Out-Law News | 06 Mar 2017 | 12:49 pm | 3 min. read
Valdis Dombrovskis, who is the EU commissioner responsible for financial stability, financial services and the capital markets union, said an action plan will build on the feedback the Commission received to a consultation it held on retail financial services last year. He confirmed a previous Commission statement which said the action plan would address the issue of digital identity authentication in financial services.
The Commission previously asked industry and other stakeholders whether there are unnecessary regulatory burdens, gaps or inconsistencies in the rules, or laws that hinder economic growth in the EU's legal framework for financial services. It published responses it received to that consultation exercise in February 2016.
In a speech in Brussels earlier this week, Dombrovskis said respondents to the Commission had been "overwhelmingly positive about the digital transformation" of financial services and that their feedback would shape the EU's new action plan.
"Part of [the action plan] will focus on supporting new methods of remote identification in compliance with anti-money laundering rules," Dombrovskis said. "The use of e-ID and e-signature schemes in several member states are developments we want to build on."
Dombrovskis said the Commission would also encourage information on cyber threats to be shared across industry prior to attacks occurring.
"We are keen to understand whether there are barriers that stand in the way of sharing information across borders," the commissioner said. "Testing our ability to withstand and cope with attacks is important. There are good national initiatives in this area. But we want to avoid a proliferation of testing obligations that operate in different countries."
In his speech, Dombrovskis said he is "personally committed" to ensure that the EU's approach to financial technology (fintech) does not "overregulate a budding industry" and instead provides space for it to grow.
"We do need to be aware of course also of the new sources of risk," Dombrovskis said. "But our focus should be on removing barriers to market entry and keeping our legislation proportionate."
Dombrovskis said that the Commission has set up its own fintech taskforce, which includes Commission staff expert on financial regulation, data technology and competition policy. He said the taskforce will look at "new regulatory frameworks which are being introduced in different countries" with the aim of understanding their impact on the digital single market agenda.
Dombrovskis said the Commission would shortly open a public consultation "on the challenges and opportunities that fintech offers to consumers, industry and the market".
"Are there instances of rules acting as barriers to greater competition, choice or improved services?" Dombrovskis said. "Is there need to act at the European level? We also want to assess whether existing rules and policies are fit for purpose in the light of technological change and whether specific initiatives are needed to support innovation or contain risks."
In his Autumn Statement announcement last year, UK chancellor Philip Hammond said that the UK's Joint Money Laundering Steering Group (JMLSG) will "modernise their guidance on electronic ID verification to support the use of technology to access financial services". That announcement was welcomed by financial services and technology expert Luke Scanlon of Pinsent Masons, the law firm behind Out-Law.com.
Scanlon said at the time: "The modernisation of the JMLSG guidance will be a major step forward in helping people and businesses make their financial lives more digital. SMEs and consumers are aware of how difficult it can be to open up a bank account and verify and authenticate that they are who they say they are. Digital-only banks and new payment service providers promise a future in which all financial aspects of a person or business’ life can take place online, but this can only occur if it becomes easier to establish relationships with financial providers in the first instance in a wholly digital context. Digital IDs are fundamental to this transition."
"The government is likely to back the FCA’s public statements which suggest that the JMLSG guidance will need to be updated in a way that enables bank accounts to be opened without relying on cumbersome offline paper-based processes. Fintech businesses are highly active in this area and there is increasing scope for biometric solutions to play a pivotal role here," he said.