financial services

News Update Financial Regulatory

Fines, money laundering, risks, climate and more
06 April 2021
6 April 2021

In this News Update, we discuss developments in determining administrative fines by financial regulators. We also discuss consultations by EBA on changes to Guidelines on risk-based AML/CFT supervision and by the ESAs on Taxonomy-related product disclosures. Finally, we highlight some other important financial regulatory publications.

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Developments in determining administrative fines by financial regulators

Various financial regulators are currently determining or revising their policies for fixing the amount of an administrative fine in a specific case.

As mentioned in our 12 January 2021 News Update, the Dutch Central Bank (De Nederlandsche Bank, "DNB") did this by determining its Algemeen Boetetoemetingsbeleid DNB (DNB's General Policy on the method of setting fines) that came into force on December 2020.

On 2 March 2021, the European Central Bank ("ECB") published its Guide to the method of setting administrative pecuniary penalties that outlines the principles and methods for calculating the administrative fines used to sanction banks for breaches of prudential requirements. The guide clarifies that the ECB sets the fine level in relation to the severity of the breach, and to ensure proportionality, the size of the supervised entity. Breaches can be classified into five categories: minor, moderately severe, severe, very severe and extremely severe. The category a breach falls into depends on a combination of two factors: the impact of the breach and the degree of misconduct. The ECB may increase or reduce the base amount to account for all mitigating and aggravating circumstances and ensure that the fine is proportionate, effective and dissuasive.

On 25 March 2021, the Dutch Authority for the Financial Markets ("AFM") launched the consultation on the revision of its policy on determining administrative fines (with explanatory notes in Dutch). According to the AFM, the current policy is partly outdated and no longer fully in line with the law and regulations. The consultation runs until 30 April 2021. The AFM expects to publish the final version in the Dutch State Gazette (Staatscourant) and on its website in mid-2021.

The AFM and DNB have published several fines over the last few months, indicating that this instrument (and its publication) is gaining importance. For example, the AFM recently published fines imposed on Today's Tomorrow and its director for breaching the rules on sound business standards, and to operators of the platform 24option.com for, among others, providing investment advice without the required licence. DNB recently published fines imposed on a natural person because trust services were provided on a professional or business basis without a licence, and on MUFG Bank for exceeding the large exposure limit. On 30 March 2021, the European Securities and Markets Authority ("ESMA") published a case where the power to impose fines was applied at the EU level. ESMA fined five entities in the Moody’s Group €3.7 million and issued public notices for breaches of the Credit Rating Agencies Regulation regarding independence and the avoidance of shareholder conflicts of interest.

If you have any questions on determining administrative fines by financial regulators, do not hesitate to contact us or our Investigations & Public Enforcement colleagues Vincent Affourtit and Frank Mattheijer.

EBA - Consultation on changes to Guidelines on risk-based AML/CFT supervision

On 17 March 2021, the European Banking Authority ("EBA") launched a public consultation on changes to its Guidelines on risk-based supervision of credit and financial institutions’ compliance with anti-money laundering and countering terrorism financing ("AML/CFT") obligations. The consultation runs until 17 June 2021.

The revised Guidelines focus on helping the supervisors identify and manage ML/TF risks more effectively, including the risks that may arise from de-risking practices in some sectors or Member States by providing greater detail on ML/TF risk assessments. These require a robust supervisory strategy and plan based on these risk assessments. The Guidelines also set out how supervisors can choose the most effective tools to support different supervisory needs and objectives. Moreover, the Guidelines stress the importance of cooperation between different supervisors as well as with other stakeholders, such as Financial Intelligence Units.

The EBA also published its 2021 Opinion on ML/TF risks in the EU financial sector and its revised ML/TF Risk Factors Guidelines to address de-risking practices based on evidence gathered in its call for input.

DNB also adjusted its Guideline on the Anti-Money Laundering and Anti-Terrorist Financing Act and the Sanctions Act, reflecting the legislative amendments that came into force in 2020.

ESAs - Consultation on Taxonomy-related product disclosures

On 17 March 2021, the EBA, the European Insurance and Occupational Pensions Authority ("EIOPA") and the ESMA ("ESAs") issued a consultation paper seeking input on draft regulatory technical standards ("RTS") regarding disclosures of financial products investing in economic activities that contribute to an environmental investment objective, defined by the Taxonomy Regulation.

The proposed draft RTS aims to (i) facilitate disclosures to end investors regarding the investments of financial products in environmentally sustainable activities, and (ii) create a single rulebook for sustainability disclosures under the Regulation on sustainability-related disclosures in the financial services sector ("SFDR") and the Taxonomy Regulation. The consultation paper includes additional taxonomy-related disclosures that concern information about which environmental objectives the investments of the product contribute to, and information about how, and to what extent, the activities funded by the product are Taxonomy-aligned. This consists of two elements: (i) a graphical representation of the taxonomy-alignment of investments of the financial product and a key performance indicator calculation for that alignment, and (ii) a statement that the activities funded by the product that qualify as environmentally sustainable, are compliant with the detailed criteria of the Taxonomy Regulation. The ESAs also propose to standardise the presentation of the disclosures by amending the templates for the pre-contractual and periodic disclosures proposed in the draft RTS under the SFDR, by adding a new section that includes the disclosures required under the Taxonomy Regulation.

Other financial regulatory publications

We have highlighted a selection of other publications by legislatures and regulators for the financial markets and financial supervision in March 2021:
If you have any financial regulatory questions, please do not hesitate to contact Berry van Wijk and Roel Theissen.
Written by:
Berry van Wijk

Key Contact

Rotterdam
Advocaat | Partner | Lid van de Raad van Commissarissen
+31 10 217 24 29
+31 6 5184 5344
Roel Theissen

Key Contact

Amsterdam
Advocaat | Counsel
+31 20 605 61 05
+31 6 8234 6438