CUBE RegNews 19th November

Greg Kilminster

Greg Kilminster

Head of Product - Content

Treasury issues final rule to strengthen CFIUS procedures and enforcement

The US Department of the Treasury has introduced new regulations to enhance the Committee on Foreign Investment in the United States (CFIUS) processes and strengthen its enforcement capabilities. This marks the first major update since the 2018 Foreign Investment Risk Review Modernization Act (FIRRMA), with the final rule aiming to address national security risks more efficiently. 


Some context 

CFIUS is tasked with assessing foreign investment and real estate transactions for potential threats to US national security. It also ensures compliance with its regulations and agreements through penalties and other remedies. In recent years, CFIUS has advanced its monitoring, compliance, and investigative tools, particularly for transactions that were not voluntarily notified. The new rule builds on these developments, reflecting CFIUS’s dual focus on safeguarding national security and maintaining an open investment policy. 


Key takeaways 

The final rule introduces several significant changes: 

  • Enhanced information requirements: CFIUS can now request a broader range of details from transaction parties, particularly in cases of unnotified deals. 
  • Risk mitigation deadlines: The CFIUS Staff Chairperson can set timelines for transaction parties to respond to risk mitigation proposals, ensuring statutory review periods are met. 
  • Expanded penalty scope: Civil penalties may now be imposed for material misstatements or omissions even outside formal reviews, reinforcing compliance. 
  • Increased penalties: Maximum fines for violations have been substantially raised, with a new calculation method for breaches of mitigation agreements or conditions. 
  • Broader subpoena use: CFIUS can apply its subpoena authority more widely, including in non-notified transaction reviews. 
  • Extended reconsideration timelines: Parties now have more time to appeal penalties, and CFIUS has additional days to respond to such petitions. 


Next steps 

The final rule will take effect 30 days after publication in the Federal Register. It is intended to reinforce the Treasury’s commitment to ensuring robust oversight while facilitating transparent and timely reviews. Transaction parties and investors should review the updated requirements to ensure compliance with the enhanced regulatory framework. 


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Ireland’s Central Bank outlines vision for regulation in a changing economy

In a speech at the Central Bank of Ireland’s Financial System Conference, Governor Gabriel Makhlouf emphasised the need for a forward-thinking regulatory framework to address the challenges of a rapidly evolving financial system. Makhlouf detailed the Central Bank’s efforts to adapt its supervisory and regulatory approaches while highlighting key areas for innovation and future focus. 


Transforming regulation for a dynamic environment 

Makhlouf outlined the Central Bank’s commitment to adapting its practices in response to a financial landscape shaped by digitalisation, innovation, and evolving consumer needs. “Central banks, regulators, businesses, and consumers all have to adapt, transform and evolve,” he noted, emphasising the importance of flexibility in regulatory frameworks. 


A cornerstone of this transformation is the introduction of a new supervisory framework, designed to ensure the Bank remains equipped to manage the complexities of a fast-changing financial system. The framework, he explained, “will remain risk-based but is evolving to deliver a more integrated approach drawing on all elements of our mandate.” This includes a greater focus on consumer protection, which Makhlouf described as being “at the heart of day-to-day supervision.” 


The revised framework also promises a streamlined and transparent approach to oversight. “Firms will hear one consistent voice from the Bank, with more coordinated messaging and more streamlined demands,” he said. This integrated model, effective from January 2025, aims to ensure that regulatory oversight keeps pace with innovation and complexity in the sector. 


Innovation as a cornerstone of progress 

Makhlouf underscored the Central Bank’s proactive engagement with innovation in financial services, noting the success of its recently launched Innovation Sandbox Programme. This initiative, which focuses on combating financial crime, has already received strong interest from various stakeholders, including start-ups and established firms. “The projects submitted are exploring new technologies and developing innovative methods to tackle financial crime,” he said, highlighting the potential benefits for both consumers and the broader financial system. 


The Bank’s approach to innovation extends beyond sandboxes. It includes collaboration with European partners on initiatives such as the Digital Euro and ongoing work on the EU’s new Financial Data Access Regulation. These efforts reflect the Central Bank’s broader strategy of being “future-focused” while balancing public and private innovation. 


Preparing for the future of finance 

Looking ahead, Makhlouf identified three transformative areas: 

  • payments innovation, 
  • tokenisation, and 
  • artificial intelligence (AI). 


He stressed the urgency of modernising payment systems to reduce frictions, especially in cross-border transactions. The development of a National Payments Strategy, alongside work on the Digital Euro, reflects the Central Bank’s focus on ensuring public money remains accessible in a digital age. “The introduction of a digital euro is a logical next step in the evolution of our currency,” he said. 


On tokenisation, Makhlouf clarified its distinction from speculative cryptocurrencies, stating that it involves “using distributed ledger technology to ‘tokenise’ real assets with real value.” He highlighted its potential to improve transaction processing, expand financial access, and enhance regulatory transparency. Similarly, the rise of AI poses opportunities and challenges, including risks related to cyber security and ethical data use. “All of us – industry and policymakers – have a role to play,” he stressed, calling for collaboration to maximise benefits while mitigating risks. 


A call for long-term vision in European regulation 

Makhlouf concluded with reflections on the European financial system’s future, emphasising the importance of sustainable, long-term policies over short-term compromises. He advocated for structural reforms in pensions, retail savings, and the supply of investable assets to strengthen Europe’s capital markets. “Long-term productivity and competitiveness are built through sustainable long-term policy,” he said, urging against the temptation to pursue short-term growth through lower standards. 


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Australian card fraud snapshot highlights overseas fraud growth

According to a new blog from the Australian Payments Network (AusPayNet), despite some success in curbing domestic scams, overseas Card-Not-Present (CNP) fraud has emerged as a growing threat, linked to the activities of organised crime syndicates in Southeast Asia.


Some context 

Australia's payment system is handling over $1.1 trillion annually in card spending, with card-related fraud costing $868 million in FY24. The fraud rate stands at 77.6 cents per $1,000 spent. While domestic fraud mitigants such as biometric verification and payment holds are achieving some success, overseas CNP fraud on Australian-issued cards has surged by 20%, now surpassing domestic CNP fraud for the first time since 2017. 


CNP fraud, where stolen card information is used without a physical card, accounts for 92% of all card fraud. This type of fraud is prevalent in e-commerce and digital subscriptions, and the lack of strong customer authentication (SCA) among overseas merchants makes them vulnerable targets. 


Key takeaways 

Domestic fraud stabilising: Domestic fraud increased 12% to $351 million, but the fraud rate fell slightly to $1.06 per $1,000 spent, aided by the industry’s CNP Fraud Mitigation Framework. 

Overseas fraud surging: Overseas CNP fraud rose 20% to $434 million, outpacing the 13% growth in overseas card spending. The fraud rate jumped from $10.93 to $11.96 per $1,000 spent. Overseas fraud now represents 51% of all card fraud, despite accounting for just 3% of total Australian card spend. 

Emergence of scam compounds: Scam operations in Myanmar, Cambodia, and Laos are exploiting vulnerabilities in international e-commerce, leveraging techniques such as SMS phishing and data mining. The United Nations Office on Drugs and Crime (UNODC) has linked these compounds to forced labour and organised crime, further complicating enforcement efforts. 


Next steps 

Strengthening consumer trust in the digital economy remains paramount. While domestic efforts have demonstrated success, Australia faces challenges in influencing overseas merchants to adopt security measures like SCA. These measures, though sometimes associated with higher costs or cart abandonment, are critical to combating fraud. 


Collaboration between financial institutions, law enforcement, and international stakeholders will be key. With overseas fraud now dominating Australian card fraud statistics, a coordinated global effort is essential to protect consumers and disrupt criminal networks. 

AusPayNet and its partners continue to advocate for enhanced security protocols and are exploring innovative solutions to stay ahead of evolving threats. 


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Australian consultation on unfair trading

The Australian government has launched a consultation on proposed prohibitions targeting unfair trading practices, aiming to strengthen consumer protections and address gaps in existing regulations. The consultation seeks views on the introduction of both general and specific measures to combat practices that undermine consumer rights, particularly in the digital and subscription-based economies. 


Some context 

The consultation builds on findings from earlier stakeholder engagements, highlighting concerns that current protections under consumer law may not adequately address emerging risks. Specifically, the government has identified issues such as: 

  • Subscription traps: Practices that make cancelling subscriptions difficult or lead to unexpected charges. 
  • Drip pricing: Hidden fees revealed late in a purchasing process, obscuring the true cost. 
  • Dynamic pricing: Price changes during transactions, particularly in online markets. 
  • Dark patterns: Manipulative online designs that distort consumer choices. 


The proposed remedies for each are outlined below. While Australia has robust consumer protection laws, the government recognises that rapid technological advancements and evolving business models necessitate additional safeguards. 


Key takeaways 

General prohibition on unfair trading practices 

The consultation outlines and invites questions on a general prohibition which would be principles-based, addressing unfair trading practices that cause consumer harm but cannot be addressed by the ACL’s current provisions. It notes that: 

  • A proposed general prohibition would target behaviours that distort consumer decision-making or cause significant harm. 
  • Examples include withholding critical information or using design features to manipulate choices. 
  • This flexible approach aims to address future challenges as new practices emerge. 


Specific prohibitions 

The consultation outlines the following targeted measures for specific issues: 

  • Subscription practices: Proposals include mandatory upfront disclosures, opt-in requirements for auto-renewals, and simple cancellation processes. 
  • Drip pricing: Businesses could be required to display all costs transparently at the start of transactions. 
  • Dynamic pricing: A potential ban on raising prices during purchasing processes is under consideration. 
  • Online account requirements: Mandating guest checkout options to prevent unnecessary data collection and improve privacy. 


Addressing dark patterns 

Dark patterns—deceptive design tactics—are a significant focus, with proposals to penalise businesses using these methods to exploit consumer vulnerabilities. 


Application to business-to-business transactions 

While the primary focus is consumer protection, the government is considering whether some protections should extend to small businesses, recognising the challenges posed by power imbalances in commercial dealings. 


Next steps 

The consultation invites feedback from businesses, consumer groups, and other stakeholders. The consultation closes on 13 December 2024, after which a decision will be made on whether to proceed with the proposed reforms. 


Click here to read the full RegInsight on CUBE's RegPlatform.