- Financial data access and payments package / EC
On June 28, 2023 the European commission (“EC”) is putting forward proposals to bring payments and the wider financial sector into the digital age. These rules will further improve consumer protection and competition in electronic payments, and will empower consumers to share their data in a secure way so that they can get a wider range of better and cheaper financial products and services. These proposals place consumers’ interests, competition, security and trust at their centre.
The payment services market has changed significantly in recent years. Electronic payments in the EU have been constantly growing, reaching €240 trillion in value in 2021 (compared with €184.2 trillion in 2017). This trend was accelerated by the COVID-19 pandemic. New providers, enabled by digital technologies, have entered the market, in particular providing ‘open banking’ services – i.e. securely sharing financial data between banks and financial technology firms (‘fintechs’). More sophisticated types of fraud have also emerged, putting consumers at risk and affecting trust.
In response to these developments, today’s package seeks to ensure the EU’s financial sector is fit for purpose and capable of adapting to the ongoing digital transformation, and the risks and opportunities it presents – in particular for consumers. That is why the Commission has today proposed two sets of measures.
The Commission’s proposes to amend and modernise the current Payment Services Directive (PSD2) which will become PSD3 and establish, in addition, a Payment Services Regulation (PSR). These will ensure consumers can continue to safely and securely make electronic payments and transactions in the EU, domestically or cross-border, in euro and non-euro. Whilst safeguarding their rights, it also aims to provide greater choice of payment service providers on the market.
The Commission is also putting forward a legislative proposal for a framework for financial data access. This framework will establish clear rights and obligations to manage customer data sharing in the financial sector beyond payment accounts. In practice, this will lead to more innovative financial products and services for users and will stimulate competition in the financial sector.
- Federal Reserve announces that its new system for instant payments, the FedNow® Service, is now live / FED
On July 20 2023, the Federal Reserve (“FED”) announced that its new system for instant payments, the FedNow® Service, is now live. Banks and credit unions of all sizes can sign up and use this tool to instantly transfer money for their customers, any time of the day, on any day of the year.
To start, 35 early adopting banks and credit unions, as well as the U.S. Department of the Treasury’s Bureau of the Fiscal Service, are ready with instant payments capabilities via the FedNow Service. In addition, 16 service providers are ready to support payment processing for banks and credit unions.
When fully available, instant payments will provide substantial benefits for consumers and businesses, such as when rapid access to funds is useful, or when just-in-time payments help manage cash flows in bank accounts. For example, individuals can instantly receive their paychecks and use them the same day, and small businesses can more efficiently manage cash flows without processing delays. Over the coming years, customers of banks and credit unions that sign up for the service should be able to use their financial institution’s mobile app, website, and other interfaces to send instant payments quickly and securely.
- MAS Proposes Code of Conduct for Providers of ESG Ratings and ESG Data Products / MAS
On 28 Jun 2023, The Monetary Authority of Singapore (MAS) launched a public consultation on an industry code of conduct for providers of Environmental, Social, and Governance (ESG) ratings and data products. This is part of a proposed approach centred on an industry code of conduct that was co-created by MAS with industry players.
The proposed code of conduct establishes minimum industry standards of transparency in methodologies and data sources, governance, and management of conflicts of interest. MAS will monitor the implementation of the industry code and observe global developments before taking further steps to formalise a regulatory framework for ESG rating providers.
ESG ratings help provide an assessment of the impact of ESG factors on an entity. ESG data products provide information on the various ESG factors, customised to specific needs. As the integration of sustainability-related risks and opportunities into capital allocation decisions become increasingly mainstream, the use of ESG ratings and data products for investing and capital allocation has grown.
- Virtual Assets: Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers / FATF
Paris, 27 June 2023 – In 2019, FATF extended its anti-money laundering and counter-terrorist financing (AML/CFT) measures to virtual assets (VA) and virtual asset service providers (VASPs) to prevent criminal and terrorist misuse of the sector. Since then, FATF has produced three reviews on implementation of its standards on VAs and VASPs. This report provides an update on country compliance with FATF’s Recommendation 15 and its Interpretative Note (R.15/INR.15), including the Travel Rule, and updates on emerging risks and market developments, including on Decentralized Finance (DeFi), Peer-to-Peer transactions (P2P), and Non-Fungible Tokens (NFTs), unhosted wallets, and stablecoins.
FATF’s report finds that jurisdictions continue to struggle with fundamental requirements such as undertaking a risk assessment, enacting legislation to regulate VASPs, and conducting a supervisory inspection. Based on 98 FATF mutual evaluation and follow-up reports since the revised R.15/INR.15 was adopted, 75% of jurisdictions are only partially or not compliant with the FATF’s requirements. In addition, jurisdictions have made insufficient progress on implementing the Travel Rule, which is a key AML/CFT measure. Of the 151 jurisdictions that responded to FATF’s 2023 Survey, more than half still have not taken any steps towards implementing the Travel Rule. This is a serious concern as the risks posed by VAs and VASPs continue to increase and that the lack of regulation creates significant loopholes for criminals to exploit. This demonstrates an urgent need for jurisdictions to accelerate implementation and enforcement of R.15/INR.15 to mitigate criminal and terrorist misuse of VA and VASPs.
This update is provided as general information only and may not be relied upon in any individual case without additional legal advice.
