MONTHLY REGULATORY updates
C477 - Suspension of redemption of UCITS and AIF on 24 December 2021 (link)
On 15 December 2021, through Circular C477, CySEC informs the Regulated Entities for its decision to suspend on the 24 of December 2021 the redemption of UCITS and AIFs units. The suspension refers to UCITS and AIFs that hold assets in transferable securities listed in regulated markets and whose net assets are calculated daily.
CySEC took the above-mentioned decision after taking into consideration the following:
- The provisions of article 20 of the Open-Ended Undertakings for Collective Investment (UCI) Law.
- The provision of article 43(3) of the Alternative Investment Funds Law.
- The fact that 24 December 2021 is a full or part-day public holiday in most international stock markets.
- The need to safeguard the interests of unitholders of UCITS and AIFs and the proper functioning of the market.
C478 - National Risk Assessment on Money Laundering and Terrorist Financing Risks with respect to Virtual Asset and Virtual Asset Service Providers (link)
On 21 December 2021, through Circular C478, CySEC informs the Regulated Entities on the results of the National Risk Assessment on Money Laundering and Terrorist Financing ('ML/TF') risks with respect to Virtual Assets ('VA') Activities and Virtual Asset Service Providers ('VASPs').
The NRA report concentrates on the ML/TF risks posed by VA and VASPs by:
- Identifying and assessing the risks that may arise because of these new technologies; and
- Includes recommendations and other appropriate measures in order to manage and mitigate those risks, as required by the relevant FATF's Recommendations.
The said report has been published on the Ministry of Finance's website, as per the provisions of the Law, and its main purposes are to provide useful information to the Regulated Entities in order to carry out their own risk assessment and to form the basis for drawing up an Action Plan.
C479 - Public Consultation of the European Banking Authority on new draft Guidelines on the use of Remote Customer Onboarding Solutions (link)
On 22 December 2021, through Circular C479 CySEC informs the Regulated Entities about the following:
- On 10 December 2021, the European Banking Authority ('EBA') brought up a public consultation on its Draft Guidelines on the use of Remote Customer Onboarding Solutions (the "Guidelines").
- As Financial Institutions have noticed a growing demand for remote onboarding solutions, it is important to understand the capabilities of these new remote solutions, in order to use it in a sound and responsible way, be aware of the ML/TF risks arising from the use of such tools and make the most of the opportunities they offer.
- The draft Guidelines establish common EU standards which the Financial Institutions should take into consideration in order to comply effectively with their AML/CFT obligations.
- Any comments may be submitted through the EBA's consultation page till 10 March 2022.
Investment Services & Regulated Markets
MiFIR & MiFID
ESMA publishes guidance on appropriateness and execution-only requirements under MiFID II (link)
On 3 January 2022, the European Securities and Markets Authority (ESMA) published the final report on its Guidelines on certain aspects of the MiFID II appropriateness and execution-only requirements.
The previously mentioned requirements compose an important element of investor protection in the provision of investment services other than investment advice or portfolio management. Under MiFID II, investment firms that provide non-advised services are required to request information on the knowledge and experience of clients or potential clients in order to assess whether the investment service or product envisaged is appropriate. In case the investment service or product is considered inappropriate, a warning should be issued. An exemption is allowed by the execution-only framework to this assessment when certain conditions are met, including that the firm issues a warning to the client.
These Guidelines aim to enhance clarity and to foster convergence in the application of the appropriateness and execution-only requirements.
The Guidelines will be translated into the official languages of the EU and published on ESMA's website. The publication of the translations will trigger a two-month period. During this period, national authorities must notify ESMA whether they comply or intent to comply with the Guidelines. These Guidelines will apply six months after the date of the publication on ESMA's website in all EU official languages.
ESMA publishes its annual report on waivers and deferrals (link)
On 16 December 2021, the European Securities and Markets Authority (ESMA) published its Annual Report on waivers and deferrals for equity and non-equity instruments covering the year 2020.
The report includes an analysis based on waivers for which ESMA issued an opinion to the competent authority. Moreover, it provides an overview on the use of waivers and the application of the deferral regime in the European Economic Area (EEA) for trade transparency under MiFIR. Overall, ESMA observed no major change in market microstructure and waivers and deferrals regimes remain an integral part of the EEA market structure.
Taking a forward-looking approach, ESMA did not include UK data for 2020 in the report, although wherever possible, a comparison with the UK and with last years' findings were included in the report, to reflect the UK's impact on EEA markets prior to Brexit.
ESMA will submit this report to the European Commission and will publish a similar report in the second half of 2022, covering the application of the waivers and deferral regime in 2021.
Anti Money Laundering (AML) & Financial Crime
EBA consults on new remote customer onboarding guidelines (link)
On 10 December 2021, the European Banking Authority (EBA) introduced a public consultation on its draft Guidelines on the use of remote customer onboarding solutions.
The Guidelines set out a common understanding by competent authorities of the steps financial sector operators should take to ensure safe and effective remote customer onboarding practices in line with applicable anti-money laundering and countering the financing of terrorism legislation and the EU's data protection framework.
These Guidelines will apply to all financial sector operators that fall within the scope of the Anti-money Laundering Directive as soon as they are adopted.
The consultation will run until 10 March 2022.
EBA strengthens AML/CFT supervision in the EU through revised Guidelines and enhanced cooperation (link)
On 16 December 2021, the European Banking Authority published its revised Guidelines on risk-based supervision of credit and financial institutions' compliance with anti-money laundering and countering the financing of terrorism obligations.
The Guidelines set out the steps supervisors need to take to ensure adequate AML/CFT oversight of their sector and support the adoption, by credit and financial institutions, of effective ML/TF risk management policies and procedures.
Upon taking into consideration the findings from its ongoing work to review competent authorities' approaches to AML/CFT supervision, the EBA decided to update and strengthen these Guidelines.
Immediately following their entry into force, these revised Guidelines will foster greater convergence of supervisory practices across the EU, resulting to a contribution for further strengthening EU's AML/CFT defences before the new legal framework enters into force.
The EBA paves the way for setting up a central database on anti-money laundering and countering the financing of terrorism (link)
On 20 December 2021, the European Banking Authority (EBA) published its draft Regulatory Technical Standards (RTS) on a central database on anti-money laundering and countering the financing of terrorism in the EU.
The European Reporting system for material CFT/AML weaknesses (EuReCA) will be a key tool for coordinating efforts to prevent and counter money laundering and terrorism financing in the Union.
The central AML/CFT database, that EBA is legally required to establish and keep up to date, will include information on material weaknesses in individual financial institutions that make them vulnerable to ML/TF. Competent authorities across the EU will have to report such weaknesses, as well as the measures they have taken to rectify them.
The EBA will use EuReCA to provide information on ML/TF risk affecting the EU's financial sector and will also share information from the database with competent authorities as appropriate, to support them at all stages of the supervisory process.
Once the draft RTS are approved by the European Commission, they will be directly applicable in all Member States.