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Financial Services Law Insights and Observations


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  • UK financial regulators issue new authority on securities sandbox


    On April 3, the U.K.’s Financial Conduct Authority and the Bank of England released a consultation paper seeking comments on their proposal to implement the Digital Securities Sandbox (DSS), a new regime for financial firms to work on a testing ground for new technologies regarding digital assets. The goal of this testing ground would allow these firms to better issue, trade, and settle digital securities. The U.K. regulators believed that using securities on distributed ledgers (i.e., digital securities) has the potential to consolidate trade functions and reduce settlement times, reducing risk and streamlining processes. The DSS would oversee developing financial technologies, such as distributed ledger technology (DLT), during security trading. The three aims of the DSS would include promoting a safe and efficient financial system by removing potential barriers, protecting financial stability using DLT, and promoting market integrity. The securities regulated by the DSS include equities, bonds, money market instruments, and emissions allowances; however, unbacked cryptocurrencies (e.g., bitcoin) would remain outside the scope. The first sandbox entrants are expected after fall 2024.   

    Securities Of Interest to Non-US Persons UK Digital Assets

  • FCC partners with two U.K. regulators in combating privacy issues and protecting consumer data

    Privacy, Cyber Risk & Data Security

    Recently, the FCC announced (here and here) that it has partnered with two U.K. communications regulatory agencies to address issues regarding privacy and data protection in telecommunications. The FCC announced two separate statements because the two U.K. regulators perform different duties: the first announcement is with the U.K. Information Commissioner’s Office (ICO), which regulates data protection and information rights; the second is with the U.K.’s Office of Communications (OFCOM) which regulates telecommunications. Both announcements highlighted a strengthening of resources and networks to protect consumers on an international scale, given the large amounts of data shared via international telecom carriers.

    The FCC’s announcement with ICO explained that the partnership would be focused on combatting robocall and robotext efforts, as well as finding means to better protect consumer privacy and data concerns. In the FCC’s announcement with the OFCOM, the U.S. regulator announced a new collaboration to combat illegal robocalls and robotexts given the two countries’ shared interest in investigating networking abuses. The FCC elaborated on its desire to bolster requirements for gateway providers: this is the “on-ramp” for international internet traffic into U.S. networks. 

    Privacy, Cyber Risk & Data Security FCC UK Of Interest to Non-US Persons Privacy Data Protection

  • INTERPOL seizes $300 million in international financial crime operation

    Financial Crimes

    On December 19, INTERPOL announced the conclusion of a transcontinental police operation against online financial crime called HAECHI IV. The operation ended with around 3,500 arrests and seizures of $300 million USD worth of assets across 34 countries. Of the $300 million, about two-thirds of was hard currency and one-third was virtual assets. HAECHI IV targeted seven types of cyber scams, including voice phishing, romance scams, online sextortion, investment fraud, and money laundering associated with illegal online gambling, among others. Through INTERPOL’s stop-payment mechanism to block criminal proceeds, authorities blocked 82,112 “suspicious” bank accounts. Next on INTERPOL’s radar is a new scam in Korea that involves the sale of non-fungible tokens (NFTs) that are a “rug pull,” a crypto scam where developers abandon a project and investors lose their money. Interestingly, the UK team of the operation reported on how scammers used artificial intelligence to create synthetic content, which criminals primarily used for impersonation scams.

    Financial Crimes Fraud UK Of Interest to Non-US Persons

  • UK Government finalizes cryptoasset guidance with financial promotions


    On November 2, the UK Financial Conduct Authority (FCA) finalized guidance informing individuals and firms regarding the communication and promotion of cryptoassets. The final guidance follows a consultation period that closed on August 10.

    In UK law, Section 21 of the Financial Services and Markets Act 2000 prohibits any person from, in the course of business, communicating a financial promotion – an invitation or inducement to engage in investment activity – unless such person is an authorized person, the content is approved by an authorized person, or another exemption applies.  The guidance describes the application of the financial promotion oversight regime to “qualifying cryptoassets” and expresses the expectation that all “cryptoasset financial promotions must be fair, clear and not misleading.”

    The guidance reiterates that it “does not create new obligations for firms but relates to firms existing regulatory obligations” and that persons and firms that act in accordance with the guidance will be considered “as having complied with the rule or requirement to which that guidance relates.”


    Securities UK Cryptocurrency Regulation Of Interest to Non-US Persons

  • UK Government to regulate cryptoassets more strictly under a new regulatory regime


    On October 30, the HM Treasury of the UK Government released a report titled “Future Financial Services Regulatory Regime for Cryptoassets,” confirming its plans to regulate digital assets more strictly. The regulatory framework includes descriptions of requirements for the admission of digital assets to a trading venue, including disclosure documents. To make cryptocurrencies subject to the FCA’s rule-making powers, the HM Treasury expanded the definition of “specified instruments” to include digital currencies, but not its definition of “financial instrument.”

    The UK Government created the report based on stakeholder feedback on an extensive survey on cryptoassets. The report summarizes responses to 51 survey questions and provides explanations regarding the UK government’s intentions to proceed with the framework. The report outlines how the UK can attract more crypto businesses while also protecting consumer interests. Topics include, among other things, (i) confirmation that the proposed regime does not intend to capture activities relating to cryptoassets which are specified investments that are already regulated; (ii) information regarding the future FCA authorization process for cryptoasset activities; (iii) the UK government’s support for the use of publicly available information to compile appropriate disclosure and admission documents; and (iv) acknowledgment of the potential need for a staggered implementation for cross-venue data sharing obligations.  The report recognizes the rapidly evolving nature of the crypto sector and emphasizes that “the government continues to consider that developing a fully bespoke regime outside of the FSMA framework would risk creating an un-level playing field between cryptoasset firms and the traditional financial sector.”

    Any legislative changes in response to this report on how the UK Government regulates cryptoassets will occur in 2024, “subject to Parliamentary time.”

    Securities UK Cryptocurrency Regulation Of Interest to Non-US Persons

  • U.S.-UK partnership discuss fintech innovation

    Federal Issues

    On October 30, the U.S. Treasury Department issued a joint statement on behalf of the U.S.-UK Financial Innovation Partnership (FIP) providing an overview of recent meetings where Regulatory and Commercial Pillar participants exchanged views on “topics of mutual interest and to deepen ties between U.S. and UK financial authorities on financial innovation.” As previously covered by InfoBytes, the FIP was created in 2019 as a way to expand bilateral financial services collaborative efforts, study emerging fintech innovation trends, and share information and expertise on regulatory practices. Discussions focused on four topic areas: (i) cryptoassets; (ii) payment system modernization; (iii) distributed ledger technology; and (iv) artificial intelligence. Participants recognized “the continued importance of their partnership on financial innovation as an integral component of U.S.-UK financial services cooperation.” Participants also noted a desire to continue discussing these topics ahead of the next meeting in 2024.


    Federal Issues Of Interest to Non-US Persons Fintech UK Department of Treasury

  • Treasury issues statement on U.S.-UK Financial Regulatory Working Group biannual meeting

    Federal Issues

    On September 29, the Department of Treasury issued a statement on the U.S.-UK Financial Regulatory Working Group, comprised of officials from both countries, and its meeting to discuss key themes including: (i) economic stability; (ii) banking issues; (iii) non-bank sector developments; (iv) climate-related financial risks; (v) international engagement; and (vi) digital finance.

    In their meeting, participants discussed international banking regulations, specifically Basel III, emphasizing the importance of consistent global implementation. They also acknowledged ongoing work by the Financial Stability Board (FSB) and Basel Committee on Banking Supervision regarding lessons learned from events in March 2023, with a focus on bank resolution. In addition, the group deliberated on the urgency of strengthening resilience within the non-bank financial intermediation (NBFI) sector. Topics included national reforms related to money-market funds, forthcoming work by the FSB to address vulnerabilities linked to leverage in the NBFI sector, and the value of globally implementing reforms in this sector to maintain financial stability. Among other topics, the group also noted progress in climate-related financial risks and sustainable finance mandates.

    The group emphasized the importance of international cooperation and agreed to meet again in 2024 to continue their dialogue. Established in 2018, this biannual dialogue aims to enhance financial stability, investor protection, market efficiency, and capital formation in both countries.


    Federal Issues Department of Treasury Basel FSB Risk Management Nonbank Of Interest to Non-US Persons UK

  • UK-U.S. data bridge adequacy regulations to come into effect October 12

    Privacy, Cyber Risk & Data Security

    The EU-US Data Privacy Framework (the “Framework”) sets forth a set of principles and requirements that US organizations can comply with and, following certification, be permitted to join the Framework. On October 12, the UK extension to the Framework will come into effect following the UK digital minister’s submission of regulation and the US Attorney General’s designation of the UK as a “qualifying state.”

    This data bridge and the associated framework ensures that the level of protection for UK individual’s personal data, as provided for under UK GDPR, is maintained. The FTC and U.S. Department of Transportation are the independent supervisory authorities for the UK extension, which is administered by the U.S. Department of Commerce.


    Privacy, Cyber Risk & Data Security Of Interest to Non-US Persons UK EU-US Data Privacy Framework GDPR

  • U.S., UK enter agreement in principle on data flow

    Privacy, Cyber Risk & Data Security

    On June 8, President Biden presented an agreement in principle to allow for the free flow of data between the U.S. and the UK. Announced as part of the administration’s “Atlantic Declaration for a Twenty-First Century U.S.-UK Economic Partnership,” the “data bridge” would facilitate data flows between the two countries while ensuring strong, effective privacy protections. “​​The trusted and secure flow of data across our borders is foundational to efforts to further innovation,” the White House said in the announcement. “We are working to finalize our respective assessments swiftly to implement this framework.” A joint statement issued by the UK Secretary of State for Science, Innovation, and Technology, the Rt. Hon. Chloe Smith MP, and U.S. Secretary of Commerce Gina M. Raimondo reiterated the two countries’ commitment to establishing “a data bridge that would restore a robust and reliable mechanism for UK-US data flows.” The data bridge would also help facilitate data transfers to U.S. organizations that rely on other data transfer mechanisms under UK law, the joint statement said.

    Meanwhile, the U.S. and the EU are working to finalize the EU-US Data Privacy Framework (covered by InfoBytes here)—a replacement for the EU-U.S. Privacy Shield, which was annulled by the Court of Justice of the EU in 2020 after the court determined that data transferred under the EU-U.S. Privacy Shield would not be subject to the same level of protections prescribed by the EU’s General Data Protection Regulation.

    Privacy, Cyber Risk & Data Security Of Interest to Non-US Persons EU UK Biden GDPR EU-US Data Privacy Framework

  • OFAC designates evasion network supporting Hizballah financier

    Financial Crimes

    On April 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13224, as amended, against a “vast international money laundering and sanctions evasion network” comprised of 52 individuals and entities in Lebanon, the United Arab Emirates, South Africa, Angola, Côte d’Ivoire, the Democratic Republic of the Congo, Belgium, the United Kingdom, and Hong Kong. The designated network assisted a Hizballah financier and Specially Designated Global Terrorist (previously sanctioned by OFAC in 2019) in evading U.S. sanctions by facilitating the payment, shipment, and delivery of goods and services, including cash, diamonds, art, and luxury goods, for the benefit of the sanctioned individual who used the funds to finance the Hizballah financier and his lifestyle, OFAC said, explaining that the network used shell companies and fraudulent schemes to disguise the Hizballah financier’s role in the financial transactions. Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson warned in the announcement that “[l]uxury good market participants should be attentive to these potential tactics and schemes, which allow terrorist financiers, money launderers, and sanctions evaders to launder illicit proceeds through the purchase and consignment of luxury goods.” Treasury has issued warnings on money laundering and terrorist financing risks associated with the trade of works of art in a February 2022 report and an October 2020 art advisory (covered by InfoBytes here and here).

    As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. “[A]ny entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. OFAC warned that “persons that engage in certain transactions with the persons designated today may themselves be exposed to sanctions or subject to an enforcement action.” Additionally, “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the targets designated today pursuant to E.O. 13224, as amended, could be subject to U.S. sanctions.”

    The action by Treasury was taken in coordination with the Department of Homeland Security, the Department of State’s Rewards for Justice program, and the United Kingdom. The same day, the DOJ unsealed a nine-count indictment charging the Hizballah financier and eight co-defendants with conspiring to evade terrorism-related sanctions. According to the DOJ, despite being sanctioned and prohibited from engaging in transactions with U.S. persons, the Hizballah financier and the other co-defendants used a complex web of business entities to conduct money laundering transactions involving valuable artwork and diamond-grading services.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Hizballah DOJ UK Department of Homeland Security Department of State


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