Consultations

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.

The EMA submitted a response to the PSR Phase 2 Draft Guidance on the monitoring and enforcing of the IFR on 8 July 2016.

We sought two objectives, requesting:

(i) clarification regarding when issuers are expected to issue co-badged cards, and

(ii) that the PSR withdraw their requirement to label corporate cards under three different labels, instead of a single “corporate” label.

The final consolidated PSR Guidance, published on 5 October, was amended in line with the our proposals:

• there will be no requirement to co-badge cards if this not a service the issuer already offers, and
• issuers will be able to label all corporate cards with one label rather than separately distinguishing corporate cards between debit, credit and prepaid.

Details of the response can be found here.

PSR’s consultation on the application of the Interchange Fees Regulation

The EMA submitted a response to the PSR Phase 2 Draft Guidance on the monitoring and enforcing of the IFR on 8 July 2016.

We sought two objectives, requesting:

(i) clarification regarding when issuers are expected to issue co-badged cards, and

(ii) that the PSR withdraw their requirement to label corporate cards under three different labels, instead of a single “corporate” label.

The final consolidated PSR Guidance, published on 5 October, was amended in line with the our proposals:

• there will be no requirement to co-badge cards if this not a service the issuer already offers, and
• issuers will be able to label all corporate cards with one label rather than separately distinguishing corporate cards between debit, credit and prepaid.

Details of the response can be found here.

EMA responds to Czech Republic PSD2 consultation

The EMA submitted a response to the Czech Ministry of Finance’s consultation on the implementation of PSD2 in the Czech Republic. The consultation web-page can be found here, and the existing Czech Payments Systems Act (Regulation no. 284/2009 Coll.) here.

The consultation asks for stakeholders’ views regarding the specific options where Member States may diverge from the PSD2 requirements. The EMA response focuses primarily on those options that will affect EMIs, PIs and CIs passporting into the Czech Republic, whether by way of freedom of establishment or by freedom of services.

The response argues:

• Against any requirement for a Central Contact Point for PSPs passporting into the Czech Republic under the Freedom of Establishment, as this is unnecessarily burdensome, particularly for small Fintech companies
• In favour of a harmonised framework across the EEA in general, as this will decrease barriers for firms wishing to access markets across the EEA
• Against any requirement to provide the monthly transaction statement in paper format, as this is not coherent with the average customer profile of many EMA members, who often open, access and use their accounts remotely

Read the EMA response here.

EMA responds to EBA Consultation on Passporting under PSD2

See the EBA consultation details here.

The EMA has responded to the EBA’s consultation on regulatory technical standards (RTS) on the framework for cooperation and exchange of information between competent authorities for passport notifications under PSD2. These draft RTS set out templates for passporting, services passporting, agent passporting, and establishment passporting. They also set out a template for distributor passporting. These templates could have a significant impact on PSPs passporting to other EU Member States, including where any services are outsourced to another EU Member State.

The EMA’s response welcomes the standardisation of passporting notifications, as this may improve efficiencies for both regulators and firms. However, there are a number of concerns raised by the EMA in the response.

PSD2 provides for two types of passporting to be undertaken. These are based on the principle of mutual recognition set out in the Treaty of the European Union (“Treaty”). The first is freedom to offer services and the second is the right of establishment. However, the draft format conflates these concepts by requiring one form for both. Not only is this unhelpful from an administrative perspective, but it may result in Member State authorities treating passport entities as established entities. The EMA has accordingly proposed:
– that two forms are used – one for passporting under Freedom of Services, and one for Freedom of Establishment
– a separate, third form should be used for the outsourcing of services
– a definition of “distributor” would help distinguish between agents and distributors in terms of operation and legal responsibilities.

Read the EMA response here.

EMA response to FCA Guidance consultation on outsourcing to the cloud

Read about FCA’s consultation here.

The EMA responded to the FCA’s recent consultation on the use of cloud IT service providers This is of significant interest for many Fintechs and innovative PSPs who rely on such outsourcers to deliver many important functions. The FCA draft guidance in a number of areas (i.e. Legal and regulatory considerations, Effective access to Systems Data, Access to business premises) will likely have a significant impact on existing outsourcerrelationships. Based on the current draft, it is likely that many existing service contracts would have to be re-negotiated and possibly terminated with the financial service providers bearing additional costs and corresponding impact on existing operations.

The EMA’s response calls on the FCA to take into account current technology trends and market dynamics when drafting the Final Guidance on this topic. Currently, many regulated firms have limited negotiating leverage to introduce any changes to the standard service delivery agreements offered by the large, reputable cloud IT service providers.

The EMA’s response suggests that instead the Guidance focus on:
(1) additional criteria for a regulated firm to consider when establishing a cloud-service outsourcer due diligence process, and
(2) setting up a robust service review & monitoring framework; for example ensuring a service provided by a cloud-based outsourcer meets agreed key performance indicators (“KPIs”).

Read the EMA response here.