4MLD implementation: EMA’s letter to Denmark

We continued to provide input to the implementation of 4MLD in different EEA Member States, and submitted a response to the Danish consultation on 18 August.

We welcomed their proposals to implement the simplified due diligence provisions in Article 15 of 4MLD and expressed our views on the exemption from customer due diligence for e-money issuers in Article 12.

We also set out EMA’s position on the local point of contact provision for e-money issuers having distributors in Denmark, strongly discouraging the regulator from applying this requirement.

See the full response of the EMA here.

Application of CRS and FATCA: EMA letters to Luxembourg and Malta 

We sent a letter to the Director of the Luxembourg Tax Administration (l’Administration des Contributions Directes) arguing that payment accounts held by PIs and e-money accounts – whether issued by EMIs or CIs – should be exempt from reporting requirements under both FATCA and the CRS. This is because such payment products do not amount to deposit-taking activity.

In Malta, the FATCA and CRS guidelines state that relevant exclusions in the Banking Act will also influence the scope of the amended ‘Cooperation with other Jurisdictions on Tax Matters Regulations 2015’. However in considering whether an entity is conducting banking or similar business, an assessment of the actual activities will be made to make such a determination. We used these provisions in our letter to the Director General of the International Tax Unit of the Maltese Inland Revenue to argue for the exemption pf PIs, and of EMIs and CIs issuing e-money.

The EMA’s letter can be found here.

EMA letter to Rt Hon Philip Hammond MP on retention of passporting rights for the UK’s payment services industry

Following Mr Hammond’s comments at the BBA event on Tuesday 12 July, stating that he intends to ensure that the UK financial services industry can continue to passport into the EU after Brexit, the EMA wrote to describe the specific circumstances of the payments industry, and to propose a means by which mutual recognition for UK firms may be promoted.

In our letter, we set out the background to the industry, stating that mutual recognition is required to ensure the UK retains the status of financial centre, bringing innovation, know-how and creating employment. The letter concentrates on arguments specific to the payments industry rather than financial services as a whole. We urged him to seek clarity and certainty for payment services to ensure continuity of services to customers across the EEA during the negotiations period.

Further details of EMA’s letter can be found here.

4MLD implementation: EMA letter to the Dutch Ministry of Finance

In the letter submitted on 9 August, we welcomed proposals to implement Articles 12 and 15 of 4MLD into Dutch law and set out our position in relation to the local point of contact. We also explained the rationale for our concerns about the application of local law to distributors of e-money in the Netherlands.

We provided two significant reasons as to why local a point of contact is not an appropriate means of exercising control over passporting EMIs, and encouraged the Dutch government to reconsider the draft law:

• As distributors are not involved in offering a regulated service and issuing, they have very little insight into the use of e-money. The Dutch regulator is better off using a contact point located within the central office, where they can access all internal systems and data directly.
• Distributors do not constitute establishment under EU law, and issuers passporting cross-border through the use of distributors should therefore not be required to comply with local AML legislation, which is not envisaged by Art. 45(9).

The EMA’s full response can be found here.

The EMA published a position paper on the directive amending 4MLD – 5MLD.

View the full response here

The EMA responded to the FCA Consultation GC 16/5: Proposed guidance on wind-down planning on 25 July 2016.

View the full response here

The EMA submitted a response Competition and Markets Authority (CMA) Provisional Remedies for the Retail Banking Market Investigation on 20 July 2016.

View the full response here

On Monday 4 July we submitted evidence to the House of Commons Public Bill Committee responsible for scrutinizing the Finance Bill 2016.

New proposed legislation has been incorporated into the Finance Bill 2016 that will give HMRC the power to gather payments data from payment service providers and online “business intermediaries” on their customers – both businesses and consumers. HMRC want to increase tax revenue by gathering data to aid in the capturing of unreported income (the “hidden economy”), a goal that the EMA supports.  

However, this aim should not be to the detriment of consumers’ rights to the protection of their data. The proposals as set out in Clause 164 of the Finance Bill 2016 give rise to broader powers than those set out in the explanatory notes, resulting in a law that is heavily disproportionate in relation to the intended result. The new powers are drafted in such a way as to give the impression that HMRC will be making targeted requests for data from data-holders on an ad-hoc basis. However, in reality they will require data holders to report all relevant data on a quarterly basis, potentially moving to monthly basis in the near future, and they may require them to report on all accounts, regardless as to whether they are consumer or business accounts. In addition to this, there are no in-built safeguards on how the data will be used in future.

The data collection powers being proposed are not sufficiently limited: the scope of what data can be collected, and the definition of whose data can be collected are broad, collection will be periodic – annually or even monthly, and the data, once collected, may be used for any purpose. These proposed powers are compounded by the recent introduction of the UK government’s draft Digital Economy Bill, which will allow HMRC to share data with other bodies.

Below we have set out our concerns in further detail.

Evidence for Finance Bill 2016 Clause 164. Electronic Money Association

The EMA responded to a previous consultation: https://emaprd.wpengine.com/blog/ema-response-to-hmrc-consultation-on-extension-of-data-gathering-powers

EMA responds to 4MLD implementation consultation in Lithuania

The EMA submitted a response to Lithuanian consultation on their draft law implementing the 4MLD on 8 July, which concentrated on the implementation of CDD and local point of contact provisions.

We welcomed the implementation of specific e-money thresholds under Article 15 and the reference to any low-risk situations that may qualify for SDD under European guidance. However, we expressed our expectation for it to be made clear that both identification and verification may be postponed within the limits set by Article 15(1) (7).

As Lithuania proposed not to make use of the national optional threshold of EUR 500 for non-reloadable e-money products, we emphasised the importance of taking advantage of this option, in order for the e-money industry to continue providing solutions to the financially excluded and those with limited means.

Regarding the requirement for a local point of contact for each issuer physically distributing products in Lithuania, we set out why this requirement would not be an appropriate means of exercising control over passporting EMIs.

Find more details of the EMA response here.