Welcome to The MPAC Group, the UK's leading corporate compliance and regulatory advisory firm.

We have achieved this respect by working closely with our clients to meet their corporate regulatory, financial or legal obligations.

We believe client satisfaction is a function of people, solutions and delivery. At MPAC, our team of experts is comprised of experienced compliance officers, money laundering reporting officers (MLROs), senior regulators, qualified actuaries, lawyers and accountants from the financial sector delivering a wide array of services targeted to help our clients navigate through various corporate landscapes. Please take a look at how MPAC can help your business grow.

New HM Treasury Office for Financial Sanctions

HM Treasury launched a new body - the Office of Financial Sanctions Implementation (OFSI) - on 31 March 2016 to ensure financial sanctions are properly understood, implemented and enforced.

The UK Government announced in the 2015 Summer Budget that it would be seeking to increase the penalties for non-compliance with financial sanctions from a maximum of two years' imprisonment and/or an unlimited fine to seven-year imprisonment and/ or an unlimited fine in line with a breach of domestic terrorist asset freeze. We have observed that many commentators have made comparisons between the OFSI and the US Treasury Department's Office of Foreign Assets Control (OFAC), with the majority alluding to the potential increase in UK enforcement action.

We, therefore, strongly urge firms to take financial sanctions seriously and ensure compliance with the regime at all times. To do so, we encourage you to:

  • conduct sanction screening, e.g. utilise an electronic sanctions checking service or check your clients and third party service providers against the OFSI lists before the establishment of the business relationship;
  • conduct on-going monitoring and review the client or service provider against the OFSI lists throughout your business relationship;
  • maintain adequate records of your due diligence;
  • subscribe to the free e-mail alerts generated by the OFSI for any changes to the UK regime; and
  • check the OFSI website for any new updates on guidance and Q&A briefings.

Firms should be made aware that the FCA is not responsible for sanctions enforcement and the FCA's register should not be relied upon for the purpose of sanction screening.

Should you need any additional information, advice or assistance with the UK sanctions regime or sanction screening service, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk

FCA Sent Emails Regarding Misleading Marketing to all Firms Carrying Out Currency Transfer Services

The FCA sent an email to all firms carrying out currency transfer services on 26th May 2016.

The Regulator is concerned with the way that the interbank rate in currency converter tools was used in promotional and marketing materials. The FCA found that currency converter tools may give consumers a false impression that the superior interbank rates shown are available to them, rather than the materially inferior rate which they may actually receive.

The FCA reminded firms undertaking currency transfer businesses should be aware of their compliance with obligations under relevant regulations and legislation such as the Consumer Protection from Unfair Trading Regulations 2008 ('the CPRs'), BCOBS 2 of the FCA Handbook (if banks), The Price Indications (Bureaux de Change) (No 2) Regulations 1992 ('the PIRs') and UK Advertising Codes by the Advertising Standards Authority (ASA).

The FCA also observed that some firms claim that consumers can make specified savings and achieve better rates by using their services rather than those of their competitors. Firms should only make such claims if they are not misleading for the purposes of the CPRs and the FCA financial promotion rules.

In addition, payment institutions are allowed to make factual statements about their regulatory status. However, stating or implying that the firms have the approval or endorsement of the FCA would be in breach of the CPRs.

Should you need any advice or help on marketing and promotion compliance in relation to currency transfer services or any other matter, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk

One-Year Delay to MiFID II/MIFIR Agreed

An agreement on a one-year delay to new securities market rules was approved on 18th May 2016.

In May 2014 the Council of the EU adopted 'MiFID II' and 'MiFIR' to replace the existing MiFID text that regulates markets in financial instruments. MiFID II and MiFIR are:

  • MiFID II: It amends rules on the authorisation and organisational requirements for providers of investment services and on investor protection. The directive also introduces a new type of trading venue, the organised trading facility (OTF). Standardised derivatives contracts are increasingly traded on these platforms, which are currently not regulated.
  • MiFIR: It aims at improving transparency and competition of trading activities by limiting the use of waivers on disclosure requirements and by providing for non-discriminatory access to trading venues and central counterparties (CCPs) for all financial instruments, and requiring derivatives to be traded on organised venues.

Under the approach agreed, the deadline for the member states to transpose MiFID II into national legislation will be 3rd July 2017, and the date of application of both MiFID II and MiFIR will be on 3rd January 2018.

Should you need any additional information, advice or help on MiFID II/MiFIR preparatory issues or any other matter, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk.

Supervisory Priorities Arising from the MAR STOR Regime

The FCA published a web page regarding its supervisory approach and priorities in relation to suspicious transaction and order reports (STOR) regime from the implementation of EU Market Abuse Regulation's (MAR) on 3rd July 2016. The new STOR regime contains a number of key differences compared to the existing Suspicious Transactions Reports (STR) regime under the Market Abuse Directive (MAD).

  • Regulated firms and other persons as 'notifiers' - will be required to detect and report any suspicious behaviour or activity which is in scope of MAR, including instruments traded on a wider range of trading venues compared to MAD and suspicious orders and transactions;
  • Attempted manipulation and attempted insider dealing are in scope of MAR now; and
  • An indicative list of indicators of manipulation from MAR that notifiers should be aware of in ensuring their systems and procedures are effective, and trading venues must also have effective systems aimed at preventing market abuse.

The FCA is building a system for firms and trading venues to use to report STORs. Notifications are to be made using the Connect system.

The FCA will continue to take a risk-based approach, and the new STOR regime may require significant technology changes for some notifiers in relation to surveillance of quotes. The FCA also expects that notifiers to show detailed and realistic plans to be in place for inspection at any time, in order to demonstrate that them have done their best to achieve full compliance, if they are not in a position to deploy fully effective surveillance required by MAR by 3 July 2016.

Should you need any additional information, advice or help on this or any other matter, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk.

FCA's Key Findings on Inducements and Conflicts of Interest

In 2015, the FCA conducted a thematic review on the benefits provided and received by regulated firms. While it will not be publishing a final report, more commentary is expected in the FCA's MiFID II consultation paper. The review presented the following key findings:

  • Firms did not provide or receive hospitality that enhanced the quality of service to clients. The FCA makes it clear that all aspects of the hospitality should be assessed in terms of their ability to enhance client service;
  • Firms combined hospitality that did not offer any enhanced client service with hospitality that did meet requirements. Firms are expected to refrain from this practice and consider each activity's benefit separately;
  • Hospitality logs are not maintained appropriately. Firms must ensure sufficient detail on the benefits received and provided is recorded to guarantee effective monitoring and compliance;
  • Product providers made excess payments to advisory firms facilitating training or educational material supplied by them. The FCA clarifies that payments should only cover the costs incurred, otherwise these are likely to be inducements; and
  • MiFID firms are expected to ensure that clients are given an indication of the value of the allowable benefits provided in order for clients to be aware of the possible levels of inducements, which the firms were not respecting.

Firms should also be reminded that they are still subject to the inducement rules in COBS 2.3 of the FCA Handbook and, in case of Investment Managers, the dealing commission rules in COBS 11.6 of the Handbook. And close attention should be given to the new research unbundling rules coming into force under MiFID II in January 2018.

Should you need any additional information, advice or help on this or any other matter, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk.

FCA Requires Disclosure of Panama Papers Involvement

The FCA has written to around 20 banks and financial services firms enquiring about the extent of their involvement with the law firm Mossack Fonseca and the 11.5 million files knows as the Panama Papers. It has set a deadline of April 15th for those firms to provide information about their dealings with Mossack Fonseca and the action which they are taking. After the initial April 15th disclosure date, the FCA will require the targeted firms to provide "..updates on any significant issues or relationships identified" and a full response outlining the findings following the conclusion of their internal investigations.

The key message behind the FCA's letter is to remind UK based firms that any overseas branches and subsidiaries outside of Europe must comply with the UK's standards for client account monitoring and customer due diligence.

Should you need any additional information, advice or help on this or any other matter, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk.

Iranian Sanctions Update

Following the nuclear agreement agreed by world powers and Iran recently, U.S. and EU lifted some sanctions against Iran. SWIFT is also preparing to allow Iranian banks to return to using the payment system.

Although most sanctions are lifted, it is not the case for all sanctions. The EU goes further than the U.S. in that the majority of individuals and entities of the EU sanction targets will be delisted, whereas U.S. will retain all domestic sanctions and only lift extra-territorial sanctions. Therefore, firms will need to be exceedingly careful in simply reconnecting as not all sanctions were lifted by the U.S. Payments made in US Dollars and firms/banks with U.S. connections need to be cautious. Whilst trade with Iran provides opportunities, the following key points must be considered:

  • Any U.S. Citizens involved?
  • Any payments made in US Dollars?
  • Any transaction involved in the supply of any U.S. made goods either wholly or partially?
  • Is the Iranian counterparty, or any other party involved in the transaction still included on an applicable sanctions list?
  • Any contractual exclusion you may have (e.g. banking arrangements)?
  • Any support provided within the insurance cover?
  • Any implications of dealing with other Iranian counterparties who are sanctioned and may be connected to your client?
  • Any document and evidence of the checks carried out?

MPAC partners with ComplyAdvantage, a leading compliance checking platform which implements real-time data to provide accurate and updated information regarding all politically exposed persons (PEPs), trade sanctions and adverse media.

Should you need any additional information, advice or help on this or any other matter, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk.

Consultation Paper on Regulatory References Requirements

The FCA and the PRA jointly published a Consultation Paper in October 2015 about their proposals for regulatory references.

In the Consultation Paper the FCA and PRA set out the following main proposals for Relevant Approved Persons ("RAP")* and insurers:

  • Requiring firms to request regulatory references from former employers of candidates applying for SMFs and certification functions in RAPs and PRA senior insurance management functions ("SIMFs") at insurers to go back six years.
  • Modifying certain prescribed responsibilities for Senior Managers in RAPs and insurers to include compliance with the regulatory reference rules.
  • Mandating the inclusion of concluded breaches of the conduct requirements of FCA Conduct Rules (COCON), PRA Conduct Rules and Statements of Principle and Code of Practice for Approved Persons (APER) going back six years.
  • Requiring disclosures by RAPs and insurers in a standard format including the need to confirm where there is no relevant information to disclose.
  • Requiring RAPs and insurers to update previous references given in the past six years, where they become aware of matters that would cause them to draft that reference differently if they were drafting it now.

The existing requirements for firms to disclose all relevant information in references remains. The reference should meet the firm's legal obligations to ensure that it is clear, accurate and fair. Currently the requirement to provide a reference on request is actionable for damages. The FCA is consulting that whether, under the new requirement, providing a reference should be actionable for damages. In addition, the FCA and the PRA will consider whether the specific proposals for RAPs and insurers should be extended to all authorised firms.

The FCA and the PRA welcome all comments by 7th December 2015, and will publish their rules in a Policy Statement in early 2016, ahead of the effective date of the new accountability regime on 7th March 2016.

*'RAP' is short for 'relevant authorised person', the term used in section 71A of the Financial Services (Banking Reform) Act 2013 to describe deposit takers and PRA investment firms.

Should you need any additional information, advice or help on this or any other matter, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk.

Plans to Introduce 'Reverse Burden of Proof' Abandoned

The Treasury has dropped its controversial so-called 'reversal of burden of proof' plan, as part of a proposed new Senior Managers & Certification regime which would impose a guilty until proven innocent burden on top executives. Senior managers will instead have a new 'duty of responsibility' plan, which requires management to take appropriate steps to prevent regulatory breaches. Senior staff in the entire financial sector will have more responsibilities for failings under their management.

Tracey McDermott, acting head of the FCA, said: "Extending the senior managers' and certification regime is an important step in embedding a culture of personal responsibility throughout the financial services industry."

The new Senior Managers & Certification regime, which will come into effect on 7th March 2016, will also be extended to fund managers, mortgage brokers and consumer credit firms from 2018.

Bitcoin is Officially a Commodity in the U.S.

The Commodity Futures Trading Commission (CFTC), on 17th September 2015, announced that it had filed and settled charges against Coinflip, a Bitcoin exchange, for allowing the trading of option contracts on its platform. This means that, for the first time, Bitcoin and other virtual currencies are defined as commodities and the implications of this will be widespread.

As the trading of cryptocurrency futures and options in the U.S. is now subject to CFTC's regulations it means they will be able to control the derivatives providers and bring charges against anyone flouting the rules. Watch out anyone trying to manipulate the futures of the new market. Any companies who now want to operate virtual money derivatives trading platforms need to register as a swap execution facility or designated contract market. As Coinflip is not the only one in this new and growing market, others will now be in the line of fire from the CTFC.

While this move brings an element of certainty as to the position of virtual currency derivatives, will it help clean up the market in any way? It may well do so even if it means the cost of trading such derivatives will increase.

We wait to see the stance of regulators elsewhere.

Should you wish to discuss how MPAC Group may be able to assist your firm subsequent to the receipt of either a CASS thematic visit or the FCA's letter, please contact us by phone on 0203 056 0956 or via email to either Nick Andrews at nick.andrews@mpacllp.co.uk or Philip Buckingham at Philip.buckingham@mpacllp.co.uk

FCA Review on CASS Processes and Procedures

The FCA's CASS team has recently completed a review of twenty four firms with the permissions a) to provide Contracts for Differences (CfDs) and Spreadbetting and b) to hold Client Assets/Money for their compliance with CASS 10 Resolution Pack rules and reconciliations relating to CASS 6 and 7.

The Regulator found that the general level of compliance falls short of their expectations. There are also a number of specific CASS issues identified by the FCA, lumped into four common themes:

CASS resolution packs:

  • Incomplete packs, with missing core contents requirements and records
  • Inadequate frequency of updates; and
  • Lack of formal approval by the governing body.

Internal client money reconciliation:

  • Non-compliant or no internal reconciliation using external bank balances only;
  • Lack of adjustment for uncleared cheques and unidentified receipts;
  • Some firms are giving credit to client accounts before funds had cleared through various payment systems without prefunding; and
  • Some firms included negative client equity into the client money requirement.

Trust Acknowledgement letters:

  • Incorrect wording
  • Incorrect account names; and
  • Unsigned trust letters.

Client agreements:

  • Some terms did not reflect the practice of how the firms were treating clients.

The issues identified by the FCA set out above is not an exhaustive list. The FCA expects firms to review their CASS processes and procedures to ensure their ongoing compliance with all of the applicable CASS rules, and will be undertaking more short notice visits to firms with CASS permissions.

MPAC has a great depth of experience in assisting FCA regulated firms with CASS permissions to review and recommend amendments to CASS processes and procedures for firms providing CfDs and spread betting services either on an agency or matched principal basis.

Should you wish to discuss how MPAC Group may be able to assist your firm subsequent to the receipt of either a CASS thematic visit or the FCA's letter, please contact us by phone on 0203 056 0956 or via email to either Nick Andrews at nick.andrews@mpacllp.co.uk or Philip Buckingham at Philip.buckingham@mpacllp.co.uk