Global Financial Regulation Update: Emerging Trends and Recent Amendments

ESMA Updates Q&As for AIFMD, MiCA, MiFID II, and UCITS

The European Securities and Markets Authority (ESMA) has released new Q&As, providing updates and clarifications on the AIFMD, MiCA, MiFID II, and UCITS regulations. These updates address various regulatory questions and interpretations, reflecting recent developments and offering enhanced guidance for compliance in these areas.

Alternative Investment Fund Managers Directive (AIFMD)

• Initial capital and additional own funds (2227)
• Notification upon establishment of a branch (711)

Markets in Crypto-Assets Regulation (MiCA)

• Treatment of staking services in MiCA (2067)
• Grandfathering clause and applicable AML laws (2068)
• Interaction between Article 60 notifications and the CASP transitional phase (2069)
• Simplified authorisation procedures (2070)
• Crypto-asset transfers as component of another crypto-asset service or as a separate crypto-asset transfer service (2071)
• Entities not authorised as CASPs by the end of the transition period (2220)
• Entities who have not applied for, or whose application for authorisation as CASPs has been refused by the end of the transition period (2221)

Markets in Financial Instruments Directive II (MiFID II)

• Interpretation of "emission allowances" under C(4) (847)

Undertakings for Collective Investment in Transferable Securities Directive (UCITS)

• Derogation for newly authorized UCITS (601)

For more details, you can view the full updates on ESMA's official website here.

FCA Urges Firms to Enhance Treatment of Politically Exposed Persons (PEPs) in Line with FATF Standards

The FCA has directed financial institutions, including banks and lenders, to improve their treatment of politically exposed persons (PEPs) and their families. This follows legislation requiring additional checks on PEPs, aligned with global standards set by the Financial Action Task Force (FATF) and adopted by over 200 jurisdictions.

The FCA’s review found that while most firms are not imposing excessive checks or denying accounts based on PEP status, improvements are needed. The FCA recommends that firms:

• Tighten their definitions of PEPs and their associates to the legal minimum.
• Review the status of PEPs promptly when they leave public office.
• Communicate clearly with PEPs, explaining actions where possible.
• Assess the risk posed by PEPs effectively, ensuring that information requests are proportionate.
• Enhance staff training on handling PEPs.

Following changes in January 2024, which classified UK PEPs as lower risk compared to foreign PEPs, some firms have already started improvements. The FCA is also conducting more detailed reviews of certain firms' practices.

The FCA plans to update its guidance to:

• Reflect that UK PEPs are now considered lower risk.
• Clarify that non-executive board members of civil service departments are not PEPs solely due to their role.
• Provide flexibility in approving or signing off PEP relationships.

The guidance is open for consultation until October 18, 2024. Firms are expected to implement identified improvements immediately. The FCA will continue to monitor compliance and take action if necessary. PEPs with concerns can escalate complaints to the Financial Ombudsman Service.

For more details, you can view the full updates on FCA's press release.

For more assistance and expert guidance, get in touch with us at support@denolus.com. Denolus Consulting is a premier advisor specializing in comprehensive compliance and regulatory reporting solutions. We are widely recognized for our expertise in navigating intricate regulatory landscapes and supporting financial institutions and obligatory firms in developing precisely tailored solutions.

Disclaimer

The information provided in this newsletter is for informational purposes only and does not constitute legal, financial, or professional advice. Please refer to the full regulatory texts and guidelines for detailed information and consult with a qualified professional for specific advice tailored to your situation.