Global Regulator & Central Bank News Roundup

Volume 13/2024 (March 25 – March 31)


Your weekly summary of key regulatory updates in an objective bite-size format, drawing on official news and press releases from 700+ financial services regulators, central banks as well as global and regional standard setters. For more current updates, visit Regxplora, Regxelerator’s end-to-end automated and generative AI-powered financial regulatory intelligence platform. Sign up here to receive the roundup via email.

Themes covered in this edition


Prudential & financial stability
IAIS Seeks Feedback on Revisions to Supervisory Material Under the Holistic Framework
The International Association of Insurance Supervisors (IAIS) has initiated a public consultation on draft revisions to supervisory material under the Holistic Framework. Infomed by lessons learned from the implementation of the Holistic Framework, particularly through Targeted Jurisdictional Assessments (TJAs), the revisions are intended to refine Insurance Core Principles (ICPs) and related standards in the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame/CF). Key proposed changes include modifications to standards and guidance on liquidity risk, counterparty risk appetite, and contingency funding plans under ICP 16 (Enterprise Risk Management for Solvency Purposes). Additionally, revisions involve updates in relation to recovery and resolution plans and powers in ICP 12 (Exit from the Market and Resolution), ICP 16 (recovery plans), and associated ComFrame material. Feedback can be provided until 27 June. A webinar is scheduled for 11 April 2024 to present these draft revisions and address stakeholder questions.


FATF Publishes Assessment on Global Adoption of Virtual Asset Regulatory Standards
In response to concerns over the incomplete implementation of its standards on virtual assets (Vas) and virtual asset service providers (VASPs), the FATF has released a dedicated table that provides transparency over the status of implementation of its Recommendation 15. Informed by a comprehensive 12-month evaluation process that involved gathering and analyzing data on the current state of compliance across its global network, the table comprises information from nearly 60 jurisdictions including FATF members and other jurisdictions with the most materially important VASP activity, and indicates whether a jurisdiction has: (a) has conducted a risk assessment covering VAs and VASP, (b) has explicitly prohibited the use of VAs and VASPs (c) has enacted legislation/ regulation requiring VASPs to be registered or licensed and apply AML/CFT measures, (d) has registered or licensed VASP(s) in practice, (e) has conducted a supervisory inspection or included VASPs in its current inspection plan, (f) has taken enforcement action or other supervisory action against VASPs, and (g) has passed or enacted the travel rule for VASP. . The table was compiled with contributions from members of the FATF’s Virtual Assets Contact Group, inputs from the broader FATF Global Network including FATF-Style Regional Bodies, and contributions from the private sector including blockchain analytics firms.


FATF Upgrades United States’ Compliance Rating on Beneficial Ownership Transparency
The Financial Action Task Force (FATF) has released a Follow-Up Report analyzing the United States’ efforts to rectify technical compliance deficiencies previously identified in its Mutual Evaluation Report. The report highlights significant improvements made by the United States, particularly in addressing deficiencies related to Recommendation 24, which focuses on the transparency and beneficial ownership of legal persons. Specifically, the report notes progress made through implementing measures such as the Corporate Transparency Act – a bipartisan law mandating many U.S.-operating companies to disclose their true owners or controllers’ information to FinCEN (Financial Crimes Enforcement Network). As a result of these efforts, the United States’ rating for Recommendation 24 has been upgraded from Non-Compliant to Largely Compliant. Currently, the United States holds ratings of Compliant for 9 Recommendations, Largely Compliant for 23 Recommendations, Partially Compliant for 5 Recommendations, and Non-Compliant for three Recommendations.


Wolfsberg Group Releases New Principles for Auditing a Financial Crime Risk Management Programme for Effectiveness
The Wolfsberg Group has introduced the Principles for Auditing a Financial Crime Risk Management Programme for Effectiveness. Building on the Wolfberg Group’s 2019 Statement on Effectiveness and the three ‘Wolfsberg Factors’ essential for any Anti-Money Laundering/Counter Terrorist Financing (AML/CFT) programme, the new Principles are designed to guide internal audit functions within financial institutions in measuring the outcomes of financial crime risk management efforts using the three Wolfsberg Factors: (1) Complying with financial crime laws and regulations, (2) Establishing a reasonable and risk-based set of controls to mitigate the risks of an FI being used to facilitate illicit activity, (3) Providing highly useful information to relevant government agencies in defined priority areas. For each of the three Factors a dedicated Principle sets out the expectation for the internal audit’s scope of responsibility and is underpinned by several measures that articulate how a financial institution can evidence alignment with the Principle.


Cyber & operational resilience
U.S. Treasury Issues Guidance on AI Cybersecurity Risks in Financial Services Sector
The U.S. Department of the Treasury has published a comprehensive report titled “Managing Artificial Intelligence-Specific Cybersecurity Risks in the Financial Services Sector,” pursuant to Presidential Executive Order 14110 on ensuring the safe and secure development and use of artificial intelligence (AI). Orchestrated by the Office of Cybersecurity and Critical Infrastructure Protection (OCCIP) and informed by input from private and public sector, the report discusses the impact of AI on cybersecurity and fraud within the financial sector, highlighting several key challenges and risks and sets out planned and proposed response measures. Among other things, these are focused on addressing the capability gap that disadvantages smaller institutions lacking resources for in-house AI development as well as a so-called fraud data divide, whereby larger firms have access to more data, giving them an advantage in fraud prevention. The report also calls for the introduction of standardized “nutrition labels” for AI systems to ensure data accuracy, reliability, and privacy along with a unified AI-specific terminology to enhance clarity and consistency across the financial sector as well as recommends expanding the NIST AI Risk Management Framework to cater specifically to the financial sector.


Conduct & consumer protection
FCA Issues Updated Guidance on Social Media Financial Promotions
The Financial Conduct Authority (FCA) has published updated guidance on financial promotions communicated through social media, addressing the evolving landscape of digital marketing and the introduction of the Consumer Duty. The guidance emphasizes that financial promotions across social media platforms must be fair, clear, and not misleading to support retail customer understanding and decision-making. It outlines expectations for firms and influencers (finfluencers) in ensuring that promotions are standalone compliant, providing a balanced view of benefits and risks, and clearly communicating information to enable consumers to make informed decisions. Specifically, it clarifies the application of prominence requirements for risk warnings in social media promotions, particularly for high-risk investments (HRIs), ensuring that such warnings are not obscured or truncated by platform design features. Additionally, it addresses concerns about controlling who views promotions on social media and the potential for third-party sharing beyond intended target markets. The guidance also highlights the responsibility of firms in monitoring affiliate marketers, including influencers, to prevent illegal or non-compliant financial promotions.


Fintech & ecosystem innovation
ESMA Initiates Third Consultation on MiCA to Refine Crypto-Asset Regulatory Framework and first set of rules for crypto-asset service providers
The European Securities and Markets Authority (ESMA) has initiated its third consultation under the Markets in Crypto-Assets Regulation (MiCA). The latest consultation seeks stakeholders’ feedback on four key areas: the detection and reporting of suspected market abuse in crypto-assets, policies and procedures for crypto-asset transfer services including client rights, suitability requirements for certain crypto-asset services alongside the format of periodic statements for portfolio management, and ICT operational resilience for entities governed by MiCA. Feedback to the consultation can be submitted by 25 June 2023. In parallel, ESMA has also published its first set of rules for crypto-asset service providers. Key areas addressed in the proposals include requirements for CASP authorization, necessary information for financial entities intending to provide crypto-asset services, criteria for assessing acquisitions of qualifying holdings in CASPs, and guidelines on handling complaints by CASPs.


HM Treasury Technology Working Group Issues Second Report on Advancements in Fund Tokenisation
The UK’s Technology Working Group has published its second report titled “Further Fund Tokenisation: Achieving Investment Fund 3.0 Through Collaboration”. The new report advances the discussion on fund tokenisation, building on the foundational work presented in the inaugural November 2023 report. Outlining a vision for further integrating tokenisation into the financial landscape, it explores broader applications of tokenization with a focus on two specific use cases namely: (1) the use of tokens as collateral in money markets where eligible under the UK regime for noncentrally cleared derivative contracts, and (2) fully on-chain investment markets, with tokenised funds investing in tokenised securities such as in the fixed income or other asset classes. Additionally, it sets out possible next steps for the development of fund tokenization and for enabling the broader implementation of firms’ fund tokenisation strategies. In the next phase of its efforts, the Working Group, comprising stakeholders from the financial and technological sector in addition to HM Treasury and the Financial Conduct Authority, will shift the focus towards the assessing the impact of artificial intelligence on the sector.


Sam Bankman-Fried Sentenced to 25 Years
Samuel Bankman-Fried, the founder of the cryptocurrency exchange FTX and the cryptocurrency trading firm Alameda Research, has been sentenced to 25 years in prison and ordered to pay $11 billion in forfeiture for orchestrating multiple fraudulent schemes. This sentence comes after Bankman-Fried was found guilty on charges including wire fraud, conspiracy to commit wire fraud, securities fraud, commodities fraud, and money laundering. His fraudulent activities involved misappropriating billions of dollars of customer funds deposited with FTX, defrauding FTX investors of more than $1.7 billion, and defrauding lenders to Alameda Research of over $1.3 billion. The case against Bankman-Fried highlighted his extensive misuse of customer deposits for personal gain, political contributions from both parties, and repayment of loans owed by Alameda Research. Despite assurances to customers that their deposits were safe and separate from company assets, Bankman-Fried funneled billions from FTX to Alameda Research for various unauthorized uses including real estate purchases and investments. The fraudulent activities were facilitated through altering FTX’s computer code to allow unlimited withdrawals by Alameda Research and providing false financial information to lenders and investors about FTX’s financial health.


Payments & money
Swift Advances CBDC Integration with Successful Phase 2 Sandbox Testing for Cross-Border Transactions
Swift has announced the successful completion of the second phase of sandbox testing for its central bank digital currency (CBDC) interlinking solution, which demonstrates the potential for seamless integration of CBDCs and other digital tokens into existing financial practices. The collaborative experiments, involving 38 global institutions including central and commercial banks as well as market infrastructures, explored complex use cases across digital trade, securities, and foreign exchange. The findings indicate that Swift’s solution can facilitate a wide range of financial transactions by enabling interoperability between different digital currencies and tokenised assets, thereby addressing the risk of market fragmentation. Over 750 transactions were executed during these experiments to test capabilities such as atomic trade payments, automation of trade flows through smart contracts, and efficient FX settlement via CBDCs. The experiments also highlighted the potential for reduced transaction costs, enhanced liquidity in tokenised securities markets, and improved trust among trading parties. Swift plans to extend its solution to support a broader range of emerging digital networks beyond CBDCs.


IMF Fintech Note Explores CBDC and Digital Payment Progress Across Sub-Saharan Africa
The International Monetary Fund has published a Fintech Note summarizing the findings from a Sub-Saharan Africa Central Bank Digital Currency (CBDC) and Digital Payments Survey. The survey provides a comprehensive overview of the current landscape and future prospects of CBDCs, private digital money, and crypto assets in the region, including the associated motivations, benefits and challenges. Findings reveal a high level of engagement among central banks in sub-Saharan Africa with more than 75% of the countries surveyed either engaged in or planning to engage in CBDC research or pilot activities, pre-dominantly motivated by objectives such as as financial inclusion, efficiency in domestic payments, and the modernization of payment systems. Despite this interest, the survey points out critical challenges such as those related to legal frameworks, technological infrastructure, human capital resources, cybersecurity risks, and interoperability. The survey also highlights developments in fast payment systems (FPS) and mobile money as key components of the digital payment ecosystem in sub-Saharan Africa. A majority of countries have implemented or are considering FPS that can be accessed through mobile phones or internet connections. Mobile money services are prevalent across nearly all surveyed countries, offering significant benefits for financial inclusion and remittance payments. However, issues such as interoperability among different e-money systems within jurisdictions present challenges that need to be overcome. On crypto assets, while their use for transactions remains limited within the region and is mainly driven by speculative purposes rather than as a medium of exchange or store of value, most countries have not established regulatory frameworks for them.


ESMA Launches Consultation on Draft Standards for EU Green Bond External Reviewer Registration and Supervision
The European Securities and Markets Authority (ESMA) has launched a consultation on Draft Regulatory Technical Standards (RTS) concerning the registration and supervision of external reviewers under the EU Green Bond Regulation (EuGB). The consultation seeks to clarify the criteria for assessing applications from entities seeking to become external reviewers of EU Green Bonds. The proposed RTS outlines detailed requirements for registration applications, including information on senior management’s reputation, skills, professional qualifications, experience in relevant fields such as quality assurance or financial services as well as analytical staff’s knowledge and experience levels. Additionally, it addresses outsourcing assessment activities and outlines forms, templates, and procedures for registration information provision. ESMA emphasizes the importance of a standardized approach to registration requirements to foster a level playing field among applicants by reducing entry barriers. Comments on the consultation can be provided until 14 June.


ASEAN Taxonomy Board Unrolls Version 3 with New Criteria for Sustainable Finance in Transportation and Construction
The Malaysia Securities Commission has announced the release of Version 3 of the ASEAN Taxonomy for Sustainable Finance by the ASEAN Taxonomy Board (ATB). This latest version introduces technical screening criteria for two additional focus sectors – (1) transportation and storage, and (2) construction and real estate – building on the previous edition’s focus on the energy sector. The new sectors encompass a range of activities, including building construction and renovation, demolition, site preparation, and various modes of transport infrastructure. In an effort to reduce regulatory fragmentation, the taxonomy aligns the green tiers for these sectors with existing sectoral guidelines and international standards, such as the International Maritime Organisation’s GHG Emissions strategy and International Green building certifications, while also considering the unique context of ASEAN countries. Besides the sectorial expansion, the updated taxonomy also involves updates to several annexes including inter alia additional clarification and worked examples for the climate risk and vulnerability assessment checklist as well as updated national social and environmental regulations.


Hong Kong Financial Authorities Set Forth Strategy for Sustainability Disclosure Ecosystem Alignment with ISSB Standards
The Financial Services & the Treasury Bureau of Hong Kong has released a vision statement outlining the government’s and financial regulators’ strategy for developing a comprehensive sustainability disclosure ecosystem in Hong Kong. The statement emphasizes the importance of accurate sustainability information in promoting green and sustainable financial services and highlights the government’s ambition for Hong Kong to be among the first jurisdictions to align local sustainability disclosure requirements with International Financial Reporting Standards – Sustainability Disclosure Standards (ISSB Standards). Besides the development of local sustainability reporting standards (Hong Kong Standards) in alignment with the ISSB Standards, the statement outlines efforts to promote sustainability assurance, capacity building, technological solutions for efficient and comparable disclosures, and collaboration with stakeholders. On the heels of the publication, a meeting took place between Hong Kong’s Green and Sustainable Finance Cross-Agency Steering Group and the ISSB, which gathered representatives from listed companies across various financial sectors and served to discuss specific challenges and experiences of implementing sustainability disclosures in Hong Kong and Asia.


Thailand SEC Seeks Public Input on Enhanced Sustainability Criteria for Digital Token Offerings
The Thailand Securities and Exchange Commission (SEC) has launched a new public consultation on proposed enhancements to the criteria for offering digital tokens related to sustainability. The measure follows a consensus reached at the Capital Market Supervisory Board meeting in late 2023 to establish the Thailand ESG Fund, which would allow investments in sustainability-related digital tokens. To that end, the SEC’s proposed adjustments are intended to match the standards of other capital market products related to sustainability and include requirements for issuers of digital tokens labeled as “sustainability-related” to adhere to specific standards and to disclose additional information both before and after the offering, based on referenced sustainability standards. Issuers would also be mandated to involve an independent external review provider to verify the sustainability claims. In support of the initiative, the SEC has waived certain fees for sustainability-related digital token offerings until May 31, 2025.


CBI’s Climate Forum Puts Forward Recommendations to Enhance Sustainable Finance Capacity Building
The Central Bank of Ireland’s Climate Risk and Sustainable Finance Forum, under the leadership of its Capacity Building Working Group, has released a dedicated report focused on the enhancement of sustainable finance capabilities within Ireland’s Financial Services sector. Based on extensive research alongside a survey targeting Irish financial market participants, the Working Group assessed the industry’s current status and needs regarding sustainable finance skills. Key findings highlighted a significant skills gap within the sector, with varying levels of maturity across different financial sub-sectors including a general lack of awareness regarding available external support for sustainable finance education. Based on these findings, the Working Group proposed several cross-sectoral recommendations aimed at accelerating capacity building. These include launching awareness campaigns at both industry and consumer levels to highlight the importance of ESG upskilling; developing a skills framework specific to each financial services sector; creating introductory online courses on ESG topics; rolling out specialized courses tailored to various functional needs within market participants; integrating ESG components into existing educational programs and professional training; promoting government initiatives to enhance sustainability content in higher education courses; and establishing new narratives within the industry to attract talent by emphasizing financial services’ role in supporting broader climate goals. Implementation of the initiatives is set to commence in Q2 2024.


Brazil Establishes Interinstitutional Committee for Development of Sustainable Finance Taxonomy
The Brazilian Pension Funds Authority (PREVIC) has announced the establishment of the Interinstitutional Committee of the Brazilian Sustainable Taxonomy (CITSB) as part of the government’s efforts to develop a sustainable finance agenda. Chaired by the Ministry of Finance and comprising 27 government entities including PREVIC, the Central Bank of Brazil (BCB), the Brazilian Securities and Exchange Commission (CVM), and the Superintendence of Private Insurance (Susep), the newly formed committee is tasked with creating a classification system for economic activities, assets, and projects that align with Brazil’s sustainability strategy. The CITSB aims to establish a common methodology for assessing social, environmental, and climate impacts of economic activities while proposing mechanisms for monitoring, verification, and reporting to enhance materiality scope.


Panama Establishes Sustainable Finance Taxonomy to Guide Environmental Investments
Panama’s Superintendencia de Bancos and Superintendencia del Mercado de Valores have announced the launch of Panama’s Sustainable Finance Taxonomy. The taxonomy is designed to provide a clear framework for identifying and classifying sustainable economic activities, thereby supporting the improved identification of investment opportunities that support environmental goals. It was designed in a collaborative effort, involving over 350 representatives from 90 entities across various sectors and with support by technical assistance from the United Nations Environment Programme Finance Initiative (UNEP FI) as well as financial backing from the Green Climate Fund (GCF) and the European Union through its EUROCLIMA programme.


Other transversal themes
BIS Working Paper Examines Pre-Publication Financial Statement Revisions as Bank Risk Indicators
The Bank for International Settlements (BIS) has published a new working paper titled “Pre-publication revisions of bank financial statements: a novel way to monitor banks?”, which explores the potential of pre-publication revisions of bank financial statements as a source of information for assessing bank risk. Utilizing data from the Central Bank of Brazil covering numerous banks over several years in tandem with machine learning, the study investigates the frequency and severity of these revisions and evaluates the hypothesis that the revisions may offer early insights into future bank risks. Findings from the study show that 78% of all revisions take place prior to the publication of bank financial statements and that these contain material private information about future bank risk, whereby more frequent revisions are indicative of higher future risk levels as measured by indicators such as default probabilities, CAMELS ratings, and Z-scores.


Bank of England and FCA Advance Data Collection Transformation with Phase Two Industry Recommendations
The Bank of England and the Financial Conduct Authority (FCA) have jointly published a future strategy and response to the phase two industry recommendations as part of their ongoing efforts to transform data collection from the UK financial sector. This initiative, known as the joint transformation programme, aims to enhance the process of data collection for both regulators and firms by addressing key issues identified in their February 2021 Transformation Plan. The plan’s vision focuses on ensuring regulators receive the necessary data to fulfill their missions at minimal cost to industry, emphasizing three central areas: adopting common data standards, modernizing reporting instructions, and integrating reporting processes. In response to these recommendations, the Bank and FCA have outlined several projects over the next 18 months aimed at achieving five key outcomes: ensuring data collections meet regulatory needs proportionately, enhancing internal processes for creating data collections, streamlining regulatory obligation support processes for firms, establishing clear and consistent data definitions, and developing modern systems underpinning these collections. These efforts are motivated by both past recommendations from industry through the joint transformation programme and by opportunities presented by the UK’s departure from the European Union to reassess regulatory data collection methods. The strategy also includes improving support for firms in meeting regulatory obligations through new portals and considering enhanced validation checks for submitted data.


Leadership changes and appointments
Mauritius FSC Appoints Prakash Seewoosunkur as New Officer-in-Charge to Uphold Financial Supervision Standards
The Mauritius Financial Services Commission (FSC) has announced the appointment of Mr. Prakash Seewoosunkur as new Chief Executive Officer, effective from 23 March 2024. Seewoosunkur succeeds Mr. Dhanesswurnath Thakoor, who had been in the role since 2020. the country’s financial system.