Welcome back to our monthly open banking policy update! We’ll be delving into the intricacies of the Open Banking Policy, the implications of the Commercial Variable Recurring Payments (cVRP) Phase 1 and the broader efforts to combat fraud and financial crime. A further regulatory shift is the European Union’s recent advancements in Anti-Money Laundering (AML) regulations, affecting financial institutions across the continent.

The Dawn of Commercial VRP Phase 1 in the UK

The UK’s journey into the next frontier of Open Banking is marked by the anticipation surrounding the Payment Systems Regulator’s (PSR) decision on the cVRP Phase 1. This consultation phase is pivotal, addressing critical questions on use cases, pricing structures, mandatory participation, and the establishment of contractual frameworks. The essence of cVRP lies in its potential to improve how payments are initiated, offering a more flexible and secure alternative to traditional methods.

As we await further developments in March, including the formation of two key implementation groups focusing on functionality and dispute resolution, the financial sector stands on the cusp of a transformative era.

Tackling Fraud and Financial Crime with Foresight

The Financial Conduct Authority (FCA) has laid out a strategic blueprint in its report, “Reducing and preventing financial crime,” pinpointing four areas of focus for 2024. The integration of data and technology emerges as a cornerstone in this battle, enhancing the detection and prevention mechanisms against financial crimes. Collaboration plays a vital role, underscored by the introduction of the Enhanced Fraud Data Standard, which aims to streamline the sharing of data between banks, thereby fortifying defences against fraud.

Consumer awareness and education are identified as critical components in empowering individuals to recognise and protect themselves from potential threats. Moreover, the emphasis on metrics and the measurement of effectiveness, particularly through the Financial Crime Joint Money Laundering Intelligence Taskforce (JROC) workstream, highlights a data-driven approach to understanding the scale of Authorised Push Payment (APP) fraud within the Open Banking ecosystem compared to traditional Faster Payments.

The EU’s AML Package

The European Union’s finalisation of the Anti-Money Laundering (AML) Package, encompassing the AML Regulation, Directive, and the AML Authority (AMLA) Regulation, marks a significant milestone in the region’s regulatory landscape. After extensive lobbying, a nuanced stance on Payment Initiation Service Providers (PISPs) has been achieved, alleviating the burden of conducting Customer Due Diligence (CDD) on payers when the primary customer is the payee (Recital 34).

This development, particularly the exclusion of Account Information Service Providers (AISPs) from AML/CFT checks, reflects a thoughtful balance between regulatory oversight and fostering innovation.

Looking ahead

These recent developments speak to efforts for a more secure and user-centric finance ecosystem. The UK’s proactive stance on Open Banking, particularly with the cVRP Phase 1, sets this precedence. Likewise, the concerted efforts to mitigate financial crime through technology, collaboration, and consumer education underscore a holistic approach to safeguarding the financial system. In the EU, the AML Package paves the way for a harmonised regulatory framework that ensures that innovation can thrive within a secure and compliant environment.

The ongoing developments in Open Banking, coupled with robust measures against financial crime, are reinforcing the foundation for a more inclusive and resilient financial ecosystem.

Stay tuned with Yapily for more updates and insights, ensuring you’re always at the forefront of open banking regulations and policies. Speak to one of our open banking experts today to see how we can support you.