The FCA recently updated its webpage for firms subject to transaction reporting obligations under MiFID II and MiFIR.  The FCA refers to a statement issued by ESMA in December 2017 and explains that the approach described in this requires the FCA to amend the LEI validation rule in the its market data processor (MDP). The FCA had confirmed that no change would be possible before 3 January 2018.  It now confirms that the amendment to the LEI validation will be implemented in the MDP on 10 March 2018 and that from 12 March 2018 firms should (re)submit any outstanding transaction reports where the trade date precedes the LEI registration date.

The FCA recently published a speech given by Andrew Bailey, FCA Chief Executive, which includes updates on the implementation of MiFID II which includes the following comments: (i) since 3 January 2018 there has been a significant downturn in OTC equity trading, as expected, and delays in introducing some of the planned measures, including the double volume cap which ESMA has stated that this will happen in March 2018.  However, there have been no major operational disruptions and it appears that the changes have not adversely affected liquidity across equities, bonds and derivatives; and (ii) while the FCA has stated that it would enforce compliance with MiFID II effectively and proportionately, it still expects firms to comply with their obligations.  The FCA will set out the MiFID II related thematic work due to be undertaken in 2018 in its 2018/19 business plan.

ESMA recently published an updated version of its validation rules for the reports submitted under the revised technical standards on reporting under Article 9 of EMIR.  In a related press release, ESMA explains that it has updated the validation rules to: (i) allow for the reporting of exchange-traded derivatives in products for which the effective date may be earlier than the date of execution; and (ii) clarify how the identification of the product should be validated in the reports submitted on or after 3 January 2018.

The FATF methodology for undertaking assessments of technical compliance and reviewing the effectiveness of a country’s AML/CFT system consists of three sections: (i) an overview of the assessment methodology, its background, and how it will be used in evaluations or assessments; (ii) the criteria for assessing technical compliance with each of the FATF recommendations; and (iii) the outcomes, indicators, data and other factors used to assess the effectiveness of the implementation of the FATF recommendations.  The processes and procedures for mutual evaluations have been amended and will include the UK.  The Methodology will be used by the FATF, the FATF-Style Regional Bodies and other assessment bodies such as the IMF and the World Bank.

The Criminal Finances Act 2017 (CFA) introduces new sections into the Proceeds of Crime Act 2002 and the Terrorism Act 2000 which allow banks and other businesses in the regulated sector to share information with each other on a voluntary basis in relation to a number of suspicions, including that a suspicion that a person is engaged in money laundering, involved in the commission of a terrorist financing offence, or in relation to the identification of terrorist property and its movement or use. The circular sets out two types of information sharing: (i) that initiated by a regulated sector entity; and (ii) that initiated by the NCA.  Information sharing under these provisions is voluntary thus any member of the regulated sector is entitled to refuse to undertake such sharing, however if a refusal is made the person in the regulated sector should consider any obligation to submit a SAR.  The CFA amends the Data Protection Act 1998 to introduce new conditions for processing personal and sensitive personal data, thus steps will need to be taken to ensure that any disclosure complies with both the DPA 1998 and the General Data Protection Regulation (GDPR), which is to come into force in May 2018.

The ECB recently published two consultation papers on the draft principles underlying its expectations for banks’ internal capital adequacy assessment processes (ICAAPs) and internal liquidity adequacy assessment processes (ILAAPs).  The draft ECB guide to ICAAP and the draft ECB guide to ILAAP are accompanied by a set of FAQs, which, among other things, explain what the ICAAP and ILAAP are, and the purpose and legal nature of the guides.  The ECB will hold a public hearing on 24 April 2018 by telephone conference and the consultation will close on 4 May 2018. It will then publish the comments plus a feedback statement.  

HM Treasury has published its AML and counter terrorism financing (CTF) supervision report, which includes activity undertaken in 2015/16 and 2016/17 and provided by supervisors (including the FCA) to support the UK’s submission to the FATF ahead of the UK’s mutual evaluation review, to demonstrate the effectiveness of the UK’s supervisory regime.  The report sets out the next steps and focuses on key areas that demonstrate effectiveness, including: (i) supervisors’ understanding of money laundering and terrorist financing risk within their sector; (ii) how supervisors’ understanding impacts on their supervisory approach, ensuring resources are deployed according to risk; (iii) engagement with law enforcement to share information and facilitate investigations: (iii) the impact of initiatives intended to promote awareness on compliance; and (iv) whether remedial actions, including effective, proportionate and dissuasive sanctions, are applied to penalise breaches and promote compliance.

IOSCO has published a consultation paper requesting feedback on proposed recommendations relating to mechanisms for trading venues to manage extreme volatility.  In the paper, IOSCO discusses how trading venues address the risks posed by extreme volatility, concluding which mechanisms can effectively mitigate the effects of volatility and maintain orderly trading.  It makes a number of recommendations designed to help make decisions about the implementation, operation and monitoring of volatility control mechanisms, including appropriately calibrating and monitoring volatility control mechanism, releasing information about volatility control mechanisms and when they are triggered to regulatory authorities, market participants and if appropriate, the public.