We understand that it may be difficult to stay up-to-date with the boundless financial news flow. We have therefore compiled an update on the season’s key highlights and regulative changes in the financial sector, which we hope will help you stay on track.
Below you will find key highlights on a more general level and down below more detailed highlights concerning different types of licensed companies operating in the financial sector.
Anti-Money Laundering & KYC
- New Government Decree on procedures for KYC/CDD and risk factors in preventing money laundering and terrorist financing
The Government has on 11 November 2021 passed a new Decree laying down more detailed provisions on the situations in which simplified due diligence procedures may be applied and how enhanced due diligence should be applied. Additionally, the Decree provides guidance on the risk factors which may indicate a lower or higher than normal risk of money laundering or terrorist financing. The more precise provisions will ease compliance with applicable law on money laundering and provide common criteria for performing simplified and enhanced due diligence procedures.
The Decree can be found here (only in Finnish and Swedish): here.
- FIN-FSA recommendation on compliance with EBA ML/TF Risk Factors Guidelines
The Finnish Financial Supervisory Authority (FIN-FSA) has in October issued regulations and guidelines 7/2021 implementing the updated European Banking Authority’s (EBA) Guidelines on Money Laundering and Terrorist Financing Risk Factors nationally. The FIN-FSA guidelines entered into force on 26 October 2021. In its guidelines, the FIN-FSA recommends that supervised entities falling within the scope of the EBA ML/TF Guidelines comply with them. The EBA Guidelines contain guidance on the customer due diligence obligation and the factors credit and financial institutions should consider when assessing the money laundering and terrorist financing risk associated with individual business relationships and occasional transactions.
The press release is available here.
- Government statement to Parliament on the implementation of the EU Action Plan to prevent money laundering and terrorist financing
The Finnish Government has in its statement to Parliament acknowledged the Commission’s legislative package including four legislative proposals aimed at improving the detail and accuracy of EU AML/TF legislation and reducing dependence on various implementing measures by Member States as well as creating an independent authority at EU level (AMLA). The Government supports the Commission’s proposals on harmonisation and development of EU anti-money laundering regulation.
Read the Government statement (only in Finnish and Swedish) here.
- National implementation of the EU Directive on access to financial information has proceeded to the Parliament
On 7 October, the Government submitted to Parliament a proposal to amend the Act on the Bank and Payment Accounts Control System and the Act on the Financial Intelligence Unit. The EU Directive on access to financial information requires Member States to put in place centralised bank account registries or data retrieval systems allowing the timely identification of the persons holding bank and payment accounts and safe-deposit boxes. In Finland, this requirement has been implemented by laying down provisions on the bank and payment accounts control system, which consists of the bank and payment account data retrieval system and the bank and payment account registry. The Government proposes that Customs build a compiling application through which information in the data retrieval systems and the account registry could be communicated to the competent authorities. The system would make it easier for the authorities to access the bank and payment accounts control system, as the authorities could build a single interface to the compiling application instead of multiple interfaces.
Read the Government proposal here.
- Regional State Administrative Agency: Guidelines for conducting a risk assessment on money laundering and terrorist financing clarify the preparation of the risk assessment
The Regional State Administrative Agency has updated the risk assessment guidelines for money laundering and terrorist financing and published a form to support the risk assessment. The new guidelines provide supervised entities with concrete tools to identify and assess risks related to money laundering and terrorist financing in their own operations. A list of actors supervised by the Regional State Administrative Agency can be found on the Regional State Administrative Agency’s website.
The guidelines and the form can be found here.
- Updated workbooks and instructions for the RA data collection published (National reporting (Virati))
The updated data collection application and workbooks for the reporting of risks concerning the prevention of money laundering and terrorist financing and related controls (RA, Risk assessment questionnaire) are available for downloading at: Jakelu-palvelu (finanssivalvonta.fi). The reporting obligation for the RA data collection is extended to non-life insurance companies and virtual currency providers. Reporting institutions which have had either no activities in 2021 or customers subject to customer due diligence in accordance with chapter 3, section 2 of the AML Act must nevertheless submit a zero report. The reference date of data collected is 31 December 2021. The reporting deadline is 28 February 2022.
The release is available here: Päivitetyt RA-tiedonkeruun työkirjat ja ohjeet julkaistu | Kansallinen raportointi (Virati) – 2021 – www.finanssivalvonta.fi
- FATF Follow-up Report: Finland’s progress in strengthening measures to tackle money laundering and terrorist financing
Finland has been in an enhanced follow-up process following the adoption of its mutual evaluation by FATF in 2019. In line with the FATF Procedures for mutual evaluations, the country has reported back to the FATF on the action it has taken since its mutual evaluation. Consequently, to reflect Finland’s progress, the FATF has now re-rated Finland on Recommendations 34 (Guidance and Feedback), from partially compliant to compliant.
Read the report here.
ESG and Sustainable Finance
- ESAs propose new rules for taxonomy-related product disclosures
The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) have published on 22 October 2021 to the European Commission their Final Report with draft Regulatory Technical Standards (RTS) regarding taxonomy related disclosures under the Sustainable Finance Disclosure Regulation ((EU) 2019/2088, SFDR). The SFDR gave the ESAs the power to submit a significant amount of regulatory technical standards (RTS) and these are the second technical standards published by the ESAs. The aim is to enable common requirements for all sustainability products covered by the SFDR and the Taxonomy Regulation. The European Commission has indicated that it will combine both drafts of the ESAs’ relating to the SFDR into a one single delegated regulation.
Read the press release here.
- Government opposes adopting proposed delegated act on climate under EU Taxonomy Regulation
The Government opposes adopting the Climate Delegated Act under the EU classification system for sustainable activities, also known as the EU taxonomy. In Finland’s view, the objective of the delegated act – to facilitate the financing of climate change mitigation and adaptation – is important. However, the Government does not support the adoption of the delegated act in the current form proposed by the European Commission. In the Government’s view, some aspects of the technical criteria for forest management are difficult to understand and open to interpretation. The ambiguity of the criteria could lead to a situation where forestry would be excluded from the taxonomy, which would make it more difficult to access funding for forestry investments.
Read the press release here.
- The Finnish Ministry of the Environment has published a report on regulation of voluntary emissions offsetting
Currently, there are no clear common rules in the domestic offsetting market, no definitions of compensation and carbon neutrality or national criteria, and no separate national legislation. The report sets out practices and minimum criteria for good compensation and examines the steering options to improve the quality and real climate impacts of voluntary domestic compensation.
Read the report here (only in Finnish): https://julkaisut.valtioneuvosto.fi/handle/10024/163347
Other relevant changes
- The obligation to document personal data breaches also includes log data
According to new instructions from the Data Protection Ombudsman (DPO), the documentation on personal data breach must also include the log data of the information system subject to the data breach. Log data is a chronological record of events and their causes in for example information systems, applications and data contents. The DPO can request to be provided with the data breach related documentation to assess if the controller has complied with its obligation to notify the DPO or if the decision not to notify the DPO has been made on correct grounds.
DPO site on personal data breaches: https://tietosuoja.fi/tietoturvaloukkaukset
News by Sector
Funds and fund management companies
- Finland implemented the CBDF-directive and the changes entered into force on 1 December 2021
The President of the Republic of Finland has approved the laws amending the Act on Common Funds, the Act on Alternative Investment Funds Managers and the Act on the Financial Supervisory Authority nationally implementing the directive on cross border distribution of funds (CBDF-directive). The amendments made to the Act on Common Funds and the Act on Alternative Investment Funds Managers entered into force on 1 December 2021. The amendments made to the Act on the Financial Supervisory Authority will, however, enter into force on 1 January 2022. The Finnish implementation of the Directive has been gold-plated to some extent.
More information can be found here.
- The Ministry of Finance has adopted a new Decree on the activities of alternative investment fund managers 1040/2021
As set out in the Act on alternative investment fund managers (162/2014), the Ministry of Finance has issued a decision to adopt a new Decree on the activities of alternative investment fund managers (1040/2021). The Decree replaced the previous Decree on the activities of alternative investment fund managers (226/2014). The new Decree mostly introduced certain technical amendments as a result of the implementation of the CBDF Directive. The Decree entered into force without delay on 1 December 2021.
The Decree can be found here.
- The European Securities and Marketing Authority (ESMA) has published Guidelines on marketing communications under the Regulation on cross-border distribution of funds
ESMA has published Guidelines on marketing communications under the Regulation on cross-border distribution of funds. The guidelines apply to UCITS management companies, including any UCITS which has not designated a UCITS management company, Alternative Investment Fund Managers, EuVECA managers and EuSEF managers. The purpose of the Guidelines is to specify the application of the requirements for marketing communications set out in Article 4(1) of the Regulation 2019/1156. However, the Guidelines do not intend to replace existing national requirements on the information to be included in marketing communications to the extent these are compatible with any existing harmonised EU rules. The Guidelines will apply from 2.2.2022.
Read the Guidelines here.
- ESMA to focus on supervision, sustainability, digitalisation and the capital markets union in 2022
ESMA has published its 2022 Annual Work Programme (AWP), setting out its priority work areas for the next 12 months to deliver on its mission to enhance investor protection and promote stable and orderly financial markets. ESMA will focus on contributing to the EU’s priorities and on areas of supervisory convergence, risk assessment, single rulebook and direct supervision.
- FIN-FSA’s e-service expands to applications for approval of investment fund rules
The FIN-FSA has introduced an e-service, which has been gradually expanded. As of 2 December 2021, an e-service related to the establishment of the rules of investment funds has been available in the FIN-FSA’s e-service. The service enables representatives of investment firms to apply through the system for confirmation by the FIN-FSA of new or amended rules for investment funds. The implementation of the e-service involves a transitional period from 2 December 2021 to 2 March 2022 during which applications can also be sent in the current way by e-mail to the Registry of the Financial Supervisory Authority.
Read the supervisory release here.
- ESMA addresses investment recommendations made on social media platforms
ESMA has issued a Public Statement on investment recommendations made on social media. ESMA makes clear what investment recommendations are, how to post them on social media platforms and what the consequences of possible breaches of the EU Market Abuse Regulation can be. Following a rise in investment recommendations made on social media and a concern that retail investors are not aware of the risks associated with following such recommendations, ESMA considers that investment recommendations must be produced and disseminated in an objective and transparent way so that investors, before making any investment decision, can distinguish facts from opinions.
The news can be found here.
- ESMA seeks stakeholder input on shaping advice on retail investor protection
ESMA has published a call for evidence on a number of retail investor protection topics under MiFID II. These views will be utilized to ESMA’s technical advice to the European Commission on the development of its strategy for retail investment. The call for evidence includes three topics, namely, disclosures, digital disclosures as well as digital tools and channels, to which ESMA seeks input. The call for evidence is open until 2 January 2022 and seeks feedback from all interested stakeholders.
The call far evidence can be found here.
- ESMA and EBA consult on framework for the supervisory review and evaluation process of investment firms
ESMA and the European Banking Authority (EBA) have launched a public consultation on their Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP). The draft joint SREP Guidelines set out the process and criteria for the assessment of the main SREP elements such as business model, governance arrangements and firm-wide controls, risks to capital and capital adequacy and liquidity risk and liquidity adequacy. The consultations run until 18 February 2022.
The news can be found here.
- EBA has published its final Guidelines on remuneration for investment firms
EBA has published its revised Guidelines on sound remuneration policies for investment firms under the Investment Firms Directive (IFD). The final Guidelines provide details on how the provisions under IFD on remuneration policies and variable remuneration of identified staff should be applied by class 2 investment firms. The Guidelines are as far as possible consistent with the existing Guidelines under the Capital Requirements Directive (CRD). Relevant differences between IFD and CRD have been taken into account. In particular, all aspects of the remuneration policy should be gender-neutral in accordance with IFD remuneration requirements.
The revised Guidelines can be found here.
- EBA had published its final revised Guidelines on internal governance for investment firms
EBA has published its revised Guidelines on internal governance for investment firms under the Investment Firms Directive (IFD). The IFD contains specific governance requirements for investment firms in parallel to the ones applicable under the Capital Requirements Directive (CRD). The Guidelines provide details on how the IFD governance provisions should be applied by Class 2 investment firms, specifying the tasks, responsibilities and organisation of the management body, and the organisation of investment firms, including the need to create transparent structures that allow for supervision of all their activities. The Guidelines also specify requirements aimed at ensuring the sound management of risks across all three lines of defence.
The revised Guidelines are available here.
- EBA has published final draft regulatory technical standards on disclosure of investment policy by investment firms
EBA has published new regulatory technical standards (RTS) on disclosure of investment policy by investment firms. The final draft RTS put forward comparable disclosures that should help stakeholders understand investment firms’ influence over the companies in which they hold voting rights and the impact of investment firms’ policies on aspects such as the governance or management of those companies. The disclosure requirements apply to class 2 investment firms with total assets above EUR 100 million. The first disclosure date will be 31 December 2021.
The draft RTS can be found here.
- EBA has published final draft technical standards on how to calculate risk weighted exposure amounts for exposures towards collective investment undertakings
EBA has published its final draft Regulatory Technical Standards (RTS) specifying the methodology to apply to calculate the risk-weighted exposure amounts, in the context of the mandate-based approach when there are some missing inputs. The final draft RTS will contribute to the calculation of own funds requirements for the exposures in the form of units or shares in CIUs under the Standardised Approach (SA) for credit risk.
The draft RTS can be found here.
- ESMA has fined trade repository UnaVista Limited €238,500 for breaches of the EMIR
ESMA has fined trade repository UnaVista Limited €238,500 for eight breaches of the European Market Infrastructure Regulation (EMIR). The breaches were found to have resulted from negligence on the part of UnaVista and related to failures in ensuring the integrity of data and providing direct and immediate access to regulators.
The news can be found here.
- FIN-FSA has carried out a thematic assessment concerning the assessment of suitability
The FIN-FSA has carried out a thematic assessment concerning the assessment of suitability conducted by investment service providers (Chapter 10, Section 4(1) of the Investment Services Act 747/2012). Investment firms and banks were the subject of the thematic assessment. The FIN-FSA concluded that the assessment of suitability of investment services and financial instruments requires development. There were several shortcomings recognized by the FIN-FSA, for example, in internal guidelines and in customers’ investment knowledge and loss tolerance. The FIN-FSA will monitor the companies’ follow-up measures in relation to the suitability assessment.
Read the supervisory release here.
- Comprehensive review of Solvency II Directive
The European Commission has adopted a comprehensive review of the EU Solvency II Directive for insurance companies to scale up long-term investment in Europe’s recovery from the pandemic. The purpose is to make the insurance and the reinsurance sector more resilient to endure future crisis and to protect policy holders. The review consists of three elements including a legislative proposal to amend the Solvency II Directive, a communication on the review of the Solvency II Directive and a legislative proposal for a new Insurance Recovery and Resolution Directive.
- Taking sustainability risks into account in the supervision of insurance undertakings: regulatory changes and expectations set by supervisors
On 21 April 2021, the European Commission adopted its proposal on amending the Solvency II Delegated Regulation (EU) 2015/35 as regards the integration of sustainability risks in the governance of insurance undertakings. Changes are expected to become applicable in autumn 2022. Additionally, the European Insurance and Occupational Pensions Authority (EIOPA) published in April 2021 an opinion, directed at national supervisors, on the use of climate change risk scenarios in insurance undertakings’ management of sustainability risks. In supervising sustainability risks, the FIN-FSA applies both the SIF/IAIS Application Paper on the Supervision of Climate-Related Risks in the Insurance Sector and the above-mentioned EIOPA opinion on climate scenarios. The supervision will cover, for example, good governance, risk management, investment activities and reporting. The principle of proportionality shall also apply in supervision.
The press release can be found here.
- Insurers raise concerns over EIOPA’s proposed changes to rules on technical provisions
Insurance Europe has published on 16 November 2021 its response to a consultation conducted by the European Insurance and EIOPA on its proposed revision of guidelines on the valuation of technical provisions, which are the amount of capital that an insurer requires to fulfil its insurance obligations and settle all expected commitments to policyholders and other beneficiaries. According to Insurance Europe, EIOPA’s proposals raise concerns in several areas. These include, inter alia, the implementation timeline, granularity, distorted results and the lack of proportionality.
Insurance Europe’s response to EIOPA’s consultation is available at: Response to EIOPA consultation paper on the revision of the guidelines on the valuation of technical provisions.pdf (insuranceeurope.eu)
- EIOPA examines further aspects of insurers’ failures and near misses
EIOPA has published its “Failures and near misses in insurance” report, which comprises 219 relevant cases from the European insurance sector between 1999 to 2020. The report takes stock of the most common courses of action taken by insurers and national competent authorities (NCAs) during the recovery and resolution phases of failures and near misses. The two most common general causes of failure and near miss reported in the EIOPA database were linked to underlying internal risks of the insurer.
The report can be found here: Failures and near misses in insurance (europa.eu)
- EIOPA sets out its strategic priorities for the coming year
EIOPA has outlined its strategic priorities for the year 2022, under the overarching goal of building a safe and sustainable EU for citizens in times of transformation. EIOPA’s agenda will continue to be influenced by the COVID-19 pandemic, the macroeconomic environment and the overall European agenda. The pressing challenges EIOPA aims to address include climate change, cyber risk and digitalisation, as well as addressing protection gaps.
The news can be found here: EIOPA sets out its strategic priorities for the coming year | Eiopa (europa.eu)
- FIN-FSA: Applicants must be provided with prior information on statutory accident and occupational health insurances before entry into force of the policy
The FIN-FSA has published a supervision release on 12 October 2021 relating to statutory accident and occupation health insurance. According to the FIN-FSA, the insurance company is obliged to provide to the applicant basic information on the statutory accident and occupational health insurance before entry into force of the policy. The insurance company cannot require that the applicant submits an insurance application before having received such prior information. According to applicable practice, an insurance policy enters into force upon receipt of the insurance application by the insurance company. The FIN-FSA recognizes that there may not in practice be a suitable timeframe within which the insurance company is able to provide the prior information before receipt of the insurance application. It stresses, however, that such information must be given, and that the insurance company cannot require that the insurance application is filed before the applicant has received the statutory prior information.
The supervisory release can be found here (only in Finnish and Swedish): Asiakkaalle annettava ennakkotiedot myös lakisääteisistä tapaturmavakuutuksista – 2021 – www.finanssivalvonta.fi
- FIN-FSA will not extend its recommendation for insurance companies to refrain from dividend distributions
The FIN-FSA will no longer maintain its recommendation for insurance companies on dividend distributions. The recommendation will end with regard to both dividend distributions and variable remuneration. The FIN-FSA’s decision takes into account the statement issued by EIOPA on 18 December 2020 and the decision of the European Central Bank (ECB) of 23 July 2021 not to extend its recommendation to limit the dividend distributions of credit institutions beyond 30 September 2021. The decision is based on the fact that the economic situation has improved, and uncertainty has therefore decreased. Conclusively, The FIN-FSA expects insurance companies to continue to take into account the risks caused by the prolongation of the coronavirus pandemic when planning dividend distributions and otherwise in their operations.
The release can be found here.
- FIN-FSA: Responsibility and participation in decision-making of deputy members of the board of insurance companies
The FIN-FSA has published a recommendation concerning deputy members of the board of insurance companies on 30 September 2021. The recommendation applies to non-life, life and employee pension insurance companies. The FIN-FSA considers it appropriate with regard to the clarity of management systems, responsibility for decision-making and the supervision of those responsible that only ordinary members of the board and their deputies serving in their absence participate in the decision-making discussions of the board. Therefore, the FIN-FSA recommends that deputy members of the board attend board meetings only when serving in place of ordinary members, or if deputy members attending a board meeting do not serve in place of ordinary members, minutes are taken of the meeting clearly indicating the content of the spoken contributions made by the deputy members and their other participation in the meeting.
The recommendation can be found here: Responsibility and participation in decision-making of deputy members of the board of insurance companies – 2021 – www.finanssivalvonta.fi
- Regulations and guidelines 6/2021 for reporting regarding PEPP monitoring
The FIN-FSA has issued Guideline 6/2021 implementing nationally the Guidelines on the supervision of the Pan-European Personal Pension Product issued by the EIOPA. The FIN-FSA recommends credit institutions, life insurance companies, asset management investment firms, management companies and AIFM covered by the Guidelines to comply with EIOPA’s guidelines. The guidelines issued by the FIN-FSA will enter into force 22 March 2022.
The guidelines are available at: Ohjeet PEPP-valvontaa koskevaan raportointiin – – www.finanssivalvonta.fi
Credit and payment institutions
- The Finnish Council of Regulatory Impact Analysis: the effects of the Consumer Credit Directive should be clarified
The Finnish Council of Regulatory Impact Analysis has issued its statement to the Ministry of Justice regarding the Union communication (Fi: U-kirjelmä, U 38/2021) on the Finnish implementation of the new Consumer Credit Directive. The Council considers the proposal to be fairly well prepared, but the impact on consumers, creditors and lending remained too general. Therefore, the Council suggests that the impact on different consumers should be assessed in the follow-up and the impact on creditors should also be clarified.
The Council’s statement is available at: VNK (valtioneuvosto.fi)
- Summary statement on the working group’s report on the legislation on a positive credit register
The On March 9, 2020, the Ministry of Justice set up working groups to prepare a positive credit register and the legislation required by it. The aim of the positive credit register is to combat over-indebtedness by creating a better knowledge base for both individual credit situations and the monitoring and supervision of financial stability and credit markets and to provide citizens with access to up-to-date credit information in one place. The Government’s proposal is scheduled to be published during week 4/2022.
The working group’s report is available here.