Greg Kilminster
Head of Product - Content
ESMA publishes work programme for 2024
The European Securities and Markets Authority (ESMA) has published its work programme for 2024.
ESMA’s key objectives for 2024 as outlined in the plan are:
Contribute to develop a meaningful, proportionate and effective single rulebook across ESMA remit.
Contribute to making the EU Single Market in financial services deep, efficient, liquid and accessible, in particular to small and medium-sized enterprises, to raise capital. Promote global standards and enhance cooperation and dialogue with international regulatory counterparts.
Identify and analyse key risks and vulnerabilities across the entire ESMA remit to inform the public and guide regulatory and supervisory activities.
Enhance the level of preparedness to deal with potential shocks to financial markets and ensure close crisis management cooperation with National Competent Authorities (NCAs).
Coordinate with and contribute to the work of EU and international bodies on ensuring financial stability.
So far as legislative developments are concerned, the plan notes the following initiatives:
- To expand the single rulebook for sustainable finance in 2024 as part of the European Green Bond Regulation.
- Publish a final report on greenwashing actions and combating the practice.
- Delivery of technical standards for the European Single Access Point (ESAP) and ongoing preparatory IT infrastructure work for ESAP.
- Delivery of technical standards and guidelines for the Markets in Cryptoassets (MiCA) regulation and Digital Operational Resilience Act (DORA), alongside preparatory oversight for DORA.
- Initiation of the selection and authorisation process for Consolidated Tape Providers (CTPs) under MiFID and MiFIR.
- Development of technical standards and guidelines related to the Markets in Financial Instruments Directive (MiFID) and the Markets in Financial Instruments Regulation (MiFIR).
- Fulfillment of mandates from recent reviews of Investment in Transferable Securities (UCITS) Directives, the Central Securities Depositories Regulation (CSDR), and the new Retail Investment Strategy.
- Ongoing reviews of the European Market Infrastructure Regulation.
The plan notes ESMA faces a “diverse and demanding workload”.
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FinCEN announces $15 million civil money penalty
The Financial Crimes Enforcement Network (FinCEN) has imposed a hefty $15 million civil money penalty on Shinhan Bank America (SHBA) for willful violations of the Bank Secrecy Act (BSA) and its implementing regulations.
Director Andrea Gacki of FinCEN stated, “SHBA deliberately ignored its responsibilities under the BSA to maintain an effective anti-money laundering (AML) program and report suspicious transactions to FinCEN, despite being aware of its shortcomings since 2015. Today’s action is a stern reminder to banks that AML program deficiencies need prompt and effective rectification, and FinCEN takes repeated violations of the BSA seriously.”
SHBA admitted to willfully violating the BSA from April 2016 to March 2021 by failing to implement and sustain an effective AML program designed to prevent money laundering and failing to promptly report hundreds of suspicious transactions to FinCEN. Consequently, tens of millions of dollars in questionable transactions were not reported to FinCEN in a timely manner, encompassing transactions related to tax evasion, public corruption, money laundering, and other financial crimes.
FinCEN collaborated with the Federal Deposit Insurance Corporation (FDIC) and the New York State Department of Financial Services (NYDFS) in this case. The FDIC imposed a related civil penalty of $5 million, and FinCEN will credit that penalty. The NYDFS also imposed a civil penalty of $10 million for AML-related violations.
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FCA CEO on financial inclusion
Following the publication of its consultation paper on diversity and inclusion, Financial Conduct Authority CEO Nikhil Rathi has spoken at an event in Scotland about financial inclusion and what the regulator is doing to improve it.
The key points of the speech are as follows.
- Financial inclusion is important because it allows everyone to access financial products and services, regardless of their background or income.
- There are many people who are excluded from the financial system, such as the unbanked, those with low incomes, and those in rural areas.
- Financial exclusion can have a negative impact on people’s lives, making it difficult to get back on their feet after financial setbacks, or to save for the future.
- There are a number of things that can be done to improve financial inclusion, such as:
- Providing financial education and numeracy training.
- Using technology to make financial services more accessible and affordable.
- Creating commercial incentives for financial institutions to serve excluded groups.
- Promoting diversity and inclusion in the financial sector.
- Technology has the potential to play a major role in improving financial inclusion, by making financial services more accessible and affordable, and by enabling the development of new products and services that are tailored to the needs of excluded groups.
- However, there are also risks associated with the use of technology, such as discrimination and exclusion. It is important to be aware of these risks and to take steps to mitigate them.
- Commercial incentives are needed to encourage financial institutions to serve excluded groups. The government can play a role in creating these incentives, but it is also important to be creative and to consider innovative solutions.
- Diversity and inclusion within the financial sector is important because it helps to ensure that the sector is more responsive to the needs of all people, regardless of their background.
- The FCA has taken a number of regulatory actions to improve financial inclusion, such as introducing the Consumer Duty, acting on savings accounts, and capping the cost of high-cost short-term credit.
- The FCA recognises that it does not have all the levers to address the issue of financial inclusion, but it is committed to working with others to find solutions.
The speech concludes by calling for a “new Enlightenment” on financial inclusion, noting it is a complex issue, but it is one that is essential for building a more inclusive and prosperous society.
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CFTC charges three with swap reporting violations
The Commodity Futures Trading Commission (CFTC) has announced that it has fined Goldman Sachs, JPMorgan, and Bank of America a combined total of $53 million for swap data reporting failures and other violations.
- Goldman Sachs: Goldman Sachs & Co LLC has been fined $30 million for failing to diligently supervise a wide range of its swap dealer activities. The failure included unprecedented lapses in swap data reporting and PTMMM disclosures, violating multiple sections of the Commodity Exchange Act (CEA) and CFTC regulations. The order mandates Goldman to develop a written remediation plan and retain a consultant for advice and assessment.
- JP Morgan: JP Morgan Chase Bank, NA, JP Morgan Securities LLC, and JP Morgan Securities plc have been penalised $15 million for violations related to swaps reporting. The order cites deficiencies in reporting over 40 million swap transactions, violating CEA and CFTC regulations. The penalties reflect the gravity of the reporting failures, and JP Morgan’s cooperation and remediation efforts have been recognised.
- Bank of America: Bank of America, NA (BANA) and Merrill Lynch International (MLI) face an $8 million civil monetary penalty for failing to diligently supervise swaps reporting and comply with swaps reporting obligations. The violations spanned from approximately 2015, involving errors in reporting nearly four million swap transactions to swap data repositories. The penalty acknowledges their cooperation and remediation measures.
The CFTC’s actions come as the agency is stepping up its scrutiny of the swap market, though in a related statement, CFTC Commissioner Christy Goldsmith Romero noted that this was the fourth case against Goldman Sachs in 18 months and that therefore the $30m fine was insufficient adding: “I cannot support the proposed settlement because I do not find it to be strong enough to achieve the enforcement goals of justice, accountability and deterrence.”
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SEC charges ten firms for record-keeping violations
In yet more record-keeping breaches, the Securities and Exchange Commission (SEC) has announced charges against five broker-dealers, three dually registered broker-dealers and investment advisers, and two affiliated investment advisers for widespread and longstanding failures to maintain and preserve electronic communications.
Each firm has admitted the breaches and acknowledged that their conduct violated recordkeeping provisions of the federal securities laws. The firms have agreed to pay combined penalties of $79 million as outlined below and have begun implementing improvements to their compliance policies and procedures to address these violations.
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US-UK financial regulatory working group update
The US Department of Treasury has published a release summarising the most recent meeting of the US-UK Financial Regulatory Working Group in early September.
HM Treasury, the US Department of the Treasury, and representatives from various regulatory agencies including the Bank of England, FCA and CFTC amongst others took part in the meeting which focused on key themes including economic and financial stability outlook, international banking issues, developments in the non-bank sector, climate-related financial risks and sustainable finance, international engagement, and digital finance.
Discussions encompassed current economic trends, banking system developments, non-bank financial intermediation, climate-related financial risks, cross-border cooperation, and digital finance. The Working Group emphasised the importance of effective regulation and oversight, and committed to reconvening in 2024 to maintain open dialogue on shared priorities.
Established in 2018, the Working Group aims to deepen bilateral regulatory cooperation and enhance financial stability, investor protection, market efficiency, and capital formation in both jurisdictions.
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