FDATA Europe Response to EBA’s Consultation on Revised Guidelines on Money Laundering and Terrorist Financing Risk Factors: JC 2019 87 CP
Please find below FDATA’s formal submission of response to the EBA’s Consultation on Revised Guidelines on Money Laundering and Terrorist Financing Risk Factors. Due to the limitations of the response form provided online and the lack of option to attach supporting evidence, we take this opportunity to send our analysis and position via email.
We ask that you kindly share this Consultation submission with the team for review and consideration; we also ask that you consider the following analysis, and take actions recommended herein to ensure the continued viability of Open Banking in Europe.
FDATA Europe Response to EBA’s Consultation on Revised Guidelines on Money Laundering and Terrorist Financing Risk Factors: JC 2019 87 CP
Please find below FDATA’s formal submission of response to the EBA’s Consultation on Revised Guidelines on Money Laundering and Terrorist Financing Risk Factors. Due to the limitations of the response form provided online and the lack of option to attach supporting evidence, we take this opportunity to send our analysis and position via email.
FDATA successful in collaborative bid for £23m GOFCoE funding
Following recent notification by the UK Government, we are delighted to announce that the Global Open Finance Centre of Excellence (GOFCoE) has been successful in acquiring a seed fund of £23m by way of grant, to cornerstone its investment strategy.
This major award is part of a much larger funding strategy to build a world-class global utility for Research and Development in this domain; GOFCoE will be seeking to quickly build on this cornerstone investor with private sector involvement from both within the UK and international markets. The initial goal is to double the funding. The long-term aim is to make GOFCoE self-sustaining as an industry utility.
As Open Finance initiatives proliferate throughout the world, FDATA has developed considerable capability and influence to shape the fundamental policy, governance and technology elements that are vital to successful delivery and for a healthy, competitive ‘Open’ market.
As PSD2 came into force in Europe in early 2018, it became apparent that there were various things which the marketplace desperately needed but for which there was no obvious focal point or leadership to make these assets available. To respond to these gaps in market fulfilment, FDATA prepared a paper and developed a strategy for solving some of these issues: GOFCoE, originally announced to the market at the FDATA Global Summit in December 2018. FDATA has developed relationships with key partners, including Fintech Scotland and the University of Edinburgh (UoE), to build out its capability. UoE as the lead partner, has resourced a small team to develop the business plan, funding requirements, governance arrangements and strategic vision to make it a reality. The team has done a tremendous job and I thank them for their great work.
The primary driver for the selection of the UoE (and surrounding academic and financial technology cluster), is its world-class strengths in supercomputing and data science. It has proved to be an outstanding partnership of the willing, fully committing to the vision of problem-solving through international collaboration and making its resources and funding available to kick-start the programme.
Regulators across the globe have also been engaged in the design and ideation of GOFCoE.
About GOFCoE
GOFCoE aims to provide leadership, coordination, research, and capability to develop the benefits of Open Finance and to help safely unlock the potential of customer data as a force to improve lives. GOFCoE is set up to be an industry, regulatory and academic collaboration, and focusing on areas of the market that can only be really solved through collaboration. Some examples include:
- A Financial Data Sandpit of pseudonymised financial data contributed from multiple market verticals to help banks, fund managers, insurers and fintechs to more rapidly develop hypothesise, prototype algorithms, test business models and work with regulatory sandboxes to develop proof points.
- A Global Economic Observatory – a longitudinal study of how humankind earns, spends and saves through the lens of both consumers and businesses. This observatory will draw a wide variety of private sector and public sector data sets to provide an unprecedented research and policy capability including looking at things like how people manage unfair credit or prepare for a long life.
- An Algorithmic Bias Test Laboratory – a new capability to assist financial services practitioners reduce discrimination, providing assurance of compliance and ethical standards in their algorithmic distribution of products and services.
- A Global Open Finance Technical Standards Working Group – creating a digital library of the output of national and international agencies developing API standards, coupled to a working group of those agencies seeking to develop harmonisation of security standards for data sharing, digital identity, conformance testing and interoperability across markets. The OpenID Foundation will be a key partner in this initiative.
- An Economic Crime Unit – providing an international collaboration environment to enable enhanced pattern recognition research and development to reduce money laundering and fraud.
- An Education and Training Programme – running courses in machine learning in financial services, data ethics and data governance.
In the coming months, GOFCoE will be spun out of FDATA and the UoE into an independent entity, while continuing to be hosted on campus at the university. The intention behind this evolution is to put it into an internationally diverse governance framework. Although it is very much intended to support firms), regulators, policy makers and academic research, it is critical to its success that it remains independent of these actors, not perceived to be controlled by one nation state, and is positioned always on the side of the end customer. To that end, trust, market neutrality and ethics have a special meaning for the GOFCoE ethos.
Since its earliest origins in 2013, FDATA has lobbied for the rights of consumers and businesses to share their financial data with regulated actors of their choosing and to represent the interests of members in the delivery of Open Finance. GOFCoE is a major new international collaboration, a research and development facility through which Open Finance objectives will be supported, with a suite of practical capabilities for companies to work with.
The Detrimental Impacts of SCA Reauthentication to Open Banking
The Financial Data and Technology Association (FDATA), on behalf of its members, is asking the European Commission and the European Banking Authority to urgently revisit the requirements on Secure Customer Authentication and 90-day Reauthentication, due to its extremely detrimental impact to Third Party Providers (TPPs).
Companies who have operated as TPPs pre-PSD2, as well as newer firms, have shared with us that they are contemplating returning money to shareholders because they cannot sustain their business under these circumstances.
PSD2’s political objective was to nurture those companies, improving competition, innovation and security in the EU payments market. However, currently the way 90-day Reauthentication and SCA work defeats the political objectives of PSD2, and fails to materially improve security to protect consumers.
FDATA Europe Response to FCA’s Call for Input: Open Finance
What action can we take to help ensure the potential of open banking is maximised, for instance to support the development of new open banking services?
Risks to open banking due to scope of AML legislation
The Financial Data and Technology Association (FDATA), on behalf of its members, is asking the European Commission to amend the 5th Anti-Money Laundering Directive to remove account information services providers (AISPs) and payment initiation services providers (PISP) from its scope, as soon as the opportunity arises.
The inclusion of these services under European AML legislation was an unintended consequence of cross referencing between PSD2, CRD and AMLD4. It will very negatively impact the intended outcome of PSD2, which the Commission noted in its press release addressing frequently asked questions about PSD2 in January 2018, was to ‘help stimulate competition….[that] would then allow consumers to benefit from more and better choices between different types of payment services and service providers’.
FINTECH TRADE ASSOCIATION APPOINTS RENOWNED INDUSTRY EXPERT AS ITS EUROPEAN LEADER
Ghela Boskovich, the economist, fintech expert and diversity champion has been appointed as the European Chapter Leader at the Financial Data and Technology Association (FDATA). She goes into post with immediate effect and joins fellow chapter leaders at FDATA North America, FDATA Australia/New Zealand and FDATA Asia.
The Financial Data and Technology Association is a global association for financial services companies operating in fintech. Its members provide innovative financial applications and services to empower customers to make better decisions and take fuller control of their financial lives across all their accounts, credit cards, loans and investments. Boskovich will remain Global Ambassador for FemTechGlobal, the organisation promoting inclusion and diversity in financial services which she founded in 2015.
Gavin Littlejohn, FDATA Global Chairman, said: “We are absolutely thrilled to have secured Ghela as our chapter leader for Europe. She is one of the best known people in the global fintech community and she brings a wealth of experience and creativity to this critical role. “Ghela is the perfect fit for FDATA as we continue to argue for maximising data democracy and regulatory standardisation across Europe. We can’t wait for her to get started.”
Ghela Boskovich, FDATA Europe Chapter Leader said: “I believe in an ethical competitive landscape, one that focuses on the best outcome and most value for the end consumer. FDATA advocates for just that, and I’m delighted to be joining a great team, and all the FDATA members, working tirelessly to that end. The European market is setting the global policy standard for data rights; it is an honour and a great responsibility to be part of that work to transform financial services for the greater good.”
ENDS
NOTES
- The Financial Data and Technology Association is a global association for financial services companies operating in fintech. Its members provide innovative financial applications and services to empower customers to make better decisions and take fuller control of their financial lives across all their accounts, credit cards, loans and investments. It seeks to work with government, regulatory authorities and the financial services industry in our mission to open up the financial sector all over the world to the benefits of financial data and technology. It has chapters in Europe, North America, Australia/New Zealand and Asia.
- Ghela Boskovich is a self-proclaimed Fintech fanatic, and Founder of FemTechGlobal™, a network dedicated to challenging the status quo, and improving the inclusiveness and diversity in Financial Services. Frequent keynote speaker and editorial contributor, Ghela focuses on how to fast track internal innovation, specifically on the practical application and comercialisation of fintech/bank collaboration. She is preoccupied with fostering an ethical data democracy, individual consumer empowerment over their data, data economy disruptive business models, and facilitating banks’ emerging technology consumption.
- An image of Ghela Boskovich is attached,
- Media: for more information contact Message Matters (Andy Maciver, 07855 261 244; Louise Robertson, 07930 539 832)
NEXT STAGE OF EU DIRECTIVE “WILL CREATE WIDESPREAD CUSTOMER DISRUPTION AFFECTING MANY MILLIONS OF CONSUMERS AND BUSINESSES THROUGHOUT EUROPE”, SAY FINTECH BODIES
Fintech bodies call for National Regulators to work with industry to prioritise customer needs ahead of other regulatory factors
The Financial Data and Technology Association (FDATA Europe), in association with the European Third Party Providers Association (ETTPA), has highlighted a material risk to individual and business consumers in the next phase of the implementation of the Regulatory and Technical Standards (RTS) of the EU’s second Payment Services Directive (PSD2).
(Download here)
ETPPA and FDATA Europe, whilst fully supportive of PSD2, have identified a series of unintended consequences of the RTS, which will cause widespread disruption to consumers and businesses which use the services of many fintech applications. Notable examples include the impact on the many millions of businesses that use SME accountancy services such as Xero, Quickbooks and FreeAgent, unless steps are now taken.
The simultaneous attempt to encourage innovation and to introduce new payment security measures is at the root of these unintended consequences, including the deterioration of existing consumer services, the introduction of security risks to banks, interruption to retail card and bank transfer payments, and significant disruption to Fintech firms who use open finance in their business models.
Whilst the RTS has had many intricate technical challenges, with lobbying and counter lobbying between banks and fintech firms, the customer disruption issues are becoming increasingly clear, and all sides now need to work together to manage these interlocking challenges, reduce the disruption and buy some time to work on resolving the outstanding issues.
The key issues are summarised as follows
- Strong Customer Authentication, designed to improve the security between a bank and its customer, will unintentionally block access to non payments data, such as savings accounts and loan accounts, which are in very wide use
- The RTS provides no period of transition during which a TPP could seek to ask its customers to rejoin on the new technology. There needs to be a twelve month transition period after the banks have delivered a high quality API or Adjusted Interface to allow customers to migrate
- It is already crystal clear that the development of the technologies is not nearly mature enough at this stage, both in functionality and resilience. It is highly likely that on the current time table, the vast majority of banks will fail to deliver a suitable API and run out of time to then deliver the Adjusted Interface. If they simultaneously then introduce the new security measures, all access to account channels used by Fintech firms will be blocked.
FDATA and the ETTPA have suggested a new order which prioritises the needs of customers through a series of technical and practical measures.
Commenting, FDATA’s Chairman Gavin Littlejohn said:
“Open finance is the biggest and most important innovation in the financial services sector since the dawn of the internet. Customers have grown accustomed to innovative market and payment solutions that improve convenience and value. PSD2 is an important first step in creating a better framework of customer rights and protections to protect this new market.
“We have made a series of practical suggestions and we are confident both in their ability to reduce the risk, and in the good will of the EC and EBA to encourage markets to develop solutions.
“As it stands the banks, fintech firms and national regulators need to orchestrate a hierarchy of needs which puts customers first. A practical first step would be to delay any new implementation of Strong Customer Authentication which could block the traditional technology from functioning as it currently does, until such a time as the key issues are properly managed. Creating a ‘big bang’ approach to implementation, regardless of the connected circumstances, is simply creating an unnecessary cliff edge, which is easily avoided by this simple measure.
Commenting, ETPPA’s Chairman Arturo Gonzalez MacDowell said:
“During such a fast pace of change unintended consequences are always a potential difficulty.
“This is not about allocating blame – everyone is facing the right way and trying to do the right thing. But we do need to take action, and there is very little time to reduce the risk present in this next phase of implementation. We need real leadership now to navigate a path to avoid the regulations accidentally disrupting the markets they were designed to nurture.”
ENDS
NOTES TO EDITORS
- The Financial Data and Technology Association (FDATA) was established in Europe to advocate for Open Banking in 2013, during the negotiations to add account aggregation to PSD2. and then formally incorporated in 2014. It is a member organisation, is not-for-profit and has a charter to develop open secure market access to innovation across all financial verticals, including payments and payments data, but also loans, mortgages, savings, investments, pensions and insurance. Customer access to these financial verticals via Third Party Providers is described collectively as Open Finance.
- The European Third Party Providers Association (ETPPA) is the European trade association of bank-independent PSD2 TPPs. ETPPA is an international not-for-profit association (IVZW/AISBL) organised under Belgian law. ETPPA formalises the former Future of European Fintech (FoEF) coalition, which was created ad-hoc at the beginning of 2017 to represent the interests of TPPs in the negotiations around the PSD2 RTS on SCA & CSC. ETPPA represents the bank-independent TPP interests in the implementation and evolution of PSD2 and RTS vis-a-vis the national and EU authorities and other stakeholders.
- FDATA and the ETTPA have jointly authored a paper – The Unintended Consequences of PSD2 RTS – which has been presented to the regulatory authorities in the EU and the UK.
- Media – for more information contact Andy Maciver (+44 7855 261 244, [email protected])