CUBE RegNews: 16th February

Greg Kilminster

Greg Kilminster

Head of Product - Content

UK government demands AI update from regulators    

The UK government has written to a number of regulators, including the Financial Conduct Authority and the Bank of England, requesting that each provides an update by 30 April 2024, outlining their strategic approach to AI and the steps they are taking in line with the expectations in the AI Regulation White Paper published in August of 2023. 

Both letters state: “Your organisation is one of the regulators from whom we would particularly value an update, given how significantly AI could impact upon the sectors, markets, and/or firms you regulate.” and expectations are that the regulators should provide an update on the following: 

Assessment and legislation: Evaluate AI’s application within regulatory responsibilities, referencing relevant legislation. Highlight enabling laws and their significance regarding AI. 

Adoption of AI principles: Detail steps taken to adopt AI principles from the White Paper, offering concrete examples where applicable. 

Guidance on principles and legislation: Summarise issued or planned guidance on how AI principles interact with existing laws, advising regulated organisations accordingly. 

Understanding and managing risks: Discuss efforts to comprehend, evaluate, and mitigate AI-related risks such as bias, cybersecurity, and misuse by bad actors, informed by governmental AI risk assessments. 

Interactions with other regulators: Describe collaboration with other regulators to address AI-related issues spanning regulatory domains, including assessments on AI risks and opportunities. 

Capability to address AI risks: Explain current regulatory capability regarding AI risks, comparing it with perceived needs. Detail structures, resources, staffing, budget allocation, and required expertise. 

Forward plans and activities: Provide a forward-looking overview of plans and activities for the next 12 months, addressing capability gaps, risk assessments, guidance development, stakeholder engagement, and international collaboration, with a focus on resource prioritisation. 

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FINRA February fines summary and action against Morgan Stanley        

The Financial Industry Regulatory Authority (FINRA) has published its latest disciplinary summary for February 2024 covering a range of enforcement actions.  

Amongst the firms fined for violations are The Benchmark Company, LLC, The Windmill Group, Inc, Purshe Kaplan Sterling Investments, Inc and Interactive Brokers LLC. 

The briefing also details the numerous individuals fined or barred by the regulator. The briefing was published on the day that FINRA also fined Morgan Stanley $1.6 million for securities violations. The action against Morgan Stanley is the first time that the regulator has taken disciplinary action for a breach of the close-out requirements under MSRB Rule G-12(h) which that failed inter-dealer municipal securities transactions be canceled or closed out no later than 20 calendar days after settlement date. 

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US Treasury Brian Nelson shares initiatives to prevent illicit finance          

Brian Nelson, the under secretary for terrorism and financial intelligence at the US Department of the Treasury (US Treasury), has shared remarks outlining the efforts undertaken by the US Treasury to prevent illicit finance and safeguard the US financial system. In his statement, he highlighted the following initiatives: 

Conducting risk assessments: The US Treasury has issued several national risk assessments for money laundering, terrorist financing, and proliferation financing (including a 2024 investment adviser risk assessment report issued the same day). Nelson explained that these assessments benefit both the US government and private sector. 

Improving corporate transparency: Nelson emphasised the importance of limiting corporate anonymity and shared details about the Financial Crimes Enforcement Network’s (FinCEN) newly launched beneficial ownership filing system.  

Preventing abuse in the residential real estate sector: Nelson outlined the FinCEN rule proposal to increase transparency into certain non-financed transfers of US residential real estate. The proposed rule, he said, aims to provide law enforcement and national security partners with a lasting tool.


Ensuring consistency in financial services: Nelson also touched on the proposed rule to apply AML/CFT Compliance Program and Suspicious Activity Report (SAR) filing obligations to certain investment advisers. He noted that these measures would help harmonise regulatory obligations and advance a level regulatory playing field across the financial services sector. 

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BaFin consults on 8th amendment to MaRisk    

The German Federal Financial Supervisory Authority (BaFin) has issued a consultation on the 8th amendment to its supervisory circular, Minimum Requirements for Risk Management (MaRisk). The main objective of this amendment is to integrate the new requirements from the European Banking Authority (EBA) concerning interest rate risks and credit spread risks in the banking book. 

Although a significant portion of the EBA’s requirements regarding interest rate risks in the banking book are already covered in MaRisk, either explicitly or implicitly, some additional provisions were deemed necessary to ensure full compliance with the EBA guidelines. 

 The consultation deadline is 14 March 2024. 

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G20/OECD extend interim period for tax agreements     

The US Department of the Treasury has published a joint statement from the United States, Austria, France, Italy, Spain, and the United Kingdom on extending the interim period regarding tax related agreements made as part of the G20/OECD Inclusive Framework (Inclusive Framework). 

The Inclusive Framework brings together more than 140 countries and jurisdictions to implement the Base Erosion and Profit Shifting (BEPS) package to combat tax avoidance, improve international tax rules, and promote a more transparent tax environment. 

In October 2021, the Inclusive Framework reached a political agreement on a two-pillar solution that addresses the tax challenges arising from the digitalisation of the economy. The agreement introduces a set of rules, including a global minimum tax, that countries may implement to ensure that large multinational enterprises are subject to an effective tax rate of 15% on their profits in every jurisdiction where they operate. 

On 18 December 2023, the Inclusive Framework issued a statement calling for the finalisation of the text of the Pillar 1 multilateral convention by the end of March 2024, with the aim of holding a signing ceremony by the end of June 2024. 

Due to the revised timeline for the adoption and signature of Pillar 1, the participants have decided to extend the political compromise outlined in the 2021 joint statement until 30 June 2024. 

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CP375: ASIC proposes changes to derivative transaction rules   

The Australian Securities and Investments Commission (ASIC) has issued a consultation paper (CP) 375, proposing changes to the ASIC Derivative Transaction Rules (Reporting) 2024 and minor adjustments to the ASIC Derivative Transaction Rules (Clearing) 2015. 

According to ASIC, most reporting entities will not face any significant additional compliance burden while implementing the proposed changes. However, a few international reporting entities and small-scale exempt reporting entities may be affected. 

The proposed amendments to the ASIC Derivative Transaction Rules (Reporting) 2024 aim to: 

  • Simplify the exclusion of exchange-traded derivatives 
  • Streamline the scope of foreign entity reporting 
  • Remove the alternative reporting provisions 
  • Clarify the exclusion of FX securities conversion transactions 
  • Add additional allowable values for two data elements 

On the other hand, the proposed amendments to ASIC Derivative Transaction Rules (Clearing) 2015 aims to:

  • Simplify and align the exclusion of exchange-traded derivatives with the 2024 Reporting Rules 
  • Make minor updates to re-reference the changed location of definitions in the Corporations Act 2001, which have been moved by the Treasury Laws Amendment (2023 Law Improvement Package No. 1) Act 2023. 

The consultation deadline is 28 March 2024. 

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