- The EBA finds divergences in the issuance and regulation of ‘virtual IBANs’ across the EU, identifies issues, and provides recommendations on how to address them / EBA
- PSR consults on directing APP scams reimbursement for CHAPS payments / PSR
- CFPB Takes Action to Ensure Consumers Can Dispute Charges and Obtain Refunds on Buy Now, Pay Later Loans / CFBP
- MAS Expands Application of Fair Dealing Guidelines to All Financial Institutions and All Products and Services / MAS
- Singapore Issues Environmental Crimes Money Laundering National Risk Assessment/ MAS
The EBA finds divergences in the issuance and regulation of ‘virtual IBANs’ across the EU, identifies issues, and provides recommendations on how to address them / EBA
On 24 May, 2024, The European Banking Authority (EBA) published a Report on the issuance of what is commonly referred to as ‘virtual IBANs’ (vIBANs). In the absence of a common definition, the Report observes that the industry issues vIBANs in different ways and for different purposes and national authorities diverge in interpreting and applying regulatory requirements. The Report also identifies resulting issues in terms of money laundering and terrorist financing, consumer and depositor protection, authorization and passporting, and regulatory arbitrage, and provides recommendations on how to address them.
The Report sets out the characteristics of virtual IBANs, explains various use cases the EBA has observed in the market, summarizes potential benefits as perceived by market actors, and identifies challenges and issues associated with this practice. The latter includes divergences between national authorities in interpreting and applying existing EU financial services law to vIBANs, in particular the Anti Money Laundering Directive, the Payment Services Directive, the Capital Requirements Directive, and the SEPA Regulation. These divergences undermine the EU Single Market and give rise to regulatory arbitrage.
For more Information & the Final Report : The EBA finds divergences in the issuance and regulation of ‘virtual IBANs’ across the EU, identifies issues, and provides recommendations on how to address them | European Banking Authority (europa.eu)
PSR consults on directing APP scams reimbursement for CHAPS payments / PSR
On 8 May, 2024 The Payment Systems Regulator (PSR) is proposing to direct banks and other payment firms participating in CHAPS1 to reimburse their customers who have been victims of authorised push payment (APP) scams. The PSR’s direction will underpin the Bank of England’s new CHAPS reimbursement rules.
In June 2023, the PSR published its policy requiring payment firms to reimburse APP scam victims who lose money through transactions over the Faster Payment System (FPS) – the system over which the majority of these scams happen. These FPS protections, which come into effect from 7 October 2024, mark a step change in the culture of payments to improve scam prevention and focus firms on protecting people.
However, criminals operate across multiple payment systems and in December 2023, the PSR said it would support the Bank of England as it introduces similar requirements for CHAPS. This means consumers will benefit from consistent protection across two major UK payment systems and more payment firms will be incentivised to tackle scams, reducing the likelihood of criminals switching from FPS to CHAPS due to differences in firms’ defences.
The PSR has made its approach to CHAPS as similar as possible to its approach to FPS to reduce unnecessary duplication of work for directed payment firms while ensuring a high level of protection in both systems.
What happens next?
After the PSR has considered the responses to this consultation, it expects to finalise and publish the specific direction in September 2024. The PSR is proposing 7 October as the go-live date; the same as the FPS reimbursement policy, meaning APP scam victims will get the same protection across both payment systems.
The lead up to 7 October go-live date
Industry should already be preparing to implement the reimbursement requirement, and collaboration in these coming months will be important to achieve effective implementation. The PSR is working closely with Pay.UK, payment firms and trade bodies to ensure preparedness and timely implementation.
For more Information: PSR consults on directing APP scams reimbursement for CHAPS payments | Payment Systems Regulator
CFPB Takes Action to Ensure Consumers Can Dispute Charges and Obtain Refunds on Buy Now, Pay Later Loans / CFBP
On 22 May, 2024, The Consumer Financial Protection Bureau (CFPB) issued an interpretive rule that confirms that Buy Now, Pay Later lenders are credit card providers. Accordingly, Buy Now, Pay Later lenders must provide consumers some key legal protections and rights that apply to conventional credit cards. These include a right to dispute charges and demand a refund from the lender after returning a product purchased with a Buy Now, Pay Later loan. The CFPB launched its inquiry into the rapidly expanding Buy Now, Pay Later market more than two years ago and continues to see consumer complaints related to refunds and disputed transactions. Today’s action will help bring consistency to this market.
The Buy Now, Pay Later market has expanded rapidly over the past few years. Lenders advertise buying products over four simple payments. Products are marketed as a way to help consumers pay for expensive products and services over time without having to pay interest. Today, both products, like televisions and gaming systems, and services, like airline tickets and cruises, can be purchased through Buy Now, Pay Later products. Buy Now, Pay Later products are popular across ages, races, and income levels.
For more Information: CFPB Takes Action to Ensure Consumers Can Dispute Charges and Obtain Refunds on Buy Now, Pay Later Loans | Consumer Financial Protection Bureau (consumerfinance.gov)
MAS Expands Application of Fair Dealing Guidelines to All Financial Institutions and All Products and Services / MAS
On 30 May 2024, The Monetary Authority of Singapore (MAS) issued an updated set of Guidelines on Fair Dealing. A key change is that the scope of the Guidelines has been expanded to apply to all financial institutions (FIs), and all products and services they offer to their customers.
The updated Guidelines aim to raise standards of fair dealing and improve the experience of customers dealing with FIs. FIs will be expected to incorporate key principles of fair dealing at various stages of a product’s life cycle, or services rendered.
With the updated Guidelines, customers can expect:
- Products suited to the needs of the target market segment;
- Advice with suitable product recommendations, accurate representation of information and extra consideration for those who are more vulnerable ;
- Clear explanations on a product and its terms and conditions; and
- Independent and responsive handling of feedback.
First introduced in 2009 under the Financial Advisers Act, the Guidelines covered the selection, marketing and distribution of investment products, as well as the provision of advice and post-sales services for these products. FIs have mostly adhered to the same principles in their dealings with customers beyond advisory services and investment products. The expanded scope of the Guidelines formally recognizes this, while keeping unchanged the core objectives of fair dealing and focus on customer outcomes.
For more information: MAS Expands Application of Fair Dealing Guidelines to All Financial Institutions and All Products and Services
Singapore Issues Environmental Crimes Money Laundering National Risk Assessment/ MAS
On 29 May 2024, Singapore published an Environmental Crimes Money Laundering (ML) National Risk Assessment (NRA) which identifies the key threats and vulnerabilities in environmental crimes ML that Singapore is exposed to, and outlines mitigation measures which government agencies, financial institutions (“FIs”) and Designated Non-Financial Businesses and Professionals (“DNFBPs”) can develop to address the risks.
Environmental crimes and the laundering of their proceeds endanger the environment and have a far-reaching impact. Each year, environmental crimes such as illegal wildlife trafficking and illegal logging are estimated to generate around US$110 billion to US$281 billion in criminal gains globally. Singapore’s exposure to environmental crimes ML stems from its position as an international financial centre, and a trading and transit hub, with a highly externally-oriented economy.
For more information: https://www.mas.gov.sg/news/media-releases/2024/singapore-issues-environmental-crimes-money-laundering-national-risk-assessment
