As the French financial community pursues its work on digital assets, the ACPR - AMF Fintech Forum has issued a consultation on the anti-money laundering and combating the financing of terrorism (AML/CFT) challenges for this ecosystem. The consultation document, which is presented as a questionnaire, is intended to map out AML/CFT practices, needs and expectations in this growing industry.
AMAFI is stressing the need to introduce AML/CFT measures that are just as stringent as in other areas of activity, but that are also tailored to the specific features of blockchain technology to ensure that they are effective. In particular, the considerable benefits that this technology offers, in terms of its ability to ensure the traceability of all transactions carried out in the distributed ledger, could be usefully harnessed to facilitate AML/CFT supervision and make it more precise (AMAFI / 20-06).
These measures also need to capture the international dimension of the blockchain ecosystem. While AML/CFT is of course an imperative requirement, we cannot overlook the fact that, in these areas especially, participants can turn to service providers outside France. Care must therefore be taken not to unduly handicap the competitiveness of French firms by imposing disproportionate or even non-applicable measures. Not only would such measures do nothing for AML/CFT, they would also undermine the efforts of recent months to make the Paris financial centre attractive to these participants. AMAFI is proposing several avenues of discussion, touching on the need for European dialogue on this issue, the liability of the person or entity that initiates a movement on the blockchain, and the treatment of digital assets that promote participant anonymity.
EFSA - initial comments on MiFID 2/R Review
AMAFI contributed to the new Paris Europlace brochure on the offer of the Paris Market Place
In late 2019, the International Organization of Securities Commissions (IOSCO) held a consultation on proposed guidance covering conflicts of interest identified in primary bond issues. The IOSCO report proposed eight measures, partly modelled on provisions in Europe’s MiFID 2 framework.
In its response (AMAFI / 20-10), AMAFI indicated broad support for the proposed guidance, noting that the measures were generally appropriate and posed no real difficulties insofar as they were already incorporated into European regulations. However, AMAFI requested clarification on several aspects, including issues relating to the determination of issue prices, and offered feedback based on the most common practices on the French and European markets. In conclusion, it said that the European legal and regulatory framework did not need to be amended.
Financing for SMEs and mid-tier firms is vitally important, which is why AMAFI was closely involved in the European Commission’s SME Growth Market initiative. We successfully argued for a liquidity contract that could be used in different Member States, without prejudice to existing accepted market practices at the domestic level. As a result, Regulation (EU) 2019/2115 on SME growth markets introduced the regulatory framework for just such a contract. In accordance with the framework, the Commission asked ESMA to submit the draft regulatory technical standards (RTS) needed to draw up a standard template, giving it until September to do so.
Ahead of the public consultation scheduled to begin before the summer, ESMA staff sought discussions on issues that AMAFI believes must be considered when preparing the RTS. After talks within its Liquidity Contract Group, AMAFI sent ESMA a document building on these discussions and highlighting key points based on its expertise in this area (AMAFI / 20-09). In particular, the document stressed the importance of leeway to accommodate specific national features.
AMAFI has published an update of its guide to implementing product governance obligations (AMAFI / 20-16), which notably clarifies the obligations to regularly review target markets and identify crucial events affecting products. As with previous versions, the guide was discussed with AMF representatives prior to publication and has been translated into English.
In terms of European-level discussions, AMAFI continues to participate actively in the MiFID FinDaTex working group, which developed the European MiFID Template. The aim this time is to prepare a standardised format for distributors and manufacturers to exchange information on sales outside the target market. AMAFI plans to ensure that this future European Feedback Template converges as far as possible with the format proposed in annex 3 of its guide.
Dans le contexte de la crise sanitaire et de ses conséquences économiques, le rôle des marchés dans le financement de la reprise et le retour de la croissance s’avère crucial. Comment les marchés accompagnent-ils les Etats et l’Union européenne dans le financement des plans de relance ? Comment canalisent-ils les flux nécessaires vers les bons objectifs ? Comment améliorer leur efficacité dans ce rôle central ? Autant de questions auxquelles l’ouvrage entend apporter des réponses grâce à la contribution d’une palette d’auteurs français et internationaux.
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Over recent months, AMAFI has been thinking about ways to reinvigorate the Capital Markets Union (CMU) initiative. To tap into the expertise of a recognised think tank, these discussions are being held in conjunction with the Centre for European Policy Studies (CEPS). Account is also being taken of work already done or under way on the topic (see editorial). While the reforms carried out so far have fallen well short of their original goals and failed to match the scale of the financing needs, the coronavirus health crisis has utterly transformed the backdrop to this discussion in past weeks. Most of the challenges are well-known and revolve around enabling the markets to grow alongside bank credit, which is now constrained, in order to finance the struggle against climate change, the digital revolution, the fourth industrial revolution, and efforts to adapt social structures to cope with population ageing. Moreover, this needs to be done while simultaneously ensuring that the European Union maintains adequate control over its financing sources, without which it cannot hope to have real sovereignty. The need for structural reforms at European level has become much more urgent, if we want markets to play their role to the full in financing the economic recovery while also being ready to cushion the impact of potential future crises.
AMAFI’s proposals will be published in the coming weeks. The overriding goal is to draw on the work done in this area in order to plot a consistent path forward based around members’ experience with market functioning and market mechanisms. Six priority areas have been identified, namely to facilitate the creation of a genuine European securitisation market, make the prudential regulatory framework more flexible, grow the role of pension funds, consider public support in specific areas, maintain access to international pools of liquidity and provide European markets with a safe asset, which is vital to structuring aspects.
With the Covid-19 crisis seemingly doing nothing to shake the United Kingdom’s resolve to leave the European Union on 31 December, talks remain tense, to put it mildly, with limited progress on the financial services sector. Although the European Commission wants to complete assessing the equivalence of the UK and European regulatory frameworks by the end of June, it is still awaiting answers to its clarification requests, while the UK continues to affirm its capacity to deviate from the European regulatory framework.
Against this backdrop, an AMAFI delegation, led by Chairman Stéphane Giordano, took part in a conference call with Almoro Rubin de Cervin, Director of General Affairs at DG FISMA, and his team. The purpose of the call was to present AMAFI’s priorities regarding the equivalence process for financial services (AMAFI / 20-29) and review the progress in Brexit negotiations.
The call provided an opportunity to stress the need to prolong the temporary equivalence of UK central counterparties in order to maintain market integrity and safeguard the ability of EU investment firms to keep providing customers with the same quality of service. AMAFI also reiterated the need for third-country branches of EU investment firms to be exempt from MiFID II STO/DTO trading obligations in order to preserve their competitiveness. While European Commission staff understand the importance of a pragmatic approach, exact implementation procedures are still being examined. Another issue raised during the exchange was the possibility that one of the first areas of divergence might be remuneration policies, with attendant impacts for the competitiveness of European firms
Entry into application of the reporting mechanism provided for by European Securities Financing Transaction Regulation (EU) 2015/2365 (SFTR) has been pushed back from 13 April to 13 July 2020 for credit institutions and investment firms (cf. Financial Newsletter No. 40).
The ad hoc working group set up a year ago by AMAFI continues to be busy helping members get ready for the deadline. Regular meetings are being held to review firms’ readiness, discuss technical questions and talk about the tests currently being carried out. The SFTR group has put together a file that allows firms to specify how they are taking part in the tests being conducted by entities such as trade repositories and providers of technical solutions for SFT reconciliation.
All this work will help in preparing for the 13 July deadline, which remains a huge technical challenge for market participants, despite the postponement.
