Horizons: Current information for financial service providers - May 2024

Financial service providers should keep an eye on these current developments now: Our experts clarify in the current issue of Horizonte Among other things, we will discuss the risks that BaFin has identified for financial markets, what lessons banks can learn from the first part of the ECB's Cyber Resilience Stress Test and what tasks the new EU anti-money laundering authority, AMLA for short, will have.

• BaFin identifies seven risks for the financial markets

For the third year in a row, the report "Risks in the focus of BaFin 2024" highlights risks to the integrity of the financial markets in Germany. BaFin also identifies three significant, longer-term trends: digitalisation, sustainability and geopolitical upheaval. It derives supervisory measures for banks, insurance companies and capital management companies from these risks and trends. You can find more information on the risks and BaFin's measures in the current issue of Horizonte.

• This is in the draft bill for the CSRD Implementation Act

In March, the Federal Ministry of Justice published the draft bill for the implementation of the Corporate Sustainability Reporting Directive (CSRD). In addition to far-reaching changes to the German Commercial Code, amendments are also proposed to other laws, such as the German Stock Corporation Act, the German Limited Liability Companies Act, the German Cooperatives Act, the German Securities Trading Act and the German Auditors' Code. In addition, the draft also provides for penalties and fines for breaches of sustainability reporting obligations. We explain the details of the draft bill and clarify which companies will be affected.

• Fight against money laundering: EU harmonises regulations and creates new supervisory authority

The reform of the European anti-money laundering system - AML for short - is about to be finalised. Firstly, it is based on a harmonised set of rules that extends the group of obliged entities and now also applies to professional football clubs, for example, without having to be transposed into national law. Secondly, a new regulatory and supervisory authority, the Anti-Money Laundering Authority (AMLA), is being created. One of its tasks is to develop a harmonised supervisory methodology that can be applied by all competent supervisory authorities in the EU. Read more details on the AML reform in this issue of Horizonte.

• Example of money laundering prevention: how technology and data-driven compliance works

Financial institutions are obliged to identify and report suspicious money laundering activities. This requires transaction monitoring that analyses numerous data from various sources in order to identify suspicious patterns or anomalies. This is a challenge for many financial institutions. It is therefore essential for the compliance function to utilise technological innovations. These include machine learning, artificial intelligence or natural language processing to increase the effectiveness and efficiency of transaction monitoring.  

• Cyber Resilience Stress Test: Objective and procedure for strengthening the resilience of banks

At the beginning of 2024, the ECB launched the first Cyber Resilience Stress Test (CRST) for the banks it supervises. The aim is to determine how effectively they are protected against cyber attacks. The first phase of the test has now been completed. KPMG provides an overview of the process and how banks can strengthen their resilience and ability to recover from an attack. You can read the details in the Horizonte magazine.

• Crypto comes of age: MiCAR creates the world's largest regulated market for crypto assets

With the Markets in Crypto-Assets Regulation, or MiCAR for short, the EU is creating a standardised market for crypto assets and the services based on them. MiCAR is aimed at natural and legal persons. It also applies to companies that issue or publicly offer crypto assets in the EU, apply for authorisation to trade crypto assets on a trading platform or provide services in connection with crypto assets. MiCAR opens up new opportunities for financial institutions, exchanges and FinTechs to establish and expand their business models.

• Consumer protection for private customers: New requirements for the monitoring of banking products

The new requirements of the BaFin circular on the supervision and governance of banking products have been in force since May 2024. The aim is to promote consumer protection. Throughout the entire life cycle, during the design, market launch and review of products, it must be ensured that they are compatible with the interests, objectives and characteristics of consumers. Pragmatic implementation of measures to fulfil the requirements will not be easy. With a short implementation period, this applies in particular to process design, new internal controls and technical implementation and documentation.