Banking and Financial Services

Overview

Last updated 29 March 2017 

Bird & Bird's EU Legislation Tracker highlights Regulations and Directives scheduled to take effect or to be implemented by Member States in the period to the UK's departure from the EU. It does not provide an exhaustive survey. Instead, we have sought to summarise some of the key legislation, both draft and finalised, which we are tracking in the run up to Brexit and which are likely to be of interest to companies which do business in the UK and/or elsewhere in Europe. 

The Tracker includes a short commentary on the substance of each of the measures identified, and a timeline for their known or likely effective dates (for Regulations) or implementation deadlines (for Directives). These are colour coded by reference to the likely date of Brexit.

For the purposes of the Tracker, we have assumed that the UK will exit the EU two years from its service of Article 50 notice (i.e. 29th March 2019). Ultimately the UK's Great Repeal Bill will determine whether the UK will retain, implement, amend or repeal the legislation summarised in our Tracker and the date when this will happen.

Key
Implementation status 
  Implementation deadline/effective date likely to be pre-Brexit
  Implementation deadline/effective date likely to be post-Brexit
 
 Timeline    EU legislation
 

Implementation deadline

26 June 2017

 
Fourth Money Laundering Directive (MLD4) ((EU) 2015/849)
Overview:

  • The EU's new anti-money laundering legislation.
  • Companies House register of beneficial owners will need to list details of entities which currently avoid the need to be registered (e.g. trusts). It will also need to be "current", (registering any change in beneficial ownership within six months of the change.)
  • The scope of customer due diligence (CDD) will change, with greater emphasis on a risk-based approach. Local politically-exposed persons will no longer be exempt from enhanced due diligence. There will also be and increased sanctions for non-compliance.

Brexit impact:

  • The UK government has stated that it intends to introduce legislation to implement MLD4 prior to the Directive's 26 June 2017 deadline.
  • That said, it is possible that the drive for productivity from the UK government (following their review of red tape) will lead to a future divergence from the EU regime. 

Other information:

Full text:
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32015L0849&from=EN

HM treasury position:
https://www.gov.uk/government/consultations/transposition-of-the-fourth-money-laundering-directive

Department for Business, Energy & Industrial Strategy consultation:
https://www.gov.uk/government/consultations/implementing-the-fourth-money-laundering-directive-
beneficial-ownership-register

Department for Business, Innovation & Skills, HM Treasury, Harriet Baldwin MP and The Rt Hon Sajid Javid MP press release:
https://www.gov.uk/government/news/financial-red-tape-targeted-in-new-review

 
 

Takes effect:

26 June 2017

 
Revised Wire Transfer Regulation (WTR2) ((EU) 2015/847)

Overview:

  • Complementary legislation to MLD4 which introduces a range of measures to combat money laundering and terrorism financing.
  • It clarifies that a person-to-person (natural persons) transfer of funds using payment card, e-money instrument, a mobile phone or any other digital technology falls within the WTR2 ambit.
  • The payer's payment service provider (PSP) will have to include with any transfer information on the payee including payee's name, account number and unique transaction identifier; and the payee's PSP will have to verify the accuracy of this information where the transfer is more than €1,000.
  • WTR2 compels PSPs to establish internal, secure, independent, specific and anonymous whistleblowing channels. It also sets minimum measures and sanctions a competent authority must take in respect of relevant breaches and improves the balance between data protection and anti-money laundering requirements.

Brexit impact:

  • The UK government has stated that it intends to introduce legislation to implement WTR2 prior to the Directive's 26 June 2017 deadline.

Other information:

Full text:
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32015R0847&from=EN

Commentary from Payments Cards & Mobile:
http://www.paymentscardsandmobile.com/fourth-money-laundering-directive-revised-
wire-transfer-regulation/

HM Treasury consultation (WTR2 referred to as the Fund Transfer Regulation (FTR)):
https://www.gov.uk/government/consultations/transposition-of-the-fourth-money-laundering-directive

 

 

Implementation deadline:

3 July 2017 (followed by a 6 month transitional period expiring 3 January 2018)

 
Second Markets in Financial Instruments Directive (MiFID II) ((EU) 2014/65)
Overview:

  • The EU's second piece of legislation which regulates firms providing financial instruments and the venues where they are traded.
  • MiFID II increases the scope of MiFID to include emissions allowances and unregulated multilateral discretionary trading platforms (e.g. broker crossing networks), which will now be defined as organised trading facilities.
  • There will be new safeguards for high frequency algorithmic trading and additional obligations for trading venues. MiFID II aims for greater transaction transparency for equity-like and non-equity markets. MiFID II will also seek to harmonise the passporting procedures. It will widen the definition of systematic internalisers (SI) and change the SI regime.
  • It will extend the scope of transaction reporting and avoid double reporting under the EMIR. It will also introduce more detailed requirements for post-trade data reporting.
  • It will increase supervisory powers to ban specific products, services and practices. It will also enhance corporate governance and the conduct of business requirements.

Brexit impact:

  • The UK government has published three draft statutory instruments to give effect to MiFID II, and intends that final versions will be laid before Parliament in early 2017, in accordance with the 3 July 2017 deadline for implementation,
  • MiFID and MiFID II allow UK investment firms to "passport" their services to the rest of the EU. Whether this passporting regime will continue once the UK has exited the EU will be a key element of the Article 50 exit negotiations.
    The UK government has stated that it intends to introduce legislation to implement MLD4 prior to the Directive's 26 June 2017 deadline.. 

Other information:

Full text

FCA consultation

FCA guide

Bank of England Prudential Regulation Authority consultation

HM Treasury consultation (closed)

 

Implementation deadline:

13 January 2018

 
Second Payment Services Directive (PSD2) ((EU) 2015/2366)

Overview:

  • The second chapter of the EU's modernising payments industry legislation.
  • Applies to payment service providers (e.g. credit card companies), payment initiation service providers (e.g. banking software providers) and account information service providers (e.g. wallet or comparison apps).
  • PSD2 updates and complements the first Payment Services Directive. It widens the scope to include "third party" firms, one-leg and non-EU currency transactions.
  • In addition, it seeks to enhance the consumer experience by the introduction of "third party" firms

Brexit impact:

HM Treasury has stated that until the Article 50 exit negotiations are concluded, the government will continue to negotiate, implement and apply EU legislation, and that the government aims to finalise and lay the final implementing legislation in Parliament in early 2017.

Other information:

Full text

HM Treasury consultation (February 2017)

Bird & Bird general article

Bird & Bird FinTech article


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