Greg Kilminster
Head of Product - Content
PSR moves to publish ‘fraud enabler’ data
The Payment Systems Regulator (PSR) has announced plans to publish data on the firms which are most commonly reported as enabling contact between fraudsters and victims of push payment (APP) fraud. This data, gathered from the UK’s largest banks, will outline how and where fraudsters connect with victims. The PSR aims to raise awareness and encourage action within industries most frequently associated with such scams. Stakeholders are invited to provide feedback on the publication plans until 4 December 2024, with the final report scheduled for release in mid-December.
Some context
APP fraud, in which victims are tricked into authorising a transfer of funds, has been a priority for the PSR since 2019. To combat this, the regulator introduced mandatory reimbursement requirement for APP fraud victims, effective since October 2024, making both the sending and receiving payment service providers jointly responsible for compensating affected consumers. Alongside this measure, the PSR has published firm-level data on APP fraud cases to drive industry innovation and accountability.
The regulator’s latest initiative aims to use publicly available data to broaden the response to APP fraud. By spotlighting digital and telecom platforms as potential fraud “enablers,” the PSR hopes to motivate these sectors to collaborate more closely with payments firms, thereby reducing fraud risks upstream.
Key takeaways
The PSR’s planned publication is expected to bring several benefits, including:
- Increased consumer awareness: The report, planned for release before the holiday season, will enable consumers to make more informed choices about digital payments and online interactions.
- Greater customer vigilance: By identifying high-risk platforms, the PSR aims to encourage consumers to stay alert while using services like social media or online marketplaces, especially during periods of high online activity.
- Improved cross-industry collaboration: Payment firms can use the insights to better understand the risk profile of transactions. This knowledge is expected to encourage more collaboration between digital service providers and payment firms, thereby strengthening fraud prevention efforts across sectors.
- Reputational incentives for change: The PSR intends to rank platforms based on the frequency they were reported as “fraud enablers.” By doing so, it hopes to prompt companies to improve their fraud prevention measures, motivated by reputational concerns and the opportunity to demonstrate proactive fraud management.
Next steps
The PSR has invited comments on its approach to publishing fraud enabler data until 4 December 2024. After evaluating feedback, the PSR plans to release its 2023 data report in December, which will include rankings and sector-specific insights. This publication marks the start of an annual reporting process, with continued data collection and increased consistency expected from 2026.
Click here to read the full RegInsight on CUBE's RegPlatform.
ECB consults on revised options and discretions for bank supervision
The European Central Bank (ECB) is consulting on its approach to using options and discretions within EU banking laws. The proposed revisions cover key supervisory powers that allow national authorities to interpret certain provisions, aiming to create consistent rules across the eurozone’s banking sector. The consultation period runs until 10 January 2025.
Some context
Under EU law, certain banking regulations provide national supervisory authorities with discretionary powers to determine how specific provisions apply within their jurisdictions. The ECB’s revised policies are designed to harmonise the use of these options, supporting a unified supervisory approach across the European banking sector. The need for these updates arose from the latest EU banking package, which includes the Capital Requirements Regulation III (CRR III) and Capital Requirements Directive VI (CRD VI), both aimed at enhancing prudential standards across the banking system.
The proposed revisions follow a similar update in 2022, which aligned the ECB’s supervisory policies with the CRR II and CRD V regulations. By reflecting recent regulatory changes, the ECB seeks to strengthen transparency and promote uniformity in supervisory practices, especially in areas such as capital requirements, risk classification, and fund management.
Key takeaways
The updated guidance affects several critical aspects of banking oversight. Notable areas include:
- Capital definitions and requirements: The ECB is setting clearer criteria for what qualifies as “own funds” and how banks should calculate capital needs for specific risk categories. This aims to create a more reliable assessment of banks’ financial health.
- Trading book classifications: Updated rules outline the types of assets banks can categorise under the trading book, aiming for consistency in how these holdings are valued and supervised.
- Consolidation scope: The ECB provides guidelines on exemptions for determining which entities should be included in a banking group’s consolidated supervision, allowing for consistency across jurisdictions.
These changes are intended to improve coherence in supervisory practices, ensuring that similar rules are applied to banks across the euro area. For institutions classified as “significant credit institutions,” these policies will serve as a guide for both the ECB and national supervisory teams in decision-making.
Next steps
Stakeholders have until 10 January 2025 to submit feedback. Following the consultation period, the ECB will publish the responses, along with a summary of feedback and the final policy framework. These documents will be accessible on the ECB’s Banking Supervision website, along with frequently asked questions.
Click here to read the full RegInsight on CUBE's RegPlatform.
Australian Treasury explores licensing regime for franchise sector
The Australian Treasury has released a consultation paper exploring the potential benefits of introducing a licensing regime for the franchising sector. This regime, if adopted, would address ongoing challenges in the sector and enhance regulatory oversight, fostering fairer relationships between franchisors and franchisees. Stakeholders are invited to submit feedback by 8 December 2024.
Some context
The franchising sector in Australia has been regulated by a mandatory code since 1998, with the current framework set by the Competition and Consumer (Industry Codes—Franchising) Regulation 2014. However, recent evaluations have highlighted persistent issues such as power imbalances and inadequate disclosure, which the current regulatory framework struggles to address proactively. One of these reviews recommended exploring a licensing regime, a model that could offer preemptive protections by establishing standards franchisors must meet before operating.
The Treasury's consultation paper now seeks feedback on whether this licensing approach would provide more effective protection for franchisees while ensuring a competitive, sustainable franchising market.
Key takeaways
The consultation paper examines five primary functions that a licensing regime could address:
- Regulatory oversight: A licensing framework could allow for proactive regulation, enabling authorities to enforce standards before issues arise. This would represent a shift from the current “ex post” model, which intervenes after breaches occur.
- Dispute resolution: The current Franchising Code mandates alternative dispute resolution (ADR) processes, but concerns remain over the cost and accessibility. A licensing regime could introduce mandatory binding arbitration, similar to mechanisms in other regulated sectors, to provide quicker, enforceable resolutions.
- Enhanced disclosure: Improving the Franchise Disclosure Register (FDR) is a priority. Licensing could enforce uniform data collection and disclosures, helping franchisees make better-informed decisions. Additional features could include comparative tools for evaluating franchise opportunities.
- Franchise model prerequisites: The paper suggests that a minimum business maturity level should be required before a franchise licence is granted. This could involve franchisors demonstrating operational success and franchisee support capacity to ensure long-term viability.
- Education and resources: Licensing could mandate that franchisors and franchisees complete specific training on the Franchising Code and industry best practices, aiming to reduce disputes and enhance franchisee protections.
Next steps
The Treasury has called for industry feedback on these potential regulatory changes by 8 December 2024. Following this, further engagement is planned to refine the regulatory approach and funding model, with initial data collection improvements potentially starting in 2026.
Click here to read the full RegInsight on CUBE's RegPlatform.
Fund manager fined for regulatory breaches
The Central Bank of Ireland has imposed a €393,512 fine on Waystone Fund Management (IE) Limited (WFM) following breaches of the Alternative Investment Fund Managers (AIFM) Regulations, governing practices for safeguarding investor interests. The breaches occurred between May 2018 and August 2020 and highlighted deficiencies in WFM’s oversight and management responsibilities, including failings in due diligence, risk management, and conflict of interest handling.
Fund investment mismanagement led to investor loss
WFM, acting as the alternative investment fund manager for a fund launched in October 2018, delegated investment management to an external investment manager. However, the delegated manager invested €17.7 million in illiquid private assets, labelled as “Loan Notes,” between October 2018 and February 2019, which soon proved problematic.
A November 2019 audit flagged significant concerns over the valuation of the Loan Notes. Despite WFM’s efforts to retrieve the invested funds, only partial recovery was achieved, leaving €10.2 million outstanding. This shortfall forced the fund’s suspension in August 2020, resulting in substantial investor losses. Following a settlement, affected investors recouped their initial investments.
Regulatory breaches and settlement
The Central Bank’s investigation into the fund’s suspension uncovered eight breaches of AIFM Regulations. Among the issues, WFM failed to:
- Conduct sufficient due diligence on investments.
- Monitor delegated activities effectively.
- Manage conflicts of interest.
- Establish robust risk management systems.
- Maintain consistent valuation procedures for fund assets.
- Notify the Central Bank of potential regulatory breaches.
WFM acknowledged these regulatory contraventions, agreeing to pay the fine after a 30% discount under a settlement scheme, which reduced the initial €562,160 penalty.
Central Bank commitment to investor protection
Seána Cunningham, the Central Bank’s Director of Enforcement and Anti-Money Laundering, stressed that AIFM Regulations are critical to investor protection, requiring managers to maintain fair practices. "In this case, there was a wholesale failure by WFM to abide by these requirements," she said, emphasising the risks posed to investors by inadequate oversight, failure to manage conflicts of interest, and poor valuation procedures.
She also highlighted that WFM’s inexperience in managing illiquid assets and lack of oversight over its delegated manager exposed the fund to unacceptable levels of risk, reinforcing that delegation does not absolve AIFMs from regulatory responsibilities.
Click here to read the full RegInsight on CUBE's RegPlatform.