By mid-2018, the EU financial services sector will have weathered a flurry of new and revised regulations. The big shift in regulations has forced financial institutions to embrace technology in order to manage the huge amounts of data, integrate processes, and guarantee traceability.
Starting in 2018, here are the major regulatory changes affecting the EU:
June 2017: EU Money Laundering Directive IV
Coming into effect last year, the directive has made fundamental amendments to anti-money laundering procedures, including revisions to transactions in high-risk third countries, virtual currencies, and anonymous pre-paid cards. This means much more demanding scrutiny obligations for high-risk third country transactions and relationships, as well as decreased opportunities for simplified client due diligence and heightened regulation of virtual currencies and custodian wallet holders.
January 2018: Markets in Financial Instruments Directive II (MiFID II)
MiFID II, the EU's motivated effort to keep records of communications with clients, is meant to thwart systemic risk and disorderly trading while fostering transparency. This should enhance good business conduct and the quality of information being provided to clients.
January 2018: Payment Services Directive (PSD2)
PSD2 offers increased customer protection by making payments more secure. This means that customer remote authentication and customer identity verification will both be intensified.
May 2018: The General Data Protection Regulation (GDPR)
The GDPR requires businesses to safeguard EU citizens' personal data and privacy for all transactions that take place within EU member states. This empowers EU citizens to protect their privacy and will change the way organizations treat customers' data.
Even though the EU authorities are clearly demanding more regulations and control over the financial market, they are also trying to foster innovation. In August 2017 the EU Banking Authority have indicated a plan to focus on authorization and regimes for 'sandboxes.' This would provide start-up fintech firms with a more flexible regulatory environment and allow them to perform controlled tests of their products and services. According to WealthBriefing's recent study, "Global Compliance and Innovation Trends in Wealth Management," "EU authorities have indicated a wish to support the transformative potential of fintech [...]."
What can financial firms do to stay ahead of the compliance curve?
As I state in the WealthBriefing study, taking a reactive approach to regulations is no longer sustainable. When compliance is dynamically and holistically embedded in systems, new requirements are easy to apply across the entire system.