanctions: “To date, the UK has sanctioned more than 1,200 individuals and over 160 entities under the Russia Sanctions regulations. March 2022 saw an update to the primary act (Sanctions and Anti-Money Laundering Act 2018 – SAMLA) when the Economic Crime (Transparency and Enforcement) Act 2022 received royal assent. This led to the removal of section 2 of SAMLA known as “the appropriateness test”, which required a minister to determine whether sanctions where a reasonable course of action, resulting in delays in implementation in contrast to western allies. In its place, a new urgent designation procedure was introduced so that the UK could designate the individuals and entities that are designated by any of the US, EU, Australia and/ or Canada – a step forward for international alignment and the UK’s ability to expedite implementation.”   

South Africa commits to do more following FATF intervention  

The South African Reserve Bank (SARB) and the South African government has acknowledged the need to enhance its anti-money laundering, counter financing of terrorism and counter proliferation financing (AML/CFT/CPF) following FATF’s decision to add South Africa to the list of jurisdictions currently under increased monitoring at FATF’s February plenary. 

Eight action items requiring attention by South Africa were adopted by the FATF Plenary on 24 February 2023 as follows: 
 

• demonstrate a sustained increase in outbound Mutual Legal Assistance requests that help facilitate money laundering/terrorism financing (ML/TF) investigations and confiscations of different types of assets in line with its risk profile;  
• improve risk-based supervision of Designated Non-Financial Businesses and Professions (DNFBPs) and demonstrating that all AML/CFT supervisors apply effective, proportionate, and effective sanctions for noncompliance;  
• ensure that competent authorities have timely access to accurate and up-to-date Beneficial Ownership (BO) information on legal persons and arrangements and applying sanctions for breaches of violation by legal persons to BO obligations;  
• demonstrate a sustained increase in law enforcement agencies’ requests for financial intelligence from the Financial Intelligence Centre for its ML/TF investigations;  
• demonstrate a sustained increase in investigations and prosecutions of serious and complex money laundering and the full range of TF activities in line with its risk profile;  
• enhance its identification, seizure and confiscation of proceeds and instrumentalities of a wider range of predicate crimes, in line with its risk profile;  
• update its TF Risk Assessment to inform the implementation of a comprehensive national counter financing of terrorism strategy; and  
• ensure the effective implementation of targeted financial sanctions and demonstrating an effective mechanism to identify individuals and entities that meet the criteria for domestic designation. 

The country is expected to address these deficiencies by no later than the end of January 2025. 

SEC issues charges for misappropriating investor assets 

The SEC has charged Alan Shinderman and his company, Markman Biologics Corp. (Markman Biologics), with making materially false and misleading statements to investors in four unregistered offerings and misappropriating investor funds for Shinderman’s personal use, including for the benefit of Shinderman’s wholly-owned entity, Relief Defendant Aspen Asset Management Services, LLC (Aspen). 

The SEC’s complaint alleges that between November 2019 and November 2022, Shinderman and Markman Biologics raised approximately $1.276 million from investors using materially false and misleading statements in offering materials and SEC filings, regarding, among other things, the use of investor proceeds, Shinderman’s compensation, the existence of related party transactions, and Shinderman’s status as a prohibited person. Contrary to these statements, Shinderman misappropriated more than a third of investor assets for himself and Aspen. 

The SEC’s complaint charges Shinderman and Markman Biologics with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder