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 and KYC
A working group to improve data exchange in national action to prevent money laundering and terrorism financing
The Treasury will set up a working group to improve the exchange of data in the national action to prevent money laundering and terrorism financing. The working group is responsible for preparing a plan of action as well as a government proposal to improve the exchange of data. The plan of action entails measures selected on the basis of the results and proposals of the data exchange statement to improve the exchange of the data, the national bodies responsible for implementing the measures and national security requirements. The working group is also tasked with preparing a government proposal to further the amendment needs outlined in the plan of action.
More information is available here: https://vm.fi/hanke?tunnus=VM063:00/2022
EBA calls for more proactive engagement between supervisors in anti-money laundering and counter-terrorist financing colleges
The European Banking Authority (EBA) has published its second report on the functioning of anti-money laundering and counter financing terrorism (AML/CFT) supervisory colleges in the EU. According to the report, although competent authorities are committed to implementing the AML/CFT colleges framework, they need to do more to ensure ongoing collaboration and proactive information exchange within colleges. In the report, the EBA sets out its observations of good practices with an aim to help competent authorities to enhance their effectiveness in future.
ESG and Sustainable Finance
ESAs propose disclosures for fossil gas and nuclear energy investments
The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) have delivered to the European Commission their Final Report with draft Regulatory Technical Standards (RTS) regarding the disclosure of financial products’ exposure to investments in fossil gas and nuclear energy activities under the Sustainable Finance Disclosure Regulation (SFDR). In the amending final draft RTS, the ESAs propose to add specific disclosures to provide transparency about investments in taxonomy-aligned gas and nuclear economic activities.
ESMA provides comments on first draft of European Sustainability Reporting Standards
ESMA has responded to the European Financial Reporting Advisory Group’s (EFRAG) public consultation on the first set of draft European Sustainability Reporting Standards (ESRS). The draft ESRS are a key element to achieve the Corporate Sustainability Reporting Directive’s (CSRD) ambition of ensuring sustainability reporting, which is relevant, reliable, comparable and understandable. In its response, ESMA highlights its support for a strong materiality assessment but expresses its concern with the suggested ‘rebuttable presumption’ approach. EFRAG is expected to deliver its final draft ESRS to the European Commission in November 2022.
A report on double calculation of voluntary emission compensation
The Ministry of the Environment has conducted a study on the double calculation of voluntary emission offsets. The report of the study focuses on principle, technical and legal matters on the double calculation of national climate goals and voluntary emission offsets. According to the study, voluntary compensation for climate emissions can be implemented in different ways in order to avoid double calculation of emissions offsets. However, according to the report, EU legislation does not allow adjustments to the calculation of state greenhouse gas emissions.
The report is available here:
Other relevant changes
Implementation of the Whistleblower Directive – the Government Proposal was delivered to the Parliament
The Government Proposal for legislation on the protection of persons who report breaches of Union and national law was delivered to the Parliament’ on 19 September 2022. The Whistleblower directive will be implemented in Finnish legislation by the Act on Notifier Protection. The Act forbids retaliatory measures against notifiers. According to the proposal, organisations with at least 50 employees would as a rule need to maintain an internal notification channel for breaches of EU level and national legislation. The Act on Notifier Protection would be a general law which is meant to complement existing special legislation regarding investor protection. The Act would be applied in parallel and complementing existing legislation. The proposed legislation would also be complementary in relation to financial sector and Anti-Money laundering legislation, as this legislation already contains regulation on notifier protection, internal channels and the notifier channel maintained by the FIN-FSA.
The Government Proposal is available here: https://oikeusministerio.fi/hanke?tunnus=OM028:00/2018
Amendments to the Consumer Protection Act enter into force in January 2023
New and amended provisions to the Finnish Consumer Protection Act (38/1978, as amended) and related laws will enter into force in January 2023. Stricter rules for telemarketing and doorstep sales include a written confirmation procedure that is introduced for telemarketing sales. The consumer’s right of withdrawal is also extended with regard to doorstep sales. Additionally, according to the new provision on price reduction, the lowest price at which a product has been marketed during the 30 days preceding a price reduction must henceforward be disclosed in the marketing. Further, the scope of the Consumer Protection Act will be extended by consumers’ rights and obligations in relation to errors and delays in services directed to the consumer.
Legislative reform of family leave entered into force on 1 August 2022
In January 2022, Finland accepted a reform of the parental benefit system that entered into force on 1 August 2022. The reform has facilitated, for the first time, an equal parental leave quota to both parents. The aim of the reform is to facilitate the reconciliation of work and family life and to improve the equal distribution of caring responsibilities and parenting between different sexes. The reform also takes into account different family forms, single parents and plural families. Due to the reform, the family benefits are now referred to as the pregnancy allowance, special pregnancy allowance and parental allowance.
Finance Finland’s opinion on government proposal on implementation of the Accessibility Directive
The Government proposal (HE 41/2022 vp) on the implementation of the Accessibility Directive (EU) 2019/882 was published on 11 April 2022. Finance Finland (FF) has published an opinion on the proposal. FF notes that national gold plating in relation to the directive may weaken the operational conditions of the financial sector. According to FF, applying comprehensibility and language requirements to financial services with detailed statutory and partly standardized disclosure obligations may be challenging. FF considers that a guideline from the supervisor on how to operate in these types of collision situations would be necessary.
Data subject’s request to obtain their data taken prior to the request for data deletion – note to the bank on incomplete policies
The Finnish Data Protection Ombudsman has issued a note to a bank on the procedure contrary to the General Data Protection Regulation in the execution of the data subject’s rights. The bank had failed to carry out requests from two of its former clients to be allowed to inspect or delete information about themselves in accordance with data protection regulations. The Data Protection Ombudsman considers that the Bank had deleted the person’s data prior to the execution of the right of access. The Data Protection Ombudsman notes that if the data subject submits both requests, the right to verify should be fully implemented before the data is deleted.
News by Sector
Funds and Fund Management
New provisions on taxation of real estate investment funds (non-UCITS) safeguard Finland’s tax base
In connection with the budget session of 2021, the Government set out an extension of Finland’s tax base, which includes extending the taxation of special investment funds investing in real estate to income generated by their investments in Finland. A flow-through model is proposed to be applied to fund income, whereby the unit-owner would be considered to receive income directly from the investment target, leaving the Special Investment Fund (non-UCITS) excluded for tax purposes. Taxation would, in principle, be based on the investor’s tax treatment. The proposed model would apply to the taxation of both domestic special investment funds investing in real estate as well as foreign special investment funds assimilated to them.
Finansinspektionen: Unclear information about sustainable funds
Sweden’s Finansinspektionen (FI) analysed whether the prospectuses for funds with sustainable investment as an objective meet current transparency requirements. The analysis shows in part that the disclosures are unclear in several cases. For example, it is often unclear what is considered to be a sustainable investment and to which environmental or social objectives the fund contributes. According to FI, managers need to be better at providing clear and comparable information for those who want to invest in sustainable funds. This is important for making informed decisions.
ESMA reminds firms of the impact of inflation in the context of investment services to retail clients
The European Securities and Markets Authority (ESMA) has published a statement reminding firms to consider inflation and inflation risk when applying relevant MiFID II requirements in the interest of investor protection. ESMA notes that from an investor protection perspective, inflation poses a risk for retail investors, as some of them will not fully appreciate the link between inflation and financial markets and may not fully understand how considerations on inflation should be factored in when they make saving and investment decisions. Investment firms can also help raising clients’ awareness of inflation risk.
Read more here:
ESMA has updated its Q&As on commodity derivatives topics under the MiFID II and MiFIR
ESMA has updated its Questions and Answers (Q&As) on commodity derivatives topics under the MiFID II and MiFIR. The revised Q&A document reflects mainly the amendments introduced by the Recovery Package for commodity derivatives, including those introduced by the entry into force of the latest technical standards and the Commission Delegated Regulation on the ancillary activity criteria (CDR 2021/1833) replacing RTS 20 which became applicable in November 2021.
The Q&As are available here:
ESMA published Final Guidelines on MiFID II suitability requirements
ESMA has published its Final Report on Guidelines on certain aspects of the MiFID II suitability requirements. The main amendments introduced to the MIFID II Delegated Regulation and reflected in the guidelines on the topic of sustainability include information to clients on the sustainability preferences, collection of information from clients on sustainability preferences, assessment of sustainability preferences and organisational requirements. By pursuing the objective of ensuring a consistent and harmonised application of the requirements in the area of suitability, including on the topic of sustainability, the guidelines will contribute to the achievement of the objectives of MiFID II.
The guidelines are available here: esma35-43-3172_final_report_on_mifid_ii_guidelines_on_suitability.pdf (europa.eu)
FIN-FSA issues Regulations and Guidelines 5/2022 on standardised procedures and messaging protocols in securities settlement
The FIN-FSA has issued Regulations and Guidelines which nationally implement ESMA’s guidelines on standardised procedures and messaging protocols under Article 6(2) of Regulation (EU) No 909/2014. The requirement included in the regulations concerns the preparation of a settlement process: investment firms shall ensure that they have, where possible, on the business day on which the transaction is made, all necessary information on the transaction.
Both guidelines are available here (in Finnish): Määräykset ja ohjeet 5/2022: Finanssivalvonnan suositus ESMAn selvitysprosessin valmistelua koskevien ohjeiden noudattamisesta (ESMA70-151-2906) – 2022 – www.finanssivalvonta.fi
Finance Finland: Wind power or brown funds? Investors are required to assess their sustainability preferences
Since August, investment advisers, including banks and asset managers, have been required to ask the investor about their sustainability preferences and provide the client with suitable products. The assessment of sustainability preferences relates to the MiFID II directive, which regulates the market in financial instruments, according to which investment adviser has to ask the customer about his or her sustainability preferences. This ensures that customers do not have to know how to express their sustainability preferences themselves and are rather asked these directly. For example, the client is asked whether they want to choose environmentally sustainable investments and whether the adverse impacts on the environment and society should be taken into account in investment products. A large number of Finnish investors observe the sustainability of their investments, but almost as many find it difficult to assess the impact of investment products.
S-Pankki Oyj received an administrative fine for errors in reporting on derivative contracts
The FIN-FSA has issued an administrative fine of EUR 60,000 to S-Pankki due to failures in reporting on derivative contracts. S-Pankki has, during June 2019 and March 2021, failed in its obligation to ensure that information on all derivative contracts it has concluded is reported to a trade repository as required by regulation. The obligation to report derivative contracts to trade repositories register is based on Regulation (EU) No 648/2012 n OTC derivatives, central counterparties and trade repositories (EMIR). According to a statement obtained from the bank, it had wrongly assumed that the clearing broker it used since June 2019 would report derivative contracts to the trade repository on behalf of the bank. However, it is the bank’s responsibility to ensure that the data is reported in line with regulation.
Government proposes amendments to the Acts on Insurance Companies and Earnings-Related Pension Insurance Companies
The Government is proposing for earnings-related pension insurance companies the possibility to continue using current liabilities under certain conditions with regard to housing corporations that are subsidiaries of earnings-related pension insurance companies. This has been temporarily accepted and the purpose is to prolong to period of applicability by five (5) years until 2027. The underlying purpose of the amendment is to increase rental housing. The proposal is based on the Housing Policy report given to the Parliament. Additionally, the Insurance Companies Act is proposed to be amended to specify provisions on remote shareholder meetings as provided in the Companies Act. The amendments should enter into force as soon as possible and no later than 1 January 2023.
The government proposal is available here: https://stm.fi/hanke?tunnus=STM066:00/2022
Supervisors under scrutiny – Peer review on the supervision of outsourcing
The Finnish Financial Supervisory Authority (FIN-FSA) has published a blog post on the Peer Review on the supervision of outsourcing conducted by the European Insurance and Occupational Pension Authority (EIOPA). The Peer Review was conducted during the summer and it assessed the overall maturity of the framework implemented by national supervisory authorities (NSAs) to supervise the outsourced activities of insurance and reinsurance undertakings. The objective of the peer review was to identify gaps, areas of improvements and best practices to promote consistent and effective supervision in this regard.
Insurance and its pricing should be based on risk assessment
The FIN-FSA has published a supervisory statement on insurance business and the pricing of insurance. Fair pricing has been a key topic in the discussion concerning consumer protection, also in relation to insurance products. According to a statement published by the Swedish Financial Supervisory Authority (Finansinspektionen), the Swedish non-life insurance market has clear differences in the pricing of loyal customers compared to those who keep changing the insurance company. The FIN-FSA notes that it would be appreciable for insurance distributors in Finland to go through their processes in order to assess whether the pricing is risk based and equitable between different consumer groups. Additionally, the FIN-FSA reminds supervised entities of complying with Section 19 of the Insurance Contracts Act.
The supervisory statement is available here: https://www.finanssivalvonta.fi/tiedotteet-ja-julkaisut/valvottavatiedotteet/2022/vakuuttamisen-ja-sen-hinnoittelun-tulee-perustua-riskiarviointiin/
FIN-FSA’s thematic review on ORSAs in relation to investment risks
The FIN-FSA has conducted a thematic review on own risk and solvency assessments of insurance companies in particular with regard to investment risks. The purpose of the thematic review was to review the risk and solvency assessments of insurance companies with respect to investment activities and risk management. The thematic review will provide a basis for future ongoing supervisory actions and monitoring of the FIN-FSA on insurance companies.
The thematic review is available here: https://www.finanssivalvonta.fi/globalassets/fi/tiedotteet-ja-julkaisut/valvottavatiedotteet/2022/teema-arvio_orsa.pdf
Strengthening the resilience and sustainability of the insurance and pensions sectors: EIOPA sets out its strategy for 2023 – 2026
The European Insurance and Occupational Pensions Authority (EIOPA) has set out its strategy for the period 2023 – 2026. The strategy is designed to strengthen the resilience and sustainability of the insurance and pensions sectors, and to ensure the strong and consistent protection of consumer interests across the European Union. EIOPA has strategic priorities include sustainable finance, digital transformation, supervision, policy, financial stability and internal governance. EIOPA’s key activities for 2023 include for example integrating ESG risks in the prudential frameworks on insurers and pension funds, Implementation of the Digital Operational Resilience Act (DORA) and Addressing consumer detriment from cross-border activities.
EIOPA consults on governance arrangements in third countries
EIOPA launched, on 1 August 2022, a public consultation relating to a draft supervisory statement on the use of governance arrangements in third countries.
EIOPA’s aim with the supervisory statement is to enhance the supervision and monitoring of insurance undertakings’ and intermediaries’ compliance with relevant EU legislation concerning governance arrangements in third countries. To achieve clarity of supervisory expectations, the principle of substance over form is used to ensure that similar risks are treated in a similar way, irrespective of the legal form of the governance arrangement and their location.
The consultation paper is available here: https://www.eiopa.europa.eu/document-library/consultation/consultation-use-of-governance-arrangements-third-countries_en
EIOPA publishes application guidance on how to reflect climate change in ORSA
EIOPA published on 2 August 2022 the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA). The publication follows a public consultation on the topic as well as a pilot exercise in which stakeholders were invited to participate. The publication gives insights into where undertakings have the possibility to address climate change risks in ORSA and provides examples using mock non-life and life companies to help undertakings design the steps for the materiality assessment and run climate change scenarios.
The application guidance is available here: https://www.eiopa.europa.eu/document-library/other-documents/application-guidance-climate-change-materiality-assessments-and_en
Credit and Payment Institutions
Consumer Ombudsman has updated its guideline on provision of consumer credits
The renewed guidance acknowledges the newest changes in the Consumer Protection Act (38/1978), the most recent case law and decisions from the Consumer Ombudsman. The amendments in the price regulation of consumer credits have been taken into account. The guideline highlights that the definition of credit cost should remain wide. The guidance is based on existing regulation, preparatory works and case law, and the aim of the guidance is to assist businesses in complying with the regulation.
The updated guideline is available here: https://www.kkv.fi/kuluttaja-asiat/tietoa-ja-ohjeita-yrityksille/kuluttaja-asiamiehen-linjaukset/kuluttajaluottojen-tarjoaminen/
Consumer credits – EU regulations to be updated
The EU is updating its consumer credit regulations to improve consumer protection in digital spaces during current economic instabilities. The EU parliament plenary session adopted its view on new consumer credit rules proposed by the commission in September 2022. The new rules propose for example that creditors should provide more openly information to consumers and the information should be available on all digital devices. The directive ensures that consumers can make informed decisions and compare different offers. Consumers also have a 14-day period to withdraw from the credit agreement.
Read more here:
The Positive Credit Register Act entered into force – large-scale use of the register will start on 1 April 2024
The Positive Credit Register will collect all information on credits granted to Finnish citizens. Creditors report the amount of the credit and the transactions related to the credit in the register. Delays in payment are also reported if the repayment is more than 60 days overdue. Credits granted by foreign creditors will also be reported to the Register. Creditors are also able to use the information in the register when granting new credits. The Register will be implemented in two stages.
Banks prevented scams worth EUR 6.7 million at the beginning of the year – scam numbers foreshadow a brisk year of fraud
According to data collected by Finance Finland, banks have managed to prevent EUR 6.7 million worth of scams or have been able to return money taken by fraud to customers. Between January and June 2022, a total of EUR 10.8 million was taken from Finns. In total, 1841 scams came to the attention of banks. Nearly half of the scams were fake policing and phishing scams. The biggest monetary losses came from documentary and love scams: EUR.3.8 million.