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Financial organizations across the globe encountered increased regulatory pressure in 2012 as more visibility and scrutiny were placed on the areas of compliance, risk, finance and audit. According to the experts at Wolters Kluwer Financial Services, that pressure is only likely to build in 2013.
Following U.S. President Barack Obama’s re-election in November, it’s clear the Dodd-Frank Act will remain in place and the Consumer Financial Protection Bureau (CFPB) will intensify its rulemaking and oversight efforts. And Basel III, Solvency II and global International Financial Reporting Standards (IFRS) continue to be in the spotlight for financial organizations operating in the U.K., Europe and the Asia-Pacific region.
But now, the question for many companies is, “How do we meet these obligations and regulators’ heightened expectations?” The answer according to regulators worldwide often lies within the quality and availability of an organization’s data. Regulators in nearly every country are taking a data-driven approach to supervision, demanding organizations provide more information than ever before to help ensure they are meeting compliance requirements, protecting consumers and effectively managing risk.
A number of Wolters Kluwer Financial Services’ experts have weighed in on these issues, among others, to help financial institutions reflect on 2012 and anticipate what lies ahead for 2013:
Global Regulations, Risk Management and Finance
Selwyn Blair-Ford, Head of Global Regulatory Policy
“Basel III has been the source of much transformation over 2012 as the industry has been preparing for the changes in capital requirements that are due to start from January 2013. Rules related to liquidity ratios, leverage ratios and capital buffers have also been finalized…[more].”
Jeroen Van Doorsselaere, Subject Matter Expert – Finance
“Over 2012, in the Asia-Pacific region, there has been a strong focus on the automation and implementation of the current IAS 39: Recognition and standard for financial instruments, which released by the International Accounting Standards Board (IASB). This will continue to be a focus in 2013…[more].”
Wolfgang Prinz, Vice President of Product Management
“The integration of risk and finance has continued apace during 2012, mainly as a result of the demand of the regulatory authorities. Not only must firms implement the headline Basel III measures relating to capital and liquidity, but the regulators themselves are asking deeper and more probing questions…[more].”
Nancy Masschelein, Head of Product Strategy
“The benefits of integrating risk and finance have become all too apparent in the aftermath of the financial crisis as the two functions are inextricably linked. The evolution of finance and risk regulation has not always followed the same path in the past…[more].”
Joost Roelin, Director of Product Management
“The delay on the deadline for FinRep reporting requirements has had an impact on the industry over the last year as a lot of projects were underway in order to prepare. Some of these projects have been delayed into 2013 due to the later reporting date which means all projects will run into 2013 as the requirements are not yet final…[more].”
Nico Deprez, Manager, Product Management – IFRS
“If we look back on 2012, a number of important projects were completed this year in order to get ready for new or revised International Financial Reporting Standards (IFRS). One such standard has been IFRS 13, which sets out a definition of ‘fair value’ and is applicable for all standards referring to it…[more].”
Mike MacDonagh, Director of ERM Content Strategy
“Many of the enterprise risk management (ERM) issues for 2012 will extend into 2013, such as increasing regulation and maintaining effective risk management in a cost-cutting environment, but as the fall-out from the financial crisis resolves from a mess of initiatives and regulations into specific projects and a focus on key risks, we expect to see the industry focus on some key issues…[more].”
U.S. Regulations and Risk Management
Timothy R. Burniston, Vice President and Senior Director, Regulatory Consulting Practice
"2013 will bring continued concern about the daunting challenges posed by regulatory change for U.S. financial institutions. Of the nearly 400 rules required by the Dodd-Frank Act, only about one-third have been finalized, and another third have yet to be proposed. The new requirements are likely to trickle out for years to come…[more].”
David Thetford, Securities Compliance Principal Analyst
“In this election year, and especially in the months leading up to the U.S. presidential election, legislation and regulation within the financial services industry have nearly ground to a halt. Legislators have taken a wait-and-see approach to changes on their agenda, while regulators continue to digest the Dodd-Frank Act and process the multitude of changes it requires. The pace never stops completely, though…[more].”
Michael Fuchs, Director of Commercial Lending
“Commercial lending has quickly emerged as one of the few business lines in which U.S. banks and credit unions have an opportunity to significantly grow revenue. In fact, aside from automobile lending, it’s the only business area where financial institutions’ aggregate balances are growing…[more].”
Kathy Donovan, Senior Compliance Counsel – Insurance
“In terms of regulatory changes and enforcement actions, the life and health lines of business certainly felt the most impact within the U.S. insurance industry in 2012…[more].”
Art Tyszka, Director of Default Services
“Default management across all lending areas will be a major concern for U.S. financial institutions in 2013 as regulators increase their focus on loan servicing practices. The home loan foreclosure crisis has been an elephant in the room for the past several years within the financial services industry. But a number of other consumer default concerns are about to take center stage…[more].”
The U.S. Commodity Futures Trading Commission (CFTC) today announced that on November 26, 2012, it filed a civil enforcement complaint under seal in the U.S. District Court for the District of Arizona, charging defendant Ray Thomas Brown of Phoenix, Ariz., with fraud in operating two commodity scams since at least 2010.
According to the complaint, unsealed on December 3, 2012, Brown fraudulently solicited members of the public to participate in a commodity pool while acting as an unregistered commodity pool operator, and Brown fraudulently duped persons to authorize him to trade their commodity futures accounts. Brown’s fraud allegedly included misrepresentations and omissions about his past trading success, trading profits, trading expertise, and personal history, the dissemination of false account statements, and the misappropriation of customer funds. As a result of at least two fraudulent schemes, Brown succeeded in duping customers into sending at least $1.2 million to bank and trading accounts under his control, according to the complaint.
On November 27, 2012, the court entered an order freezing Brown’s assets and requiring him to give the CFTC access to his books and records.
In the first scheme, according to the CFTC complaint, Brown lured his victims into a Ponzi scheme by fraudulently guaranteeing profitable returns of up to 100 percent per month and falsely representing that trading in the pool account was generating as much as multi-million dollar profits. Brown allegedly directed persons to send funds to bank accounts under his control to participate in the commodity pool, and at least $950,000 was deposited in these accounts. Unknown to the victims, Brown allegedly misappropriated a considerable portion of investors’ funds and allegedly used the funds he collected from pool participants to pay for his personal expenses. Brown actually traded only a small portion of the funds he received, and he lost virtually all of those funds in trading, according to the complaint. Furthermore, Brown allegedly concealed his trading losses by issuing false account statements showing fictitious trading profits and grossly inflated cash assets of the pool.
In the second scheme, Brown fraudulently misrepresented his trading expertise and past performance to convince clients to open individual commodity futures trading accounts and to authorize him to trade those accounts, according to the complaint. These victims deposited at least $270,000 into those accounts, and Brown lost virtually all of those funds within 90 days, according to the complaint.
In its continuing litigation in this matter, the CFTC seeks restitution to defrauded customers, a return of ill-gotten gains, civil monetary penalties, trading and registration bans, and a permanent injunction against further violations of federal commodities laws, as charged.
The CFTC thanks the Black Mountain Precinct of the Phoenix Police Department for its invaluable assistance in this matter. The CFTC also appreciates the assistance of the Arizona Corporation Commission.
CFTC Division of Enforcement staff members responsible for this case are Jonathan Robell, Dmitriy Vilenskiy, Tracy Walraven, Richard Foelber, and Joan Manley.
U.K./European Regulations and Risk Management
Ed Kennedy, U.K. Solvency II Manager
“The delays in the introduction of Solvency II have been the source of much discussion in the insurance industry over 2012, with many claiming that the postponements could hinder preparation. However, there is a very compelling case that demonstrates that the investment to date does not have to lie fallow…[more].”
Kieran Leahy, Vice President - U.K., Ireland & MEA
“The implementation of Solvency II has been delayed as the Omnibus II vote in the European Parliament is now set for March 2013. The new date has been set to allow time for EIOPA to conduct further impact assessments for Long Term Guarantees and its terms of reference for the European Parliament…[more].”
