2021 continued to be another unprecedented year in the financial services industry. Not only did the impact of COVID-19 continue to accelerate change, but a number of new regulations, standards and guidelines were introduced.

Banking Circle ended the year on a high, signing three new clients in December.

Our Head of Compliance and MLRO, Mitch Trehan, caught up with The Banker this month to publish a Masterclass series. Across four video interviews, Mitch discusses de-risking strategies, the state of play of current correspondent relationships and a new approach to correspondent banking.

This month, the Financial Stability Board (FSB) announced that it is conducting a survey to collect feedback on how existing national and regional data frameworks are impacting cross border payments with FSB members given until 14 January 2022 to submit their feedback.

Pay.UK also announced an update to its New Payments Architecture (NPA) project, which focuses on improving UK retail payments for both businesses and customers. The second standards technical release, while still in drafts, has factored in changes brought about by ISO 20022, and can be used to undertake business impact assessments of these new standards.

Finally, The European Central Bank (ECB) this month stated it will be redesigning Euro banknotes, with the new designs expected in 2024 after a consultation period.

Here are the top industry stories from the past 12 months:

Kalifa review of UK FinTech published

In February, an independent review of the UK’s FinTech sector was conducted by Ron Kalifa OBE, which identified priority areas of support needed. The report revealed that the UK was at risk of losing its leading position as a FinTech hub, and outlined recommendations to ensure its position was maintained. Funding in 2020 was down year-on-year, but the acceleration of digitalisation, especially in the financial services sector, means it has never been a more important time to embrace innovation.

Suggestions from the report include the creation of a regulatory FinTech ‘scalebox’ to provide additional support to growth stage FinTechs, as well as a Centre for Finance, Innovation, and Technology, to strengthen national coordination across the ecosystem.

However, in November, Innovate Finance raised concerns that the UK Government had failed to devise a cohesive strategy based on these recommendations.

Banking Circle Group CEO, Anders la Cour, provided his comments on the release of the report.

The EBA published its final report containing revised AML and CTF risk factor guidelines

During March, in response to the emergence of new risks and changing EU legislative framework, the European Banking Authority (EBA) released updated guidelines on customer due diligence, and the factors that credit and financial institutions need to consider when assessing the money laundering and terrorist financing risks associated with individual business relationships and occasional transactions.

In September, Luxembourg’s financial regulator, the Commission de Surveillance du Secteur Financier (CSSF), announced that it was officially adopting the guidelines, followed by Germany’s Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in November.

A further update from the EBA announcing a public consultation to its draft guidelines on the use of remote customer onboarding followed at the end of 2021. The deadline to respond is 10 March 2022.

Bank of England announced creation of a Central Bank Digital Currency Taskforce

Moving into Q2, The Bank of England (BoE) and HM Treasury (HMT) announced the creation of a joint Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential UK CBDC.

A statement was issued outlining the next steps for CBDC in November. It was confirmed that in 2022, HMT and the BoE will launch a consultation which will set out their assessment of the case for a UK CBDC, including the merits of further work to develop an operational and technology model.

Deadline for Strong Customer Authentication extended to 2022

As we reached the halfway mark in the year, the FCA announced it was extending its deadline for implementing Strong Customer Authentication (SCA) for e-commerce transactions to 14 March 2022.

The extension on the new rules, which are being introduced to enhance the security of payments and limit fraud, has been put in place to minimise disruption to merchants and consumers. The reason for the extension was, in part, due to the impact of the pandemic.

By the 14 March 2022 deadline, the FCA expects “full compliance for e-commerce transactions”. A reminder about the deadline was sent to CEOs in October, stating that “Any firm that fails to comply with the requirements for SCA after this date may be subject to supervisory or enforcement action, where appropriate”.

European Payments Council SRTP rulebook came into force

In June, the European Payments Council’s first version of the Single Euro Payments Area (SEPA) Request-to-Pay (SRTP) scheme rulebook came into force.

The rulebook outlines rules, practices and standards that make it possible for eligible SEPA Request to Pay service providers to join, participate and operate in the scheme.

The latest version of the rulebook, v2.0, can be viewed here.

Implementation of ISO 20022 messages announced

The Market Infrastructure Board made the decision to move forward with fully-fledged ISO 20022 message implementation. The global adoption of the ISO 20022 standard will have a substantial impact on the payments and the transfer of financial information, working toward a standardised approach to messaging formats in cross border payments.

Implementation began in November 2021, with ISO 20022 messages going live on SWIFT. The EURO1 migration to ISO 20022 is expected to be in November 2022, while the UK and US are expected to adopt the ISO 20022 standard in 2022 and 2023 respectively.

The full timeline can be viewed here.

BNPL regulation welcomed by key industry players

With the COVID-19 pandemic fuelling the trend for e-commerce, new payment methods, such as Buy Now, Pay Later (BNPL) saw huge growth.

As we moved into Q3, following the publication of the FCA’s Woolard Review, which exposed some of the potential consumer risks of BNPL, HM Treasury launched its long-awaited consultation on regulation of the market. Following the announcement, many prominent BNPL providers stated that they broadly welcomed the proposal to increase regulation.

The consultation closes on 6 January 2022.

Proposed changes for financial regulators following Brexit

As we approached the end of 2021, new proposals were laid out to give financial regulators new freedom and responsibilities following the UK’s exit from the European Union, which previously set many of the rules on finance.

Whilst their core duties, such as maintaining financial stability, and ensuring consumer protection will remain the priority, the aim is to enable regulators to help boost growth and competition in finance, allowing them more autonomy on how to act.

The final version of the framework is expected to be released in early 2022, however, there remain concerns about how the UK’s financial services industry will remain competitive in the wake of Brexit and the pandemic.