The month’s key regulatory and compliance-related developments impacting private banks and wealth managers.
EU releases tax haven black list
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In its latest crackdown on tax evasion, the EU has published a ‘black’ list of countries that have failed to comply with its agreed tax rule standards.
The jurisdictions are: American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and the UAE. These countries could lose access to funds from the EU.
The EU also issued a ‘grey’ list of 47 other jurisdictions that are currently not compliant with its tax governance standards, but have committed to reform their tax rules. This list includes Hong Kong, Jersey, Bermuda, the Cayman Islands, Switzerland and Turkey.
The EU noted that the list would be updated at least once annually and a country may be removed from the list once it has addressed its shortcomings.
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By GlobalDataEconomic and financial affairs, taxation and customs Commissioner Pierre Moscovici said: “The adoption of the first ever EU black list of tax havens marks a key victory for transparency and fairness. But the process does not stop here. We must intensify the pressure on listed countries to change their ways.
“Black listed jurisdictions must face consequences in the form of dissuasive sanctions, while those that have made commitments must follow up on them quickly and credibly.”
The EU’s latest move follows The Paradise Papers data leak of 13.4 million files from offshore law firms and company registries in 19 tax havens worldwide.
More than one-third of UK businesses unprepared for MIFID II
A survey has shown that more than one-third of financial institutions in the UK are unprepared for the updated Markets in Financial Instruments Directive (MiFID II), less than 30 days before the regulation comes into effect to make extensive changes to companies’ compliance requirements.
The research was carried out by UK-managed cloud service provider, Timico.
While 39% of UK organisations are said to be unsure about whether they are compliant, only 8% of company employees said they understood the repercussions of not complying with the rule and have received training.
MiFID II is a key EU legislation that regulates firms that provide services to clients linked to financial instruments such as shares, bonds and directives. It comes into force on 3 January 2018, and companies can be fined up to €5m ($5.9m) or 10% of company turnover for non-compliance.
Recital 57 of the directive will require businesses to record all communications that are intended to result in a transaction. This is designed to increase transparency and accountability in the financial markets. Regardless of the source, recordings must be stored for at least five years.
The research also highlighted that 14% of staff were unaware of what processes are required to be compliant, while 37% are in the process of initiating a training programme.
Some 41% of employees did not know if staff were aware of the legal requirements of MiFID II or had received any training on the legislation.
A total of 42% of businesses said they do not have a mobile-compliant platform in place to record telephone conversations.
The research was conducted in November 2017 and polled 500 participants in the finance sector, including IT managers, IT directors, CTOs and CEOs.
Australia begins public inquiry into misconduct of financial firms
The Government of Australia has announced plans to establish a royal commission to examine the conduct of the country’s financial services businesses.
The commission will examine a range of issues, including the extent and effects of misconduct by financial services businesses, and how well equipped regulators are to detect and address misconduct.
The inquiry will cover banks, insurers, financial services providers and superannuation funds, not including self-managed superannuation funds.
“Ongoing speculation and fear-mongering about a banking inquiry or royal commission is disruptive and risks undermining the reputation of Australia’s world-class financial system.
“The Government has decided to establish this royal commission to further ensure our financial system is working efficiently and effectively. Instead of the inquisition into capitalism that some have called for, the royal commission will take a conventional, focused approach,” the Government said in a statement.
The announcement follows calls by the chairs and CEOs of the country’s big four banks – ANZ, NAB, Westpac and Commonwealth Bank – for an inquiry.
In their letter, the banks said: “Our banks have consistently argued the view that further inquiries into the sector, including a royal commission, are unwarranted. They are costly and unnecessary distractions at a time when the finance sector faces significant challenges and disruption from technology and growing global macroeconomic uncertainty.
“However, it is now in the national interest for the political uncertainty to end.”
