March, 2024
Hey there,
We're pleased to introduce our new monthly regulatory newsletter, focusing on crypto asset business and AML issues.
February was an eventful month in the crypto world, with a surge in crypto assets and significant regulatory developments across the EU in anticipation of MiCA. In a data privacy dominion, a Spanish app faced GDPR breaches, and the EU is preparing for an AI office to align with its upcoming AI regulation.
Stay informed and enjoy your reading!
??Glovoapp fined €550,000 for inadequate security measures
On?March 7, 2023, the Spanish data protection authority published?its decision (No. PS-00209-2023),?under which it?imposed fine of €550,000?on Glovoapp23, S.L. (?Glovoapp“) for?violation of the General Data Protection Regulation (?GDPR“).
Spanish data protection authority was contacted by Italian data protection authority with an inquiry after its investigation revealed that the data of delivery drivers who used a platform operated by Glovoapp,?could be accessed by operators outside Italy.
Following its investigation, Spanish data protection authority determined that:
?? European Commission announces creation of European AI Office
On February 21, 2024, the European Commission announced the creation of the European AI Office (the ?AI Office“) pursuant to the Proposal for a Regulation of the European Parliament and of the Council Laying Down Harmonised Rules on Artificial Intelligence (the??AI Act“).
The AI Act is the first-ever comprehensive legal framework on AI worldwide, guaranteeing the fundamental rights, health and safety of people, which shall provide legal certainty to businesses across the 27 Member States.
The AI Office is established within the European Commission and is responsible for implementing the requirements of the AI Act through supporting the governance bodies of EU Member States in their tasks. This is underpinned by the powers given to the European Commission by the AI Act, including the ability to conduct evaluations of general-purpose AI models, request information and measures from model providers, and apply sanctions. The AI Office shall also promote an innovative ecosystem of trustworthy AI, to reap the societal and economic benefits.
?? Updated EU payment rules will make it possible to receive SEPA payments in 10 seconds
The European Parliament has approved updated EU payment rules aimed at ensuring swift euro (SEPA) transfers for consumers and businesses. These rules, agreed upon with the EU Council, mandate that banks execute payments instantly, with funds reaching recipients within 10 seconds, and provide confirmation to the payer. The cost of such transfers cannot exceed that of regular ones. Non-eurozone EU states will also implement these rules, albeit with a longer transitional period. Additionally, payment service providers must implement fraud detection measures, or banks will compensate clients for fraud losses. Clients will also have the flexibility to set instant payment limits. The rules garnered support from 599 MEPs, with formal approval pending from the EU Council. Once approved, EU member states will have one year to prepare for their implementation.
?? Frankfurt Becomes Headquarters for EU's Anti-Money Laundering Authority
The European Parliament and Council have chosen Frankfurt as the headquarters for the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), Europe's new central enforcer in combating financial crimes. Frankfurt emerged as the winner after a joint vote, beating out eight other candidate cities, including Brussels, Dublin, Madrid, Paris, Rome, Riga, Vilnius, and Vienna. Co-rapporteurs Emil Radev and Eva Maria Poptcheva emphasized AMLA's significance in tackling illicit financial activities and highlighted the transparency of the selection process, which included public hearings and specific criteria for location selection.
A press conference featuring parliament co-rapporteurs, Belgium's Permanent Representative to the EU, and the European Commissioner for Financial Services was scheduled after the vote. This decision marks the first time the host city for a new EU agency was agreed upon jointly by the Parliament and Council, following a Court of Justice ruling.
The AMLA regulation, part of broader reforms to combat money laundering and terrorist financing, is set to be formally adopted and implemented by July 2025, with initial operations overseen by the European Commission.
???? FATF removes UAE, Gibraltar from “grey-list”.
The United Arab Emirates (U.A.E.) has been commended by the Financial Action Task Force (FATF) for significant strides in enhancing its anti-money laundering and counterterrorist financing efforts, leading to its removal from FATF's "gray list" of monitored jurisdictions. The U.A.E. has improved its financial intelligence capabilities and implemented measures to ensure the transparency of beneficial ownership of legal entities. However, international anticorruption groups, including Transparency International and The Sentry, expressed concerns about the decision, citing the need for further action to address the U.A.E.'s challenges with money laundering and financial secrecy.
FATF President T. Raja Kumar emphasized that while exiting the gray list doesn't imply a perfect system, the U.A.E. has committed to further enhancing its anti-money laundering and counter-terrorism financing regime. Additionally, FATF updated its list by removing Barbados, Gibraltar, and Uganda from the gray list, while adding Kenya and Namibia. Despite ongoing geopolitical tensions, FATF did not take additional action related to Russia's membership suspension or the conflict in Ukraine but urged all jurisdictions to remain vigilant against potential risks to the international financial system.
?? EU Council adopted regulation on instant payments
Newly adopted EU Regulation on instant payments will make instant payments available in euro for consumers and businesses from EA and EEA countries. Instant payment allow money transfer within 10 seconds. Key addition is that payment service providers will be required to offer sending and receiving instant payments in euro and charges applicable to such service cannot exceed standart credit transfer charges.
The new rules will start working soon, with a faster transition period in euro-using areas and a longer one in non-euro areas. These rules give payment and e-money institutions access to payment systems by changing the settlement finality Directive (SFD). This means they'll have to offer instant credit transfers after a certain time. To make sure this doesn't add extra risk, there are safety measures in place. Under these rules, instant payment providers have to check if the recipient's account details match before making a transfer, which also applies to regular transfers.
?? EU Comission adoped delegated regulations in preparation for MiCA
EU Comission has recently adoped 4 new regulations which address various technical aspects in anticipation of MiCA coming into force. These delegated regulations address the following:
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3.1. Market share of value of cross-border transactions of ARTs and EMTS;
3.2. Market share of value in relation to exchange activities of ARTs and EMTs;
3.3. Market capitlisation on an international scale per given calendar period;
3.4. Market capitalisation on an international scale of all ARTs and EMTs issued by the issuer per given calendar period;
3.5. Market share of value of cross-border transactions of ARTs and EMTS into and outside the EU.
4. Rules setting out product intervention measures of ESMA, EBA and each member state competent authority again crypto assets, ARTs and EMTs.
?? EU progress towards adaptation of new AML package
Representative of the Council of the EU announced that they have reached an agreement on a final compromise text of EU AML package which includes:
Next steps should follow EU Parliament adopting its position and EU Council approving it before these legislative proposals are adopted and published in the EU Official journal.
?? Netherlands and ?? Austria is preparing for MiCA
Dutch authority for the Financial Markets (AFM) has informed market participants that they will be able to submit CASP license applications from 22 April, 2024. If approved, the license will be issued from 30 December, 2024. AFM has taken further steps in preparation of MiCa with a checklist and notification forms.
Austrian Financial Market Authority (FMA) has published a roadmap for CASPs in preparation for the MiCA. Its clear that FMA expects to start authorisation process sometime in October, 2024 with MICA fully transposed into national acts by end of December, 2025.
?? EU ECON announcement on PSD3 and PSR
On February 14, 2024, the European Parliament's Economic and Monetary Affairs Committee announced the adoption of draft reports concerning PSD3 and PSR, focusing on payment and electronic money services in the internal market. Notable highlights include measures for secure transfers, data protection, transparent charges, better cash access, and the authorization process for new payment service providers.
Secure Transfers: The proposed regulations emphasize strong customer authentication and responsibility for fraud-related losses, extending liability to technical service providers and online platforms.
Data Protection: Customers will have the right to opt out of data sharing with third parties when using payment services.
Transparent Charges: MEPs stressed the need for upfront fee disclosures in a clear, transparent, and accessible manner.
Better Cash Access: Exemptions are proposed for retail stores providing cash independently and lighter registration for certain ATMs not servicing payment accounts.
Authorization Process: New entrants into the payment services sector will face strict conditions, while existing institutions seeking authorization will need to adhere to enhanced security, data protection, and governance arrangements.
The Parliament plans to vote on these texts in April, initiating negotiations with the Council of the EU thereafter.
?? ESMA warning on posting investment recommendations on social media
European Securities Market Authority (ESMA) issued a public warning for people posting investment recommendations on social media. Warning is trying to address prevalent issue of posting, making recommendations and discussing investments online. Whether willingly or unwillingly, such discussions can fall into a legal realm of Market abuse Regulation (MAR) and infringe prohibitions of insider dealing, market manipulation and investment recommendation regime. Importantly, initiatives aimed at investment education can be susceptible to such practises as well.
MAR sets out two different types of requirements for investment advice depending on whether person giving advise is professional or non-professional. The determination is made by taking account whether this is their main business or they are associated with such firm whether independent or representing buy/sell side.
This warning reminds such persons on requirements for any advice – general applicable to all and additional ones applicable to professional advisors only.
This is a novelty as ESMA not been active in targeting investment advice on social media and serves as a warning of a breach of the law for those who claim or assume expertise or wish to influence the area.]