Ashurst Paris FinTech Update 6102022 30454 PM

Regulation and Guidance

1. Provision of payment services by telecom operators

#payment services  #telecom

On 1 March 2022, the ACPR published a blacklist (accessible here in French) of entities from the electronic communication industry that are providing payment services.

• Providers of electronic communications networks or services that (i) offer payment transactions through direct carrier billing (DCB, facturation opérateur) and (ii) provide payment services to their customers, must comply with the limits of the “electronic communication exclusion” set out in the Second Payment Services Directive (PSD2). 
• Where such providers do not comply with such “electronic communication exclusion”, they must be authorized as payment services providers or act as agents of a payment services provider.
• In this press release, the ACPR (i) blacklists thirteen telecom operators that did not comply with such rules, and (ii) states that it has reported that situation to the judicial authorities. 

2. Transitional regime for crowdfunding service providers

#crowdfunding

Order of 9 March 2022 (accessible here in French) is taken in application of ordinance no. 2021-1735 of 22 December 2021 aligning French regulatory framework with the European package on crowdfunding service providers (see our FinTech Newsletter #1). 

This Order amends the AMF General Regulation to provide for grand-fathering provisions maintaining the application of the previous rules for crowdfunding advisors (conseillers en investissements participatifs - CIP)  and investment services providers pending their authorisation by the AMF as crowdfunding service providers (CSP) or until 10 November 2022 at the latest.

3. ADAN response on EBA consultation on remote onboarding customer solutions

#remote onboarding  #identity check

The French Association for the Development of Crypto-Assets (ADAN) published on 10 March 2022 a response to the EBA's consultation on its draft guidelines for the use of remote customer integration solutions (accessible here in French and here in English). The main recommendations include: 

• Strengthening identity proofing requirements; and  
• Creating an EU certification regime for remote identity verification providers that would be binding on the actors offering remote onboarding solutions. 

4. Warning on marketing of small loans

#loans  #BNPL  #licence

The ACPR published on 31 March 2022 a press release (accessible here in French) reminding that: 

• Service providers offering small loans in return for payment (online or via their mobile applications) must be duly licensed and registered on the REGAFI – Registre des agents financiers (accessible here in English); and
• The costs of all kinds paid by the subscribers of such loans to obtain the sums promised under the announced conditions (including in an "accelerated" manner) must comply with the limits set by the prohibition of usury (usure).

5. Online marketing of saving products and financial instruments

#IDD  #MiFID  #online marketing

On 21 April 2022, the ACPR and the AMF published a joint study (accessible here in French) on online marketing practices for life insurance contracts and financial instruments. 

• Through “mystery” visits and interviews of consumer associations, a dedicated joint unit conducted a series of investigations to verify whether the online application processes ensured clients’ informed consent and good understanding of the products.
• These investigations revealed some good practices, but also numerous cases of non-compliance with the regulations on customer information and informed consent.
• The regulators are reminding professionals that they are required to comply with the regulations in force (mainly MiFID 2 and Insurance Distribution Directive as transposed into French law).

6. ADAN position papers on MiCA and TFR

#crypto  #AML-CTF  #MiCA  #TFR 

On 26 April 2022, the ADAN published two position papers:

A first one in relation to EU's Markets in Crypto-Assets Regulation (MiCA) (accessible here in English) , where the ADAN expresses concerns on: 

• The recent evolution of the regulatory debates is characterized by (i) a willingness to overly speed-up the negotiations, (ii) discussions relying on incomplete and sometimes obsolete information, and (iii) a lack of solicitation of the EU crypto industry to be part of the debates. 
• The risk that MiCA could miss EU objectives to find the right balance between investor protection and innovation enhancement.

The ADAN also suggests improvements on (i) the proportionality of the rules, (ii) the adaptability of the rules and the exploitation of technological opportunities and (iii) the pragmatism in the application of such regulation.

A second one related to EU's Transfer of Funds Regulation (TFR) (accessible here in English), where the ADAN considers it would be inappropriate to replicate the current AML-CTF framework to crypto industry without considering the specificities of this new asset class, and believes that TFR should be strengthened on four pillars:

• Adaptations of the requirements based on technological opportunities (e.g. combine “on-chain” information with “off-chain” external data);
• More proportionate rules based on a correct risk assessment (e.g. a more granular risk-based approach); 
• A level playing field between the crypto-asset sector and the traditional financial sector (e.g. application of the same exemptions); and
• Feasibility (i.e. to reflect the reality of the market and to be pragmatic about what provisions can and cannot be implemented). 

7. Handling of complaints

#complaints  #payment institutions  #e-money  #crowdfunding

On 17 May 2022, the ACPR has issued a new recommendation 2022-R-01 (accessible here in French) on the handling of complaints applicable in particular to credit institutions, payment institutions, e-money institutions (including when acting on a cross-border basis or through a branch) and crowdfunding intermediaries (intermédiaires en financement participatif).  

The purpose of such recommendation is (i) to reduce response times for customers, (ii) to make it easier for customers to refer their complaints to the Ombudsman, (iii) to improve the identification and follow-up of complaints and (iv) to correct any detected malfunctions.

This recommendation will be applicable from 31 December 2022. 

8. Update of AMF Q&A on digital assets service providers

#crypto  #staking  #cryptolending

On 31 May 2022, the AMF has updated its Q&A on digital assets service providers (accessible here in French) to reflect developments in the products and business models of the crypto actors. 
In particular, this Q&A clarifies:

• The notion of promotional communication localising a service on digital assets on the French territory; 
• That the AMF requires the use of a language that is understandable for French customers on communication materials and in the handling of their complaints; and
• The possible regulatory qualifications of "staking" and "cryptolending" activities as digital assets services and/or a payment services requiring to be duly authorized or registered (as the case may be).

Reports

1. ACPR report on new payment actors

#payment services  #agents  #e-money  #distributors

On 15 March 2022, the ACPR published a report (accessible here in French) providing an overview of the new non-banking actors within the payment services industry following the implementation of Second Payment Services Directive (PSD2).

The report notably highlights:

• the creation of large-scale networks of physical sales outlets alongside bank branches which are distribution agents responsible for customer relationships whereas the payment institution or the e-money institution provides the regulated service; and 
• the growing "platformization" of the industry, with innovative players under the status of agents who develop their own service offer under the control of the institutions that mandate them.

2. FATF report on France’s measures to combat money laundering and terrorist financing

#AML-CTF  #crypto

On 17 May 2022, the FATF has published a mutual evaluation report on France’s measures to combat money laundering and terrorist financing (accessible here in English).

Such report notably points out that:

• The understanding on AML-CTF risks of financial institutions and virtual assets services providers is generally good; and
• The implementation of client identification protocols remain a challenge for payment and e-money service providers. 

3. AMF’S 2021 annual report

#AMF  #DLT  #ICO  #Pilot Regime

On 18 May 2022, the AMF published its 2021 annual report (accessible here in French) in which it gives an update on the progress of its strategic plan #Supervision2022, which is coming to an end, and provides an overview of the year 2021.  

In relation to innovation and new technology, the AMF mentioned the following points:

• The French digital asset services providers (DASP) regime is now fully operational, with 21 DASP registered (i.e. in accordance with the mandatory regime) in 2021 (out of a total of 34). The AMF has also received an application for authorisation (i.e. in accordance with the optional regime) from one institution, which is still under review. 
• The optional regime for initial coins offerings (ICOs) had a more limited success, with only a  few approvals given by the AMF.
• The AMF has supported the creation of a European “Digital Lab” to authorise the regulatory exemptions needed to conduct security token experiments. The adoption of the European regulation on a pilot regime for market infrastructures based on DLT echoes this proposal.

4. ACPR’S 2021 annual report

#ACPR  #control  #AI  

On 31 May 2022, the ACPR published its 2021 annual report (accessible here in French).  

In relation to innovation and new technology, the ACPR mentioned its achievements over the past years, and its objectives for the years to come:

• To engage in dialogue with FinTech actors (in particular via the Fintech-Innovation Hub);
• To observe the development of technological innovations (e.g. through studies on the transformation of the banking and insurance sectors and by participating in European and international discussions); and
• To anticipate technological developments and prepare future control methods (in particular through work on artificial intelligence and the "Suptech" approach, which aims to increase the ACPR's analysis and audit capacity). 

Sanctions & Decisions

ACPR-Sanction Commission (1 March 2022, no. 2021-01)

#e-Money #AML-CTF

The ACPR sanctioned a French electronic money institution with a fine of EUR 700,000 and a blame for failure to comply with its obligations under the AML-CTF regulations in relation to its electronic money activities.

The decision is accessible here in French.

Upcoming Events

• The ACPR’s Fintech-Innovation Hub organizes its second TechSpint in 2022 aiming to assess the benefits from data pooling in AML-CTF (more information accessible here).
• The AMF and ACPR announced their participation in the second edition of the French FinTech Week from 11 to 15 October 2022 (more information accessible here),

Authors: Hubert Blanc-Jouvan, Partner ; Agathe Motte, Partner ; Maxime Gandibleux, Counsel ; Aurélien Fournier-Her, Counsel ; Francesco Assi, Senior Associate ; Oriane Lemesle, Associate ; Lucien Jarry, Associate