Mark Your Calendars!

Volume 11, Number 5
May 26, 2021

Advocacy News You Can Use

One of the best things about working with credit unions is their willingness to share with each other.  People helping people not only applies to our members, but between our individual credit unions. This spirit of cooperation makes our industry unique, and it often is not seen in other sectors. We are particularly good at it when it comes to compliance or regulations, where we try to find out best practices or how a particular regulation applies to a credit union when sometimes those rules were drafted with a bank in mind.    

So, I am very excited the opportunity our upcoming 2021 World Credit Union Conference  gives us to collaborate, share and discuss many of the emerging issues for credit unions. For this year’s WCUC, which will be all-virtual July 14-21, we have lined up experts and practitioners from around the world to give not only a global perspective, but the perspective from the local level. Our International Advocacy breakout sessions will cover topics on COVID-19, Open Banking, Privacy, Proportionality and Financial Inclusion and the ever popular (and perhaps biggest compliance burden) Anti-Money Laundering/Combating the Financing of Terrorism. To find the full schedule of Advocacy events at WCUC, click here and select “Track View” and then, “Advocacy.”

I urge you to register for the 2021 World Credit Union Conference so you can come participate, share your insights and seek answers to your questions. With all of us working together we can continue that special credit union tradition of helping each of us navigate the regulatory landscape.

Financial Stability Institute Issues Paper on Supervising Cryptoassets

The Financial Stability Institute issued its insights on supervising cryptoassets for anti-money laundering. The paper noted that although certain cryptoassets have the potential to make payments and transfers more efficient, some of their features may heighten money laundering/terrorist financing (ML/TF) risks. In particular, the speed of transactions, global reach, potential for anonymous activity and the potential for transactions to take place without financial intermediaries make cryptoassets vulnerable to misuse. In fact, the scale of illicit use of cryptoassets is already significant, highlighting the importance of AML/CFT regulation and supervision, as well as law enforcement, in this area.

The paper discusses emerging regulatory approaches and supervisory practices, and identifies policy priorities to address common challenges faced by regulatory authorities. It also notes the efforts of the Financial Action Task Force in this area to prevent the misuse of cryptoassts for ML/TF.

A copy of the paper can be viewed here.

Why this matters to your credit union: The use of Cryptoassets is continuously increasing for purposes of money laundering and terrorist financing. Thus, supervisory authorities are placing increased scrutiny on the role of financial institutions with respect to their responsibilities. This article provides insight into the various supervisory approaches that are being considered that may apply to a credit union in the future.    

Financial Conduct Authority Develops Consumer Duty to Increase Level of Consumer Protection

The Financial Conduct Authority (FCA) is currently establishing plans for a new Consumer Duty to bolster their existing rules and principles in order to enhance consumer protection in retail financial markets. In the FCA’s 2020 Financial Lives survey, one in four respondents said they “lack confidence in the financial services industry and only 35% of respondents agreed that firms are honest and transparent in their dealings with them.” The Consumer Duty will be a requirement for firms to adhere to and is subject to regulatory enforcement for non-compliance. Its three key elements include:

  1. “The Consumer Principle, which will reflect the overall standards of behavior the FCA expects from firms. The wording being consulted on is: 'a firm must act in the best interests of retail clients' or 'a firm must act to deliver good outcomes for retail clients'.
  2. Cross-cutting rules which would require three key behaviors from firms, which include taking all reasonable steps to avoid foreseeable harm to customers, taking all reasonable steps to enable customers to pursue their financial objectives and to act in good faith.
  3. It will also be underpinned by a suite of rules and guidance that set more detailed expectations for firm conduct in relation to four specific outcomes – communications, products and services, customer service, and price and value.”

More information on the FCA’s Consumer Duty is available here.

Why this matters to your credit union: Consumer protections adopted in one jurisdiction are sometimes used by other countries as a model. These developments may give insight into new requirements that may be considered in a particular country.

Basel Oversight Group Discuss Global initiatives on Non-Bank Financial Intermediation

The Basel Committee on Banking Supervision’s oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS), met to endorse the Basel Committee’s 2021-22 work program and strategic priorities. The work program “places high priority on the implementation and evaluation of previously agreed reforms, on assessing emerging risks and vulnerabilities, and increasing supervisory cooperation.” Part of that endorsement included and discussion surrounding global initiatives for non-bank financial intermediation (NBFI).

Regulators are taking notice that NBFI has a substantial impact on the market: banks and non-banks (such as insurance companies, pension funds, investment funds, etc) are “interconnected through multiple channels,” and non-banks take up nearly half of the “global financial system.” Following the Financial Stability Board’s lead on tackling NBFI initiatives, the GHOS suggest taking a “holistic approach” when addressing areas needed to improve NBFI resilience.

More information on the GHOS meeting can be viewed here.

Why this matters to your credit union: Regulations for the non-banking sector often have an impact on markets including those of credit unions. This provides insight into how regulatory changes may have an impact on a credit union.

Andrew T. Price, Esq.
Sr. VP of Advocacy
World Council of Credit Unions (WOCCU)
99 M St., SE, Washington, DC 20003 USA
Office: +1-202-843-0704 | Mobile: +1-850-776-5699 |

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