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Written by Jackie Whiting
on September 30, 2020

Here in Europe, autumn has officially arrived and with the colder temperatures comes plenty of important updates and exciting developments in the global regulatory community. From the release of the FinCen files to the issuing of record-breaking fines, this month has been very busy for regulators, compliance teams and regtechs alike.

Let’s get straight to some of the biggest stories that broke this September!

Blame the system for FinCen files, not the banks, experts urge

Whether you’ve been passively consuming news in the last two weeks or not, it would have been hard to miss the release of the FinCen Files. The files, obtained by Buzzfeed and the International Consortium of Investigative Journalists, contain Suspicious Activity Reports (SARs) filed with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCen for short) between the years of 1999 and 2017. In total the suspicious transactions outlined in the documents amount to roughly $2 trillion USD.

Unsurprisingly, this has led many to question what role the world’s largest banks and financial institutions have had to play in contributing to the global money laundering crisis. Some are eager to lay blame whereas other experts have taken a decidedly different perspective on the problems revealed in these files.

“Daniel Tannebaum, who leads Oliver Wyman’s Anti-Financial Crime Practice for the Americas and has worked with a number of major banks on compliance and regulation, said the outcry caused by the files risks vilifying the people within the financial sector trying to do the right thing.”

In the story from CNBC, Tannebaum goes on to suggest that the U.S. government has been traditionally more hands-off than governments in Europe and elsewhere, which instead tend to interact closer with regulators to establish things like transaction monitoring frameworks and working relationships between both public and private institutions.

Tom Keatinge, director of the Centre for Financial Crime and Security Studies at RUSI also shared a similar perspective as Tannebaum, shifting blame from the financial institutions and onto antiquated systems. ““We are still running a system that was built 25 years ago when it took five days to clear a payment, but yet now money is moving at the touch of an app or a button, so the system I think is what we need to be looking at here, more than the banks themselves.”

Global tax abuses, money laundering and corruption take heaviest toll on the world's poor, UN report says

Our next story from The International Consortium of Investigative Journalists summarizes what a United Nations panel recently concluded regarding the impact of global tax abuses, money laundering and corruption.

“The International Financial Accountability, Transparency and Integrity panel, comprised of former heads of state and government leaders, past central bank governors, business and civil society leaders and prominent academics, said in an interim report that outmoded financial controls had failed to keep pace in a globalized, digitalized world.”

The report goes on to call for a comprehensive approach to tackling widespread abuses, highlighting that it's the developing countries that are being hit the hardest by our collective failure to effectively address these problems. COVID-19 has made a bad situation worse

“We need to explore new and creative solutions to make systems more comprehensive and robust, and ultimately build a coherent ecosystem of institutions and frameworks for transparency, accountability and integrity,”

The report from the FACTI states that approximately 10% of the world’s GDP is held offshore; and around $1.6 trillion is laundered every single year. Alex Cobham, the chief executive of advocacy group Tax Justice Network, welcomed the panel’s call for a comprehensive overhaul and international buy-in.

“Today’s report published on the heels of yet another trillion-dollar finance scandal makes one thing clear: our global tax system isn’t broken, it’s programmed to fail,” he said. “No country can reprogram a global tax system on its own. The FACTI panel confirms that the OECD has proved incapable of delivering genuinely inclusive outcomes: we need a UN tax convention to make sure our global tax system works for everyone.”

FACTI said it expects to publish its final report in February of next. This would concentrate on providing solutions to the problems detailed in its interim report.

EU Unveils Digital Finance Strategy, Crypto-asset Framework

To close off this month’s regtech roundup, we’re ending on the topic of digital finance in Europe, where progress is being made in terms of regulation, integration and widespread adoption. This past month, the European Commission adopted a new ‘Digital Finance Package’ with the goal of increasing Europe’s competitiveness and innovation in the financial sector, including attention in key areas like crypto-assets and e-commerce transactions.

“'The future of finance is digital,’ said executive vice-president Valdis Dombrovskis. ‘We saw during the lockdown how people were able to get access to financial services thanks to digital technologies such as online banking and fintech solutions.’

Technology has much more to offer consumers and businesses and we should embrace the digital transformation proactively, while mitigating any potential risks. That’s what today’s package aims to do. An innovative digital single market for finance will benefit Europeans and will be key to Europe’s economic recovery by offering better financial products for consumers and opening up new funding channels for companies.”’

The strategy itself is built on four main priorities, including the removal of “fragmentation in the ‘Digital Single Market’; adapting the EU regulatory framework to facilitate digital innovation; promoting data-driven finance including by enhancing data sharing within the financial sector; and addressing the challenges and risks with digital transformation.”

How does it look for the retail environment? The Retail Payments Strategy includes the following goals and concepts:

  • aims to bring safe, fast and reliable payment services to European citizens and businesses, making it easier for consumers to pay in shops and make e-commerce transactions safely and conveniently
  • achieve a fully integrated retail payments system in the EU, including instant cross-border payment solutions, which will also facilitate euro payments with other non-EU jurisdiction
  • explore the feasibility of developing a ‘label’, accompanied by a visible logo, for eligible pan-European payment solutions

And finally, what’s in store for crypto-assets? The proposed new legislation includes the following suggestions and goals:

  • boost innovation, preserve financial stability, protect investors from risks, and provide legal clarity and certainty for crypto-asset issuers and service providers – such as crypto-asset trading platforms, exchanges and wallet services
  • introduce rules explicitly prohibiting market abuse such as insider dealing and manipulation in secondary markets, and require crypto-asset service providers to put in place surveillance and enforcement mechanisms to deter such abuse
  • crypto-asset service providers must have a physical presence in the EU to be authorised, and will be subject to capital requirements, governance standards, IT requirements, and an obligation to segregate their clients’ assets from their own asset

That’s it for this month! But before you go…

This week we’re joining a list of incredible speakers who will be presenting at the biannual CoinGeek Conference, the largest Bitcoin conference in the world. Bringing together entrepreneurs, developers, venture capitalists, policy makers and representatives from various industries around the world, we’re proud to have the opportunity to add our perspective on leveraging the power of blockchain for regulatory purposes. The conference begins today and it’s not too late to register for a free ticket! Get yours here.

Also if you’re looking for more stories from us, take a look at two conversations we recently had with our new investors. Learn more about Japan-based Global Brains from Naoki Kamimaeda and discover Fairway Global Investment’s take on blockchain from John Vorrias. Both interviews offer unique views on the world of investing.

And finally, if you enjoyed the read, why not follow us on LinkedIn and Twitter? You’ll receive next month’s news round up and stay informed on the latest happenings in all things regtech, compliance and regulatory news.

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