With the help of compliance software Ruler, Charco & Dique closely monitors the developments in financial legislation. We determine the impact of upcoming changes and translate them into the daily practice of our clients.

Which developments should you take into account? Every quarter, we provide a structured overview of the regulatory changes and their consequences for financial institutions in our Regulatory Updates. In this blog, we list a number of focus areas for Q3 2022.

Retrospective

What laws and regulations have recently come into effect?

• On July 4, 2022, the amended ESMA guidelines on stress test scenarios under the Money Market Regulation (MMF) entered into force.
• On July 7, 2022, the 2022 Act amending the Financial Markets Act partially entered into force. Settlement companies, payment institutions, electronic-money institutions and investment firms now have the option to maintain a segregated capital account. All provisions correcting omissions and oversights have also entered into force. The remaining amendments will take effect on January 1, 2023.
• Delegated regulations 2022/1299 and 2022/1302 and implementing regulation 2022/1300 entered into force on August 15, 2022. Directive 2021/338, which entered into force at the end of 2021, includes amendments to Articles 57 and 58 MiFID II, which deal with the commodity framework, including the position limit regime. Based on the alterations, level 2 regulations have been developed to give further interpretation to the requirements.

EBA Guidance on AML/CFT role for compliance officers

On June 14, 2022, EBA published its Final Report containing guidance on the role, duties and responsibilities of AML/CFT compliance officers. For the first time at EU level, this guidance comprehensively addresses the whole set-up of AML/CFT governance. The guidelines set clear expectations about the role, duties and responsibilities of the AML/CFT compliance officer.

The guidelines explain:

• that AML/CFT compliance officers should be employed by the same organization long enough to be able to take (on their own initiative) all necessary measures to ensure compliance and effectiveness of internal AML/CFT measures;
• what the duties and role are of the board member responsible for AML/CFT;
• what role the AML/CFT compliance officer fulfils in the group;
• when a group AML/CFT compliance officer should be appointed in the parent company to ensure the establishment and implementation of
• effective group-wide AML/CFT policies and procedures; and
• what information should be included, at a minimum, in the AML/CFT compliance officers’ activity report to the management.

The provisions in the guidelines should be applied proportionately. Taking into account the diversity of financial firms that fall within the scope of the Wwft. The guidelines will enter into force on December 1, 2022.

Updated guidance on collecting data on large earners (CRR/IFD)

EBA has updated its guidelines on data collection on large earners. The purpose of data collection on large earners is to analyze and publish annual trends in the number of individuals within these institutions earning at least €1 million. 

The EBA guidelines focus on national regulators, but include explanations on the information these supervisors should request from banks and (Category 1 and 2) investment firms. The updated guidelines were published on June 30, 2022, and apply from December 31, 2022 to data to be collected in 2023 for the 2022 fiscal year. The data must be sent to the regulator by August 31, 2023. The existing Guidelines on Collecting Data on Large Earners dated July 16, 2014 (EBA/GL/2014/07) are thus superseded.

For fiscal year 2021, data collection for large earners will be conducted according to the existing guidelines for both banks and investment firms, unless they are small and unrelated.

The Guidelines contain two templates for submitting information, one for bank and category 1 investment firm staff (Appendix I) and one for category 2 investment firm staff (Appendix II). The Guidelines should be read in conjunction with the applicable “EBA Guidance on Sound Remuneration Policies under Directive CRD” and the “EBA Guidance on Sound Remuneration Policies under Directive (EU) IFD.
Data on large earners should be reported at the consolidation level. The information should cover all large-earner data for all entities and branches within the highest level of prudential consolidation. In the case of stand-alone banks or investment firms, large-earner data should be reported on an individual basis.

New remunieration rules for financial enterprises

The Financial Institutions Remuneration Policy Act (Wbfo) is being amended. The bill applies to banks, managers of investment institutions and UCITS, investment firms, payment service providers, financial service providers, mortgage providers, PPIs and insurers. The Act will take effect on January 1, 2023.

Important elements of this Act are:

• a statutory retention period: directors and employees of financial organizations are obligated to retain shares (or other financial instruments which value depends on the company’s performance) that are part of the fixed remuneration for at least five years after being acquired;
• an obligation for financial organizations to account for the relationship between remuneration and the role and position of the company in society; and
• a tightening of the possibility of derogation from the bonus ceiling for non-CAO staff.

UBO registration for trusts and FGRs

A bill introducing a register of beneficial owners (UBOs) of trusts and similar legal entities was introduced on April 26, 2021. The latter includes, for example, Funds for Joint Accounts (FGRs).

The Dutch trust register is intended to make transparent who the ultimate stakeholders are of trusts and similar legal arrangements of which:

• the trustee is domiciled or resident in the Netherlands, or
• for which the trustee enters into a business relationship or acquires real estate in the Netherlands.

The Act is now final and published on December 16, 2021. The Implementation Decree associated with the Act will enter into force on November 1, 2022. From then on, trustees have three months to register the UBOs of trusts and FGRs in the trust register. This must be done no later than February 1, 2023.

Read the full Regulatory Update article on the website of Charco & Dique.