Navigating regulatory waters: a comprehensive look at recent developments in the financial sector

In the dynamic world of finance, regulatory updates play a pivotal role in shaping industry practices and safeguarding the interests of stakeholders. From strengthening anti-money laundering measures to fostering transparency in crypto-asset markets, recent months have witnessed a flurry of regulatory activity across various domains. In this comprehensive overview, we delve into the intricate details of key regulatory developments that are reshaping the financial landscape.

The AMF’s guidance on risk factors and access to financial services

The Autorité des Marchés Financiers (AMF) recently issued updates to its guidance on risk factors and access to financial services[1]. Aligned with the European Banking Authority (EBA) orientations, these updates aim to enhance customer due diligence measures and effectively manage money laundering and terrorist financing risks. By providing comprehensive guidance on identifying and evaluating risk factors associated with business relationships or transactions, the AMF seeks to bolster the integrity of the financial system. Moreover, the inclusion of simplified and enhanced customer due diligence measures underscores the importance of robust compliance frameworks in mitigating financial crime risks. For entities falling under the AMF’s supervision, adherence to these guidelines is not only a regulatory requirement but also a crucial step towards maintaining trust and credibility in the marketplace.

Thematic inspection by the AMF on SCPI units’ marketing

In a bid to strengthen market integrity, the AMF conducted thematic inspections on the marketing of units in real estate investment trusts (REITs) under temporary ownership stripping arrangements[2]. Temporary ownership stripping, a specialised form of subscription, divides ownership rights into bare ownership and usufruct, posing unique challenges for investment service providers (ISPs). The inspection findings revealed significant gaps in considering the special features of temporary ownership stripping, highlighting the need for better risk mitigation practices. Key recommendations include deploying comprehensive customer training modules, involving wealth management specialists in decision-making processes, reinforcing marketing conditions to align with regulatory expectations, implementing an information tracking system provided to clients and informing about potential impacts. By addressing these shortcomings, ISPs can enhance their compliance posture and ensure responsible marketing practices in the REITs market.

ESMA’s enforcement action on credit rating agency

The European Securities and Markets Authority (ESMA) imposed sanctions on a German-based credit rating agency for breaching conflict of interest obligations[3]. The agency’s failure to comply with policies and procedures for managing conflicts of interest and preventing them underscores the importance of robust governance and transparency in credit rating activities. This enforcement action serves as a stark reminder of the regulatory scrutiny facing credit rating agencies and the imperative of strict adherence to compliance standards. As stakeholders continue to navigate complex financial landscapes, ensuring integrity and accountability in credit rating practices remains paramount for fostering investor confidence and market stability.

The EBA’s guidelines on credit service providers lists

The European Banking Authority (EBA) published final guidelines on national lists of credit service providers[4], prioritising borrower and buyer interests. By specifying the content, accessibility, and updating deadlines for these lists, the guidelines aim to enhance transparency and consumer protection in credit markets. Compliance with these guidelines is essential for credit service providers to maintain trust and confidence among borrowers and purchasers. Moreover, the guidelines underscore the EBA’s commitment to promoting a level playing field and fostering responsible lending practices across the European Union.

The EBA’s consultation on repurchase plans for crypto-assets

As part of its regulatory mandate, the EBA launched a public consultation on redemption plans for asset-referenced tokens (ARTs) or electronic money tokens (EMTs) under the Markets in Crypto-assets (MiCA) regulation[5]. These consultations aim to establish clear guidelines for activation triggers, buyback plan principles, and implementation steps, ensuring orderly redemption processes and investor protection in crypto-asset markets. Given the evolving nature of crypto-assets and their increasing integration into traditional financial systems, robust regulatory frameworks are essential to mitigate risks and safeguard investor interests.

Directive amendment to the MiFID2

Directive (EU) 2024/790[6] introduces amendments to the Markets in Financial Instruments Directive (MiFID2), focusing on enhancing market transparency and EU capital market competitiveness. These revisions aim to foster greater transparency and efficiency in financial markets, aligning with the European Commission’s objective of creating an electronic data flow for trading data accessibility. The directive seeks to enhance investor confidence and facilitate cross-border market activities by streamlining regulatory requirements and promoting standardised reporting practices. As financial markets continue to evolve in response to technological advancements and market dynamics, regulatory agility and foresight are essential for promoting market integrity and resilience.

The FATF guidelines on beneficial ownership of legal persons

The Financial Action Task Force (FATF) released guidelines on beneficial ownership transparency for legal entities[7], advocating for a multi-dimensional, risk-based approach. By promoting stricter controls and information access by competent authorities, these guidelines strengthen anti-money laundering and counter-terrorist financing efforts globally. Compliance with these guidelines is crucial for policymakers and practitioners to effectively combat illicit financial activities. Moreover, the guidelines underscore the FATF’s commitment to promoting international cooperation and standard-setting in fighting financial crime.

European parliament rules on breaches of European sanctions

The European Parliament adopted rules criminalising violations and circumventions of European sanctions[8], aiming to harmonise sanctions enforcement and deter breaches. This law proposes a common definition for violations such as not freezing funds, not complying with travel bans or embargoes, as well as minimum penalties. By imposing heavier dissuasive fines and prison sentences, these rules uphold international norms and strengthen the effectiveness of European sanctions regimes. Moreover, the rules underscore the European Parliament’s commitment to promoting respect for international law and human rights through robust sanctions enforcement mechanisms.

The ESMA’s consultation on regulation of crypto-asset service providers

ESMA launched a consultation on rules for suspected market abuse detection, customer rights, suitability requirements, and ICT operational resilience for crypto-asset service providers. These consultations seek industry feedback to inform the development of robust regulatory frameworks and promote effective supervision in crypto-asset markets. Given the rapid evolution and proliferation of crypto-assets, regulatory clarity and oversight are essential for ensuring investor protection and market integrity. As regulators strive to strike a balance between fostering innovation and mitigating risks, stakeholder engagement and collaboration are critical for shaping effective regulatory responses.

The CNIL guide to personal data security

The Commission Nationale de l’Informatique et des Libertés (CNIL) released a guide on personal data security, addressing emerging challenges in data protection. Providing practical recommendations and best practices, this guide supports organisations in ensuring data security amidst evolving technological landscapes. By promoting a risk-based approach and emphasising the importance of data governance and accountability, the guide equips organisations with the tools and strategies needed to mitigate data security risks effectively. Moreover, the guide underscores the CNIL’s commitment to promoting data privacy and fostering a culture of responsible data stewardship.

The recent regulatory developments outlined above underscore the ongoing efforts of regulatory authorities to enhance transparency, integrity, and accountability in the financial sector. By addressing emerging risks, strengthening compliance standards, and fostering innovation, regulators play a crucial role in safeguarding the stability and resilience of financial markets. As stakeholders navigate the complex regulatory landscape, staying informed and proactive is essential for adapting to evolving regulatory requirements and fostering trust and confidence in the financial system. Continuing collaboration and engagement between regulators, industry participants, and other stakeholders will be key to driving sustainable and inclusive growth in the global financial ecosystem.

[1] Lutte contre le blanchiment de capitaux et le financement du terrorisme : l’AMF applique deux orientations de l’Autorité bancaire européenne | AMF (amf-france.org)

[2] synthese-spot-scpi-en-demembrement-fr_0.pdf (amf-france.org)

[3] ESMA fines Scope EUR 2,197,500 for breaches of conflict of interest obligations (europa.eu)

[4] The EBA publishes its final Guidelines on national lists or registers of credit servicers | European Banking Authority (europa.eu)

[5] The EBA consults on Guidelines on redemption plans under the Markets in Crypto-Assets Regulation | European Banking Authority (europa.eu)

[6] Directive – EU – 2024/790 – EN – EUR-Lex (europa.eu)

[7] Guidance on Beneficial Ownership of Legal Persons (fatf-gafi.org)

[8] De nouvelles règles pour mettre fin aux violations des sanctions européennes | Actualité | Parlement européen (europa.eu)