In this regular update, we round-up FinTech-related financial services regulatory developments for the week ending 12 May 2023.


Recent insights from Herbert Smith Freehills:


BISIH: Project Polaris – Handbook for offline payments with CBDC

The Bank for International Settlements Innovation Hub (BISIH) Nordic Centre has published a handbook outlining the key issues relating to how central bank digital currencies (CBDCs) could work for offline payments. The handbook addresses issues including security, privacy, risks, solution types and operational factors. It also addresses objectives for resilience, inclusion, cash resemblance, accessibility, and other desired attributes. [11 May 2023]

Wolfsberg Group: Response on ISO 20022 harmonisation requirements for cross-border payments

The Wolfsberg Group has published its response to the Committee on Payments and Market Infrastructures (CPMI) report on ISO 20022 harmonisation requirements for cross-border payments. The Wolfsberg Group welcomes the CPMI’s proposed format and analysis of ways to improve harmonisation. The Group believes that harmonising payment and messaging formats globally around the ISO 20022 standard offers considerable benefit to the industry in the form of more data, more structured data, and potentially enhanced transparency. In its response, the Group provides comments on the questions that deal with financial crime compliance risk. [9 May 2023]



Pay.UK: How ISO 20022 enhanced data will benefit UK payments

Pay.UK has published a short interview with Mark Streather, Policy Lead on the implementation of ISO 20022 in Real Time Gross Settlement (RTGS) and Clearing House Automated Payment System (CHAPS) at the Bank of England (BoE). Mr Streather explains the key drivers behind the switch to the ISO 20022 messaging standards, and outlines some of the expected benefits of the transformation. [10 May 2023]



EP: Committees adopt draft negotiating mandate on AI Act

In a press release, the European Parliament (EP) has announced that its Internal Market Committee (IMCO) and the Civil Liberties Committee (LIBE) have adopted a draft negotiating mandate on the proposal for a regulation on harmonised rules on artificial intelligence (the AI Act). Among other changes, the Committees have amended the proposed list of intrusive and discriminatory uses of AI to include a range of additional applications, with a particular focus on use of biometric data, predictive policing systems, and emotion recognition systems. They have also expanded the classification of high-risk areas to include harm to health, safety, fundamental rights or the environment.

In terms of next steps, the draft negotiating mandate requires endorsement by the full Parliament and then negotiations with the Council can commence. [11 May 2023]


ECB: Call for candidates – Digital Euro Scheme

The European Central Bank (ECB) has published calls for candidates for two of the dedicated workstreams set up by the Chair of the Rulebook Development Group to support the drafting of the Digital Euro Scheme rulebook:

Applications are requested by 22 May 2023; applications may be accompanied by a nomination letter from a representative payment stakeholder association or a member of the digital euro scheme Rulebook Development Group. [8 May 2023]



BdF speech: Central banks and digital currencies

M Denis Beau, First Deputy Governor of the Banque de France (BdF), joined a panel discussion on ‘The perils and potential of digital currencies’ at the RAID (Regulation, Artificial Intelligence, Internet & Data) Digital 2023 on 3 May 2023. In his opening remarks, M Beau briefly contextualised current discussions about – and developments around – central bank digital currencies (CBDC) and stablecoins against the broader background of transformation underway in financial services and the financial sector. He then moved on to highlight some of the regulatory and supervisory issues that CBDCs and stablecoins present for central bankers in respect of their responsibilities for monetary and financial stability. [4 May 2023]


Hong Kong

HKMA publishes ninth issue of the Regtech Adoption Practice Guide on customer data and privacy

The HKMA has published the ninth issue of the Regtech Adoption Practice Guide. The current issue focuses on regtech solutions for customer data and privacy, which can help banks improve the effectiveness of their privacy compliance activities and boost customer trust, amid the growing volume of customer data that is being collected and processed.

This issue:

  • Illustrates how regtech solutions can be used to address privacy risk and support customer data protection;
  • Provides practical implementation guidance to help banks plan the adoption of regtech solutions for customer data and privacy, including key considerations when implementing such solutions and insights on successful approaches to implementation;
  • Shares a use case on the adoption of regtech solutions to manage privacy risks, discussing the customer data protection challenges faced by a fintech company, how the regtech solution helped resolve such challenges, and the key learnings from successful regtech implementation from both the perspective of the fintech company and the regtech provider. [10 May 2023]
HKMA publishes report to guide banks in adoption of network analytics in AML and financial crime detection

The HKMA has published its report ‘AML Regtech: Network Analytics’ to promote the adoption of network analytics capability to strengthen the response of banks’ anti-money laundering (AML) systems to financial crimes.

The report emphasises the potential of combining intelligence-led analytical tools with rules-based monitoring systems in order to help banks enhance their anti-deception efforts. It also shares the experiences of banks already using this capability, and provides practical insights and expert perspectives to guide banks in their exploration and adoption of network analytics. This capability, together with intelligence shared through the Fraud and Money Laundering Intelligence Taskforce, has resulted in banks increasing the number of intelligence-led suspicious transaction reports by 319% in 2022 compared with 2021, leading to an increase of 113% in criminal proceeds restrained or confiscated.

Under its ‘Fintech 2025′ strategy, the HKMA will continue to support innovation and banks’ regtech adoption. An upcoming initiative involves co-hosting a further AMLab with Cyberport, which will involve all retail banks and feature a deep dive into the technology and data requirements underpinning anti-deception efforts. [9 May 2023]



MAS: Panel Discussion at the Indonesia Digital Economy and Finance Festival

MAS has published the panel discussion that involved Mr Leong Sing Chiong, Deputy Managing Director (Markets and Development), at the Indonesia Digital Economy and Finance Festival. Mr Sing Chiong joined the panel: ‘Promoting Digital Payment Inclusivity in the Region through Cross-border Interoperability Initiatives’. The panel discussion can be viewed here. [8 May 2023]


Malaysia & Indonesia

BNM and BI announce the commercial launch of the cross-border QR payment linkage

Bank Negara Malaysia (BNM) and Bank Indonesia (BI) have announced the commercial launch of the Indonesia-Malaysia cross-border QR payment linkage. The commercial launch of this linkage follows from the successful completion of the pilot phase of the linkage announced on 27 January 2022.

The linkage will see the number of participating financial institutions, which include non-banks, increase. This will enable more Indonesians and Malaysians to make instant retail payments in either country by scanning Quick Response Code Indonesian Standard (QRIS) or DuitNow QR codes at physical stores or online merchants using services offered by participating financial institutions. [8 May 2023]



RBI and GFIN invite firms to participate in Greenwashing TechSprint

In a press release, the Reserve Bank of India (RBI) has announced that it will be among 13 international regulators taking part in the Global Financial Innovation Network’s (GFIN’s) first ever Greenwashing TechSprint.

GFIN is a group of over 80 international organisations committed to supporting financial innovation in the interest of consumers; it is currently chaired by the UK Financial Conduct Authority (FCA). RBI as a participating member is inviting firms from India to participate in this Greenwashing TechSprint. The application window will close on 21st May 2023.

Firms that are successful in their applications will proceed through to on-boarding on 1 and 2 June. This will provide firms with training on the Digital Sandbox and an in-depth overview of the TechSprint process. The TechSprint will launch on 5 June and will run for 3 months, ending with a showcase day in September 2023. [11 May 2023]



BSP: Information session on digital payments

The Bangko Sentral ng Pilipinas (BSP) has announced that it held an information session for journalists in North Luzon as part of its efforts to explain and update local and regional media on current central banking topics, such as digital payments and gold buying in the Cordillera region. Participants were also given a refresher course on the basics of central banking. The two-day session was held in Baguio City from 25 to 26 April 2023. [9 May 2023]



CFPB: Remarks at Innovative Payments Conference

The Consumer Financial Protection Bureau (CFPB) has published the remarks of Seth Frotman, General Counsel and Senior Advisor to the CFPB Director, at the Innovative Payments Conference. Mr Frotman spoke about the current payments landscape and consumer financial protection, covering: data harvesting and privacy; the payment of gig and other non-standard workers; and liquidity and stability in the peer-to-peer payments system. [9 May 2023]

NY Attorney General James proposes regulations on cryptocurrency industry

New York Attorney General Letitia James has announced legislation to tighten regulations on the cryptocurrency industry to protect investors, consumers, and the broader economy. Attorney General James’ program bill aims to ‘increase transparency, eliminate conflicts of interest, and impose common sense measures to protect investors, consistent with regulations imposed on other financial services’.

The bill would require independent public audits of cryptocurrency exchanges and prevent individuals from owning the same companies, such as brokerages and tokens, to stop conflicts of interest. Crypto platforms would also have responsibilities to customers similar to banks under the federal Electronic Fund Transfer Act by requiring platforms to reimburse customers who are the victims of fraud. The bill would also strengthen the New York State Department of Financial Services’ (NYDFS) regulatory authority of digital assets. [5 May 2023]