Highest common factors? Financial crime prevention and enforcement in the UK and US

For many years, firms believed that all the regulatory tools for financial crime prevention were wielded in the US. Over recent years, while the US enforcement agencies have shown little sign of let-up in their actions, UK laws, and regulatory powers and actions, have gained significantly in their fear factor. Now, some UK laws go further than US laws, and the UK regulators continually press for more resource to enforce as effectively as their US counterparts. With the increase in financial crime offences that span jurisdictions and increased regulatory cooperation, any wrongdoing is likely to face significant punishment.

Financial Crime, US

Introducing Hungary’s new insurance law

At the end of last year a new insurance act was introduced in Hungary. Although the act is effective from 25 December 2014 the substantial rules shall enter into force only on 1 January 2016. The purpose of the legislation is twofold. On the one hand, it implements the Solvency II Directive[1] which, beyond revising the current EU Solvency regime, aims to strengthen the single EU insurance market integration, enhance consumer protection and facilitate the taking-up and pursuit of the activities of insurance and reinsurance. On the other hand, the new insurance act endeavours to upgrade the present Hungarian insurance market regulation as well. The history behind this purpose is that Hungary’s insurance sector has undergone significant development in the last decade; both the number of market participants and the choice and composition of services significantly increased. The dynamic development of this sector can be detected in the acceleration of sales number as well. By the introduction of the new insurance act the legislation has striven to utilise the experiences of the supervisory authority collected over the last decade and the recent experiences of the global financial crisis. This article provides a comprehensive overview on the main changes of the new insurance act of Hungary.

Policy, Legislation/Directives

What is the best way to deal with PSD2?

Amanda Hartshorne of Sopra Banking Software and Lynn Millar of Sopra Steria, explain how the upcoming changes to the single European market in payment services will create a payment revolution that will force banks to reinvent their offerings if they are to survive.

Financial Industry, Europe

Derivatives reform – As complex as the instruments themselves!

In 2007–2009 we witnessed a global economic crisis which has had far-reaching consequences. It has been advocated that ‘The financial crisis of this first decade of the third millennium has features that make it both severe and somewhat intractable. It might not be an exaggeration to call it a worldwide economic pandemic’.[1] Financial derivatives have been blamed for being a major cause of this economic pandemic. They, and in particular, credit default swaps (CDS) have been one of the most-popular whipping boys throughout the crisis.[2] It is said that the opaqueness and interconnectedness of over-the-counter (OTC) derivatives markets exacerbated transmission mechanisms of systemic risk. In fact, the arguably perilous nature of these instruments was illustrated well before the crisis by Warren Buffet, who famously said: ‘Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.’[3]

Financial Industry, Financial Instruments

Indonesia introduced a new law on insurance

Before he left office on 20 October 2014 and the new president was sworn in by the People Consultative Assembly, the former President of Indonesia, Susilo Bambang Yudoyono, signed several new laws and Government Regulations. One of the laws that he signed in was Law No. 40/2014 regarding Insurance (‘Law 40/2014’ or the ‘Law’). Law 40/2014 replaces the old insurance law namely Law No. 2/1992 (the ‘Old Law’).

Regulation, Asia

Reform of the Russian Pension System

At the end of 2013 the Russian Duma adopted a number of laws leading to major changes in the Russian pension system (the "2013 Reform").

Regulatory Reforms, Financial Industry, Hedge/Investment Funds, Rest of the World

A Revival of SROs on the Russian Financial Markets

In the 1990s a substantial focus in the then nascent regulation of Russian financial markets had been on self-regulatory organisations (SROs). Potentially that was because SROs were seen to be a key part of the regulation of financial markets in the US, and US regulation was seen as being robust enough to accommodate the requirements of voucher privatisation. Later on, for instance, when deposit insurance was discussed, SROs no longer seemed attractive, and indeed deposit insurance was being implemented by a state body, the DIS.[1] However, a general law for SROs was adopted in 2007 (the ‘General Law’) and as of January 2015 there are 1,191 registered SROs in Russia, 767 of which are established in sectors where SRO membership is obligatory.[2] The largest number of SROs operate in the building sector (almost 500).[3] Furthermore, there are numerous SRO in such areas as auditing,[4] energy inspections, the housing and utility sectors.

Regulation, Policy

Does financial regulation create moral hazard?

Introduction - Patrick Jake O’Rourke is a leading American political satirist, journalist and writer who has authored numerous books and is currently the H.L. Mencken Research Fellow with the Cato Institute. Known as a regular correspondent for national media and author of the ‘Parliament of Whores’ (1991), O’Rourke is also considered to be the author of the quote ‘Regulation creates a moral hazard’.[1] Although one can argue the quote may be of satirical nature, it is worth analysing it in more details in the context of financial regulation.

Regulation, Policy

The regulatory change treadmill in the UK – gathering pace or slowing down?

A review of 2014 and a look forward to 2015 - This time last year, Emma Radmore of Dentons looked at 10 key legislative and regulatory changes that will affect participants in the UK financial markets in 2014. The year 2014 has been to some extent a period of retrenchment, although many changes are still to come. This year, Emma looks at how the 2014 changes have taken effect, and looks forward to the key regulatory priorities and changes for 2015.

Regulatory Reforms, Policy

Indonesian Court revokes contract drawn up in English

The Indonesian Parliament (Dewan Perwakilan Rakyat) passed a bill regarding the country’s flag, language, national emblem, and anthem in 2009. It became Law No. 24 of 2009 on The Flag, the Language, the National Emblem, and the National Anthem (the ‘Law’ or ‘Law No. 24/2009’).

Policy, Guidance

Indonesia’s proposed new banking bill

For almost the last two decades since the last financial crisis hit Asia’s emerging market countries in the late nineties, the Indonesian banking industry has been flooded with foreign investors entering into its financial industry, the like of which has never seen before. Foreign banks and others investors grabbed the country’s banking industries, which were left paralysed during the crisis, and pumped the money to the undercapitalised banking sectors and eventually controlled the industry in such a way that the public finally complained that this ‘important’ and profitable sector of the economy had been controlled by foreign investors.[1]

Financial Industry, Asia

The implications of banking reform on senior management in banks

The Financial Services and Markets Act 2000 (FSMA) gives the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) certain powers and responsibilities over individuals that carry on particular roles within the UK financial services industry. These roles are known as ‘controlled functions’ and the individuals performing them are described as ‘approved persons’. An approved person must obtain regulatory approval before performing a controlled function.

Financial Industry, Industry Reforms

Financial crime – FCA loses patience

In November 2014, FCA published the results of two thematic reviews into how firms manage their financial crime risks, together with proposed guidance on financial crime systems and controls. The clear message from the papers, and the press release that accompanied them, is that FCA is losing patience. It found many practices that continue to show significant weakness, and accused firms of not using common sense or getting the basics right. In this article, Emma Radmore of Dentons looks at the reviews and guidance, and what firms should do to get financial crime prevention compliance right.

Insurance, Financial Crime

To what extent should a more constructive approach be taken to bribery and corruption in the UK financial services industry: tackling bribery in the banks

The financial services sector is just as susceptible to bribery and corruption as any other, however it is questionable whether the UK’s legal and regulatory framework effectively addresses the manner in which bribery can take place in a financial sector context. This article considers the regulatory and legal approach to combatting bribery within financial services in the UK, focussing on corporate and investment banks as case studies. In critically assessing the approach of the UK authorities towards policing bribery within the financial services sector, this article questions whether the approach is robust and posits that there is a mismatch of resources and strategy which undermines the efforts to curtail bribery risks in the UK financial services sector. The fundamental question asked is whether the current enforcement strategy between the FCA and SFO ultimately places the right lens before the wrong discerning eye and whether, as a result of this mismatch, the robustness of anti-bribery enforcement within financial services is severely weakened.

Regulation, Financial Crime

2015: Time for a haircut? Reflections on Bail-In in Germany

The German banking landscape has changed dramatically with the introduction of Directive 2014/59/EU, which establishes a framework to prevent the failure of financial institutions and mitigate any adverse impacts for the financial market resulting from such failure.

Financial Industry, Europe

Delisting of shares in Germany: Reflection on developments in 2014 and questions for 2015

Delisting is the process of withdrawing the admission to trading securities from a stock exchange. It complicates, especially for minority shareholders, the offering and selling of their shares. This article explores how the German legislator and courts have addressed this problem so far and identifies potential problems in 2015.

Financial Industry, Europe