Greg Kilminster
Head of Product - Content
FCA announces MS 24/1.1 on pure protection insurance products distribution
The Financial Conduct Authority (FCA) has announced the launch of market study (MS) 24/1.1 to investigate the sales of pure protection insurance products and has invited feedback on the proposed terms of reference (ToR).
FCA concerns
The FCA has identified concerns about the functioning of the pure protection market, suggesting that competition may not effectively serve consumers' interests. Specifically, they are worried that:
- Commission arrangements may not always support the delivery of fair value.
- Certain pure protection products may not offer fair value to customers.
- Competitive pressures in the market may be diminishing following the exit of several insurers providing pure protection products.
MS aim and focus
The MS aims to assess the performance of the market and the outcomes for consumers. The FCA is particularly interested in examining commission arrangements, the value of pure protection products for consumers, and the strength of competition after the exit of several providers. The study will specifically focus on four types of products: term assurance, critical illness cover, income protection insurance, and whole of life insurance including policies for over 50s that offer guaranteed acceptance.
This MS is also closely linked to the FCA's broader work on the Consumer Duty, particularly regarding price and value.
Next steps
Although the FCA is not formally consulting on the ToR, they are open to feedback on the scope of the study and the themes being explored until 11 October 2024. The study is expected to be launched later in 2024/25.
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Consumer complaints continue to rise reports Financial Ombudsman
The UK’s Financial Ombudsman Service has published the latest quarterly data from April to June 2024 which reveals a significant increase in consumer complaints about financial products and services. According to the figures, the number of new complaints has soared by 70% compared to the same period last year. The surge is primarily driven by concerns over credit cards and motor finance, with professional representatives playing a significant role in bringing these issues to the forefront.
Sharp rise in complaints
In the first quarter of the 2024/25 financial year, 74,645 new complaints were recorded, marking a dramatic rise from the 43,953 complaints received during the same period in 2023/24. This substantial increase suggests growing consumer dissatisfaction with financial products and services, particularly in areas such as credit card lending and motor finance.
Credit cards top the list of grievances
Credit cards emerged as the most complained-about product, with 18,175 new complaints lodged between April and June 2024. A significant portion of these complaints, 15,580 to be exact, centred on allegations of irresponsible and unaffordable lending. Notably, more than half of these complaints were submitted by professional representatives, reflecting a trend where consumers are increasingly turning to these intermediaries for support in resolving disputes.
Motor finance under scrutiny
Hire purchase agreements, particularly those related to motor finance, accounted for the second-highest number of complaints, with 15,925 new cases reported. Complaints about motor finance commission dominated this category, comprising around three-quarters of the total. An overwhelming 90% of these cases were brought forward by professional representatives, highlighting concerns about transparency and fairness in motor finance deals.
Role of professional representatives
The data reveals that professional representatives were responsible for around half of all complaints in Q1 2024/25, a significant rise from just 17% in the same period last year. Despite this increase, complaints filed by professional representatives had a lower success rate, with only 25% of these cases being upheld in favour of consumers, compared to 40% of cases submitted directly by consumers.
This discrepancy has led to a recent consultation on introducing a case fee for professional representatives, aimed at ensuring the fee model more accurately reflects the costs involved. An update on this proposal is expected in the coming months.
Trends across financial products
Across all financial products, the overall uphold rate remained steady at 37%, consistent with the previous year. Besides credit cards and motor finance, the top five most complained-about products also included current accounts, car/motorcycle insurance, and conditional sale agreements related to motor finance.
Current accounts were the third most complained-about product, with 8,698 new complaints, up from 7,224 in Q1 2023/24. Car and motorcycle insurance complaints remained relatively stable, with 3,940 new cases compared to 3,869 the previous year. Conditional sale agreements for motor finance rounded out the top five, with complaints rising to 2,585 from 1,776 the previous year.
Other notable trends
The data also highlighted a 13% increase in complaints related to buildings insurance, with 2,001 new cases compared to the same period in 2023/24. This rise indicates growing consumer concerns in the insurance sector, particularly around policy management and claims handling.
Conclusion
The sharp increase in consumer complaints during the first quarter of 2024/25, particularly in areas like credit cards and motor finance, suggests there are significant challenges within these sectors. With professional representatives playing a more prominent role in bringing complaints forward, financial institutions may need to reassess their practices to address consumer dissatisfaction and improve transparency. The financial regulator’s upcoming decisions on professional representative fees will likely influence how these complaints are handled in the future, potentially reshaping the landscape of consumer advocacy in financial services.
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US Federal Reserve Board announces final individual capital requirements for all large banks
The US Federal Reserve Board (Board) has finalised the individual capital requirements for all large banks, which will take effect on 1 October.
Some context
As part of its supervisory efforts, the Board conducts an annual supervisory stress test. Capital requirements for large banks are based on the Board's stress test results, which provide a risk-sensitive and forward-looking assessment of capital needs.
Key takeaways
As of 1 October, for each bank, the Board has established the following requirements:
- A minimum common equity tier 1 (CET1) capital ratio requirement of 4.5 per cent.
- A stress capital buffer (SCB) requirement of at least 2.5 per cent.
- A capital surcharge for global systemically important banks (G-SIBs) of at least 1.0 per cent.
Additionally, the Board has adjusted the stress capital buffer requirement for Goldman Sachs from a preliminary 6.4 per cent to 6.2 per cent following the firm's request for reconsideration.
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US strategy on countering corruption: FinCEN delivers new final rules
The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued two rules aimed at enhancing security measures within the residential real estate and investment adviser sectors with respect to illicit finance.
Final residential real estate rule
The final residential real estate rule mandates that certain individuals involved in real estate closings and settlements report specific information to FinCEN regarding high-risk transfers of residential real estate. They will have to complete a new form - the Real Estate Report. More detailed information can be found in a related Q&A.
The effective date for this rule is 1 December 2025, and FinCEN will issue a notice outlining the report format at a later date in accordance with the Paperwork Reduction Act.
Final investment adviser rule
The final investment adviser rule extends anti-money laundering/countering the financing of terrorism (AML/CFT) requirements, such as AML/CFT compliance programs and suspicious activity reporting obligations, to certain investment advisers registered with the US Securities and Exchange Commission (SEC), as well as those reporting to the SEC as exempt reporting advisers.
This rule aims to address the inconsistent application of AML/CFT requirements across the investment adviser industry.
FinCEN has extended the compliance deadline for this rule from the initially proposed date in the notice of proposed rulemaking (NPRM) to 1 January 2026.
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FinCEN director discusses the importance of beneficial ownership reporting
In a speech at the Beneficial Ownership Information Reporting Event in Chicago, FinCEN Director Andrea Gacki outlined the critical role that new beneficial ownership reporting requirements will play in safeguarding the United States’ financial system.
FinCEN, a bureau of the US Department of the Treasury, is tasked with combating money laundering, terrorist financing, and other forms of illicit finance. It collects and analyses data from approximately 300,000 financial institutions to aid law enforcement in targeting serious crimes such as narcotrafficking and human trafficking. However, Gacki highlighted that the use of anonymous corporate structures poses a significant challenge to these efforts, enabling criminals to launder and conceal illicit funds within the US financial system.
Gacki pointed to several examples where shell companies were used to facilitate criminal activities, including a bid-rigging and money laundering conspiracy in Chicago and a scheme to launder millions for the Sinaloa cartel. These cases, she noted, illustrate how corporate anonymity can undermine fair competition and compromise US national security.
Corporate Transparency Act: A tool to peel back anonymity
The Corporate Transparency Act (CTA), enacted in 2021, requires many businesses operating in the US to report information about their beneficial owners—the real individuals who ultimately own or control the company. This measure is designed to lift the veil of anonymity that allows bad actors to exploit corporate structures, making it easier for law enforcement to track and prosecute financial crimes.
Gacki explained that the beneficial ownership information collected under the CTA will be stored in a secure, non-public database, accessible only to authorised law enforcement and national security agencies. This database aims to provide a direct and efficient resource for investigations, reducing the time and effort required to uncover the true owners of opaque corporate entities.
High-profile case: Russian oligarch's complex web exposed
Gacki illustrated the potential impact of the CTA by recounting the case of Russian oligarch Suleiman Kerimov. Despite sanctions imposed by the US Treasury’s Office of Foreign Assets Control (OFAC) in 2018, Kerimov was able to continue benefiting from more than $1 billion in US assets through a complex network of shell companies. It took years of investigation to unravel these structures and block Kerimov’s assets effectively. Beneficial ownership reporting, Gacki argued, could significantly streamline such investigations in the future.
Balancing compliance and enforcement
Addressing concerns from the small business community, Gacki stressed that the CTA's reporting requirements are not intended to burden law-abiding enterprises. The regulations are designed to be straightforward, with a filing process that should take about 20 minutes for most companies with simple ownership structures. Importantly, the focus of enforcement will be on willful violations, not on catching minor errors by small business owners.
The director stressed that the CTA targets those who misuse corporate anonymity to hide their illicit activities—kleptocrats, money launderers, and terrorist financiers. As legitimate businesses comply with the law, criminals will face increased scrutiny and fewer opportunities to operate undetected.
Looking ahead: compliance deadlines and resources
Gacki encouraged businesses to comply with the reporting requirements ahead of the 1 January 2025 deadline. For new entities created in 2024, the deadline to file is within 90 days of formation, while from 2025 onwards, new businesses must file within 30 days. FinCEN has made resources available on its website to help businesses navigate the process, including guidance documents, FAQs, and instructional videos.
In closing, Gacki urged the audience to take the necessary steps to comply with the new regulations. She reiterated that by increasing transparency in corporate ownership, the CTA would help level the playing field for legitimate businesses and strengthen the integrity of the US financial system. This initiative, she concluded, is not just about fulfilling regulatory obligations but about contributing to the broader effort to protect national security and ensure fair competition in the marketplace.
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HKMA unveils Project Ensemble Sandbox to boost tokenisation adoption
The Hong Kong Monetary Authority (HKMA) has launched Project Ensemble Sandbox, a new initiative aimed at accelerating the adoption of tokenisation within the financial sector. The launch marks a significant milestone in Hong Kong’s drive to integrate tokenised assets into mainstream financial operations.
Tokenisation in focus
The Sandbox has been designed as a testing ground for interbank settlements using experimental tokenised money. Participating banks, which are part of the Project Ensemble Architecture Community, have linked their tokenised deposit platforms to the Sandbox. This connection will facilitate experiments in both payment-versus-payment and delivery-versus-payment settlements, involving a variety of tokenised assets.
In its initial phase, the Sandbox will explore four key areas:
- fixed income and investment funds,
- liquidity management,
- green and sustainable finance, and
- trade and supply chain finance.
These themes have been selected based on industry interest, current market trends, and the potential for innovation in these sectors. The HKMA’s focus on these themes highlights its commitment to strengthening Hong Kong’s position as an international financial centre. By fostering innovation and encouraging the development of new economic sectors, the HKMA aims to drive forward the adoption of tokenisation in the financial industry.
Regulatory support
The success of tokenisation in Hong Kong will depend heavily on the establishment of an appropriate regulatory framework. The Securities and Futures Commission (SFC), a key participant in the Project Ensemble initiative, will play a vital role in shaping this framework. The SFC, in collaboration with the HKMA, will lead efforts to promote the adoption of tokenisation within the asset management industry, further bolstering Hong Kong’s status as a leading centre for asset and wealth management.
International collaboration
Looking beyond Hong Kong, the HKMA is exploring opportunities for international collaboration. The authority plans to engage with the BIS Innovation Hub Hong Kong Centre and the CBDC Expert Group to leverage their expertise and advance the development of the Sandbox. These partnerships are expected to provide valuable insights and accelerate the adoption of tokenisation on a global scale.
Project Ensemble Sandbox represents a bold step forward in Hong Kong’s efforts to integrate tokenisation into the financial sector. With strong industry engagement, regulatory support, and international collaboration, the initiative is poised to play a crucial role in shaping the future of digital finance both in Hong Kong and beyond.
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Abu Dhabi's FSRA proposes new rules for fiat-referenced tokens
The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has released a consultation paper proposing a new regulatory framework to govern the issuance of Fiat-Referenced Tokens (FRTs). This initiative represents a significant step towards formalising the issuance of a specific class of stablecoins within the ADGM.
A new category of stablecoins
Fiat-Referenced Tokens, or FRTs, are stablecoins that are backed by high-quality, liquid assets denominated in the same currency as the FRT itself. These assets can be rapidly liquidated with minimal impact on price, making FRTs suitable as a means of payment. While all stablecoins reference fiat currencies, FRTs are distinguished by their stability, which is not shared by other asset-backed or commodity-backed tokens whose values fluctuate more broadly.
Since the FSRA first introduced its digital assets regulatory framework in 2018, it has continually updated its approach in line with industry developments. The most recent guidance issued in December 2023 distinguished stablecoins from other virtual assets, laying the groundwork for the new proposals specifically addressing FRTs.
Regulatory proposals
The FSRA's proposed regulatory framework for FRTs adopts a risk-based, proportionate approach. It seeks to balance the demands of the industry with the need for appropriate safeguards, ensuring that issuers of FRTs operate securely and prudently. This new framework would classify the issuance of FRTs as a distinct regulated activity, separate from the existing category of Stored Value under the Financial Services and Markets Regulations 2015 (FSMR). Issuers would be subject to specific conduct and prudential requirements tailored to the risks associated with FRTs.
Future developments
In conjunction with the proposed FRT regulatory framework, the FSRA is reviewing its existing suite of Regulated Activities to assess where FRTs might be integrated. This includes considering amendments to activities involving the acceptance of tokens as payment for services or investments. A separate consultation paper addressing these potential changes will be issued in the near future.
The consultation period closes on 3 October 2024.
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