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  1. P age |1 InternationalAssociationofRiskandComplianceProfessionals(IARCP) 1200GStreet NWSuite800Washington,DC20005-6705USATel:202-449-9750www.risk-compliance-association.com Top10riskandcompliancemanagementrelatednewsstoriesandworldeventsthat(forbetterorforworse)shapedthe week'sagenda,andwhatisnext DearMember, Doyouknow whatiscontagiousness? “Wedistinguishbetweencontagiousness(the shareoftotalbankingassetsrepresentedbythosebanks thataspecificbankbringsdownbycontagion)andvulnerability(thenumberofbanksbywhichabankisbroughtdownbycascadingfailures).” “Thepurposeofthispaperis toanalyze(hypothetical)contagiousbankdefaults,i.e.defaultsnotcausedbythefundamentalweaknessofagivenbankbuttriggeredbyfailuresinthebankingsystem.” Butthisissuperb!!!Whowrotethat? Atnumber10ofourlist,(FinancialStabilityReport,Oesterreichische Nationalbank,page64)Claus Puhr,ReinhardtSeligerandMichaelSigmund,fromtheOesterreichischeNationalbank,FinancialMarketsAnalysisandSurveillanceDivision,atthepaper“ContagiousnessandVulnerability intheAustrianInterbankMarket” Areyougoodinmathematics?Iftheanswerisyes,youwillenjoyNumber 10.Istartedmycareerasamathematician,butittookme4hourstoreadthepaper.Itisabsolutelybrilliant. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  2. P age |2 Ihavealongflighttomorrow,andguesswhat…IhaveprinteditandIwilltakeitwithme,toread itagain. Iknow…itlooksstrange…Itoldittooneofmyfriends,anattorney,andhesentmeapaperentitled:“Theimpactoffluctuatingworkloadsonwell-beingandthemediatingroleofwork−nonworkinterferenceinthisrelationship.” Oh,no,hebelievesthatmyproblemiscalledoccupationalpsychosis …heiswrong… Ok,whenIsleepIdodreamofSIFIs andregulatoryarbitrageopportunities,butitisquitenormalIbelieve.OfcourseIsometimesexperiencetheoppressivefeelingofguilt,thesenseofnothavingliveduptoBaseliiiframework’sexpectations(Baseliiiisagainstregulatoryarbitrage),butIcannotresist. Afterthisanalysis,Ihavedecidedwhattoread duringtheflight:Thepaper“ContagiousnessandVulnerabilityin theAustrianInterbankMarket” DidItellyouthat“wedistinguishbetweencontagiousness(theshareoftotalbankingassetsrepresentedbythosebanksthataspecificbankbringsdownbycontagion)andvulnerability(thenumberofbanksbywhichabankisbroughtdownbycascadingfailures).”? Yes,Idid,Iremembernow. ReadmoreatNumber10below. Welcome totheTop10list. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  3. P age |3 GovernorDanielK.Tarullo AttheCornellInternationalLawJournalSymposium:TheChangingPoliticsofCentralBanks,NewYork,NewYork InternationalCooperationinFinancialRegulation NextmonthmarksthefifthanniversaryofthefailureofBearStearns--inretrospect,thebeginningofthemost acutephaseofthefinancialcrisis. GabrielBernardino,ChairmanofEIOPA IMD2andSolvencyII–Theroadtobetterpolicyholderprotectionandfinancialstability WorkshoporganisedbytheEuropean FederationofInsuranceIntermediaries(BIPAR)Brussels SubmittingaSuspiciousActivityReport(SAR)withintheRegulatedSector ThisisaUnitedKingdomFinancialIntelligenceUnit(UKFIU)communicationsproduct,producedinlinewiththeSeriousOrganisedCrimeAgency's(SOCA)commitmenttosharingperspectivesontheSuspiciousActivityReports(SARs)Regime. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  4. P age |4 Thisdocumentseeks to provideadviceandrelaybestpracticewhenmakingaSuspiciousActivity Report(SAR),apieceofinformationthatalertsLawEnforcementAgencies(LEAs)thatcertainclient/customeractivityisinsomewaysuspiciousandmightindicatemoneylaunderingorterroristfinancing. FinancialStabilityBoardreportstoG20onprogressoffinancialregulatoryreforms TheChairmanofthe FinancialStabilityBoard(FSB)reported to theG20FinanceMinistersandCentralBankGovernorsonprogressinthefinancialregulatoryreformprogramme. Financialregulatoryfactorsaffectingtheavailabilityoflong-terminvestmentfinance ReporttoG20FinanceMinistersandCentralBankGovernors ThemostimportantcontributionoffinancialregulatoryreformstoLTinvestmentfinanceis to promoteasafer,sounderandthereforemoreresilientfinancialsystem. Ifimplementedintimelyandconsistentmanner,thesereformswillhelprebuildconfidenceintheglobalfinancialsystem,whichwillenhanceitsability to intermediatefinancialflowsthroughthecycleandfordifferentinvestmenthorizons. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  5. P age |5 Keynote JamesR.Doty,Chairman FloridaBarAssociation31stAnnualFederalSecuritiesInstitute,MiamiBeach,FL “Today,Iwouldliketo talktoyouaboutsomeofthePCAOB'sinitiativestoenhancetherelevance,credibilityandtransparencyoftheaudittopromotehighqualityfinancialreporting. Wemeetinthemidstofarobustand wide-rangingglobal debateonhow topromoteauditquality.Whatevertheoutcome,itisclearthattheauditisindeedavalued,criticalfeatureoftheU.S.financialsystem,anditenjoysanimportantpositionin theeyesofpeoplearoundtheworld.” StrategicGoals2013to2016 TheSwissFinancialMarketSupervisory AuthorityFINMAisaninstitutionunderpubliclawwithitsownlegalpersonality. ItisresponsibleforimplementingtheFinancialMarketSupervisionActandfinancialmarketlegislation. Asanindependentsupervisoryauthority,FINMA acts toprotecttheinterestsofcreditors,investorsandinsuredpersons,and to ensuretheproperfunctioningofthefinancialmarkets. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  6. P age |6 ManuelSánchez:Mexico’seconomicoutlookandchallenges RemarksbyMrManuelSánchez,DeputyGovernoroftheBankofMexico,attheConference “Regulatoryreform,theglobaleconomicoutlook,andtheimplications forMexico’sfinancialsector”,organizedbytheInstituteofInternationalFinanceandBanorte,MexicoCity “TheSECSpeaksin2013” CommissionerDanielM.Gallagher U.S. SecuritiesandExchangeCommissionWashington,D.C. ContagiousnessandVulnerabilityin theAustrianInterbankMarket Claus Puhr,ReinhardtSeliger,MichaelSigmund,Oesterreichische Nationalbank,FinancialMarketsAnalysisandSurveillanceDivision Thepurposeofthispaperistoanalyze(hypothetical)contagiousbankdefaults,i.e.defaultsnotcausedbythefundamentalweaknessofagivenbankbuttriggeredbyfailuresinthebankingsystem. Asfailingbanksbecomeunable tohonortheircommitmentsontheinterbankmarket,theymaycause otherbanks todefault,whichmayinturnpush evenmorebanksovertheedgein so-calleddefaultcascades. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  7. P age |7 GovernorDanielK.Tarullo AttheCornellInternationalLawJournalSymposium:TheChangingPoliticsofCentralBanks,NewYork,NewYork InternationalCooperationinFinancialRegulation NextmonthmarksthefifthanniversaryofthefailureofBearStearns--inretrospect,thebeginningofthemostacutephaseofthefinancialcrisis. Thecross-borderdimensionsofthecrisisitselfandtheglobaleffectsoftheGreatRecessionthatfollowedprovokedamajoreffort tostrengtheninternationalcooperationinfinancialregulation. Whileagooddealhasalreadybeenaccomplished,this eveningIwillsuggestthenextstepsthatwouldbemostuseful in advancingglobalfinancialstability. Ofcourse,thefashioningofaninternationalagendarequiresaclearunderstandingofthe overallregulatoryaimsofparticipatingnationalauthorities. Hereiswhereinternationalregulatorycooperationlinkstothesubjectofthisconference--ifnotquitethechangingpoliticsofcentralbanks,thenatleasttheirchanging policy goalsinthewakeofthefinancialcrisis. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  8. P age |8 Almostbydefinition,systemiccrisesrevealfailuresacrossthefinancialsystem,frombreakdownsin riskmanagementatmanyfinancialfirmstoseriousdeficienciesingovernmentregulationoffinancialinstitutionsandmarkets. Whiletherecentcrisiswasnoexception,ithaspresentedparticularchallengestothepolicyfoundationsofcentralbanks,especiallythoseliketheFederalReservethatcarryoutregulatorymandatesalongsidetheirmonetarypolicymissions. SoIbeginwithsomeremarksonthenatureofthosechallenges,beforeturningtoadiscussionofhowchangesinapproachshouldinforminternationalcooperationin financialregulation. CentralBanks andtheFinancialCrisis In surveyingthefailingsoffinancialauthorities,bothhereandabroad,one cancertainlyidentifysomespecific characteristicsofpre-crisisregulationthatlooktoday tohavebeensignificantlymisguided,rather thantheadvancestheywereformerlythoughttobe. So,forexample,regulatorsbecameprone to placetoomuchconfidenceinthe capacityoffirmstomeasureandmanagetheirrisks. Indeed,thedecadeorsopriortothecrisishadseenanaccelerationoftheshiftfromadominantlyregulatoryapproachto achievingprudentialaims--onethatrestson activitiesandaffiliationrestrictions,andotherreasonablytransparentrules--towardgreateremphasisonasupervisoryapproach,whichreliesonamoreopaque,firm-specificprocessofwatchingoverbanks' own risk-managementandcompliancesystems. Yetthebreadthanddepthofthefinancialbreakdownsuggestthatithasmuchdeeperroots. In manyrespects,thiscrisiswastheculminationoffundamentalshiftsinboththeorganizationandregulationoffinancialmarketsthatbeganinthe1970s. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  9. P age |9 TheNewDealreformsoffinancialregulation,themselvesspawnedbyasystemiccrisis,hadseparatedcommercialbankingfrominvestmentbanking,curedtheproblemofcommercialbankrunsbyprovidingfederaldepositinsurance,andbroughttransparencyandinvestorprotections to tradingandothercapitalmarketsactivities. Thisregulatoryapproachfosteredacommercialbankingsystemthatwas, forthebetterpartof40years,quitestableandreasonablyprofitable,thoughnotparticularlyinnovativeinmeetingtheneedsofdepositorsand borrowers. In the1970s,however,turbulentmacroeconomicdevelopmentscombinedwith technologicalandbusinessinnovations toproduceanincreasinglytightsqueezeonthetraditionalcommercialbankingbusinessmodel. Thesqueezecamefromboththeliabilitysideofbanks'balancesheets,intheformofmoreattractivesavingsvehiclessuchasmoneymarketfunds,andfromtheassetside,withthegrowthofpublic capitalmarketsandinternationalcompetition. Thelargecommercialbanking industrythatsawbothitsfundinganditscustomerbasesunderattacksoughtremovalorrelaxationoftheregulationsthatconfinedbankactivities,affiliations,andgeographicreach. Whilesupervisorsdifferedwithbanksonsomeimportantparticulars, theyweresympathetictothisindustryrequest,inpartbecauseofthepotentialthreattotheviabilityofthetraditionalcommercialbankingsystem. TheperiodofrelativelegalandindustrystabilitythathadfollowedtheNewDealthusgavewayinthe1970stoanearly30-yearperiodduringwhichmanyprevailingrestrictionsonbanks wererelaxed. Agoodnumberwereloosenedthroughadministrativeactionbythebankingagencies,butimportantstatutorymeasuresheadedin thesamedirection. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  10. P age |10 Thislegislativetrend culminatedintheGramm-Leach-BlileyActof1999,whichconsolidatedandextendedtheadministrativechangesthathadallowedmoreextensiveaffiliationsofcommercialbanks withinvestmentbanks,broker-dealers,privateequityfirms,andotherfinancialentities. ButinsweepingawaytheremnantsofonekeyelementoftheNewDealregulatorysystem,neitherGramm-Leach-Blileynorfinancialregulatorssubstitutednewregulatorymechanismstomatchthewholesalechangesinthestructureofthefinancialservicesindustryandthedramaticgrowth ofnovelfinancialinstruments. In fact,Iwouldgeneralizethislastobservationtosaythattheneed toaddresstheconsequencesoftheprogressiveintegrationoftraditionallending,tradingactivities,and capitalmarketsliesattheheartofthreepost-crisischallenges to thepolicy foundationsoftheFederalReserveand,to agreaterorlesserdegree,manyothercentralbanks. MicroprudentialRegulation Thefirstchallengeposedbythecrisiswas totraditional,microprudentialregulation,whichfocusesonthesafetyandsoundnessofeach prudentiallyregulatedfirm. Notallcentralbankshavemicroprudentialregulatoryauthority,ofcourse,and--asintheUnitedStates--thosethatdosometimesshareitwith otheragencies. Buttheshortcomingsofpre-crisisregulatoryregimeshavebeenofconcerntoallcentralbanks. Mostnotably,capitalrequirementsforbankingorganizations,particularlythelargeonesthatmightberegardedas too-big-to-fail,simplywerenotstrongenough. Risk-weightsweretoolow forcertaintradedassetsthathadproliferatedascreditand capitalmarketsintegratedmorethoroughly. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  11. P age |11 In somecases,thearbitrageopportunitiespresentedbyexistingcapitalrequirementswereanincentiveforsecuritizationand othercapitalmarketsactivities. Theexposurescreatedbyoff-balance-sheetactivitiessuchasstructuredinvestmentvehicles(SIVs)werebadlyunderweighted. Minimumcapitalratioswerenothighenoughand,inmeetingeventhoseinadequaterequirements,firmswereallowedtocountliabilitiesthatdidnotreallyprovidetheability to absorblossesandstillmaintainthefirmsasviable,functioningintermediaries. Therehasalreadybeenasubstantialresponsetothischallenge. WiththesupportoftheFederalReserveandotherU.S.bankregulators, theBaselCommitteeonBankingSupervisionhasstrengthenedcapitalrequirementsbyraisingrisk-weightingsfortradedassetsandimprovedthequalityofloss-absorbingcapitalthroughanewminimumcommonequityratio. Thecommitteealsohascreatedacapitalconservationbufferandintroducedaninternationalleverageratio. TheseBasel2.5andBaselIIIreforms eitherhavebeen,orsoonwillbe,implementedintheUnitedStatesandmostothercountriesthatarehometointernationally activebankingfirms. Also,theBaselCommitteehasjustrecently adoptedtheLiquidityCoverageRatio(LCR),afirststepinaddressingliquidityproblems. In theUnitedStates,someimportantadditionalstepshavebeentaken.Beginningatthepeakofthecrisis,theFederalReservehasconductedstress testsoflargebankingorganizations,makingcapitalrequirementsmoreforward-lookingbyestimatingtheeffectofanadverseeconomicscenarioonfirm capitallevelsinamannerlessdependentonfirms'internalrisk-measurementinfrastructure. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  12. P age |12 AndtheprovisionoftheDodd-FrankActpopularlyknownas theCollinsAmendmentensuresthatbankingorganizations cannotuse models-basedapproaches to reducetheirminimum capitalbelowgenerallyapplicable,morestandardizedrisk-basedratios. MacroprudentialRegulation Asecondchallengeforcentralbanksisthatthecrisisrevealedtheneedforamuchmoreactiveset ofmacroprudentialmonitoringandregulatorypolicies--thatis,areorientationtowardsafeguardingfinancialstability throughthecontainmentofsystemicrisk. Thefailure to attendto,orevenrecognize,financialstabilityriskswasperhapsthemostglaringpublicsectordeficiencyinthepre-crisisperiod.Thiswasafaultbynomeanslimited to centralbanks. Onthecontrary,systemicriskhadalsocometoseemmoretheoreticalthanrealtomanyacademicsandfinancialmarketparticipants. Evenmostofthoseinsideandoutsidetheofficialsectorwhoarguedforstrongercapitalorotherprudentialstandardsdidnotappreciatethedegreetowhichthesecondarymortgagemarkethadturnedintoahouseofcards. Still,regardlessofformalmandates,centralbanks arebetterpositionedthanmostothergovernmentagenciestoseeandevaluatetheemergenceofassetbubbles,excessiveleverage,andothersignsofpotentialsystemicvulnerability. In somerespectsthissecondchallengeisanextensionofthefirst,sincethesafetyandsoundnessoflargeinstitutionsmust takeaccountoftherelativecorrelationoftheirassetholdings,interconnectedness,commonliquidityconstraints,andothercharacteristicsoflargebankingorganizationsasagroup. Similarly,systemicrisksandtoo-big-to-failproblemscanincreaseiflarge,highlyleveragedfirmsmayoperateoutsidetheperimeterof InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  13. P age |13 statutorymicroprudentialoversight,aswasthecasepriorto2008withthelarge,free-standinginvestmentbanksintheUnitedStates. Andmarketdisciplinewillbebadlycompromisediffinancialmarketparticipantsbelievethataninsolventcounterparty cannotberesolvedinanorderlyfashionandthusislikelytoreceivegovernmentassistanceunderstress. Hereagain,domesticandinternationaleffortshavealreadyproducedsignificantreformprograms,thoughimplementationofsomeoftheseprogramsislessadvancedthanBasel2.5andBaselIII. Domestically,theFederalReserve'sannualstresstestsexaminetheeffectsofunexpectedmacroeconomicshocksonassetclassesheldwithinallmajorregulatedfirms. TheDodd-FrankActgavetheFinancialStabilityOversightCouncil(FSOC)authoritytobringsystemicallyimportantfirmsthatarenotalreadybankholdingcompanieswithintheperimeterofFederalReserveregulationandsupervision. TheFSOCis activelyconsideringseveralfirmsforpossibledesignation. Finally,theDodd-FrankActgavetheFederalDepositInsuranceCorporationorderlyliquidationauthorityforsystemicallyimportantfinancialfirms,therebycreatinganalternative to theHobson'schoiceof bailoutorbankruptcythatauthoritiesfacedin2008. Internationally,theBaselCommitteehasagreedtoaregimeofcapitalsurchargesforlargebanksbasedontheirsystemicimportance. Thereisalsoaninitiative toparallelU.S.efforts to identifynon-banksystemicallyimportantfirms. TheBaselCommitteeandtheFinancialStabilityBoardhavedevelopedinternationalprinciplesforresolutionauthority,thoughmostoftherestoftheworldisbehindtheUnitedStatesinactuallyimplementingthoseprinciples. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  14. P age |14 Butmeetingthemacroprudentialchallengewillrequiremeasuresbeyondamorecomprehensive,cross-firmapproachtomicroprudentialregulation. Muchacademicandpolicy workofthepastseveralyearshasrevivedandelaboratedthepreviouslysomewhatheterodoxviewthatfinancialinstabilityisendogenous tothefinancialsystem,oratleastthekindoffinancialsystemwenowhave. Consider,forexample,how theintertwiningoftraditionallendingandcapitalmarketsgaveriseto whathasbecomeknownastheshadowbankingsystem. Shadowbanking,whichreferstocreditintermediationpartlyor whollyoutsidethelimitsofthetraditionalbankingsystem,involvesnotonlysizeablecommercialandinvestmentbanks,butmanyfirmsofvaryingsizesacross arangeofmarkets. Whilesomeofthemorenotoriouspre-crisiscomponentsoftheshadowbankingsystemareprobablygoneforever,currentexamplesincludemoneymarketfunds,thetripartyrepomarket,andsecuritieslending. Fromtheperspectiveoffinancialstability,thepartsoftheshadowbankingsystemofmostconcernarethosethatcreateassetsthoughttobesafe,short-term,andliquid--ineffect,cashequivalents. Foravarietyofreasons,demandforsuchassetshasgrownsteadilyinrecentyears,andisnotlikelytoreversedirectionintheforeseeablefuture. Yetthesearetheassetswhosefundingismostlikelytoruninperiodsofstress,asinvestorsrealizethattheirresemblancetocashorinsureddepositsinnormaltimeshasdisappearedinthefaceofuncertaintyabout theirunderlyingvalue. And,aswasgraphicallyillustratedduringthecrisis,theresultingforcedsalesofassetswhosevaluesarealreadyunderpressurecanacceleratean adversefeedbackloop, in whichallfirmswithsimilarassetssuffer mark-to-marketlosses,which,inturn,canlead tomorefiresales. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  15. P age |15 Thiskindofcontagionlayattheheartofthefinancialstressesof2007and2008. Asalreadynoted,pre-crisisshortcomingsattheintersectionofmicroprudentialandmacroprudentialregulationhavemotivatedavarietyofreforms,manyexplicitlydirectedattheproblemoftoo-big-to-failinstitutions. Whilesomeofthesereformsremainunfinished,andsomeadditionalmeasuresareneeded,therehasbeenconsiderableprogress. Unfortunately,thesame cannotbesaidwithrespect to shadow bankingand,moregenerally,thevulnerabilitiesassociatedwithwholesale short-termfunding. Thesevulnerabilitiesinvolvebothlarge,prudentiallyregulatedinstitutions,andthus too-big-to-failconcerns,andthebroaderfinancialsystem. ExceptfortheliquidityrequirementsagreedtointheBaselCommittee,however,theliabilitysideofthebalancesheetsoffinancialfirmshasbarelybeenaddressedinthereformagenda. Yethereiswherethesystemicproblemsofinterconnectednessandcontagionaremostapparent. And,asevidencedbythefundingstressesexperiencedbyanumberofEuropeanbankspriortothestabilizingmeasurestakenbytheEuropeanCentralBank,theseproblemsarestillvery muchwithus. WithintheUnitedStates,reformeffortsareunderwayinsomediscrete,butimportant,areas. TheprovisionsofDodd-Frankrequiringmorecentralclearingof derivativesandminimummarginsforthosethatremainunclearedaredesignedtoprovidemoresystemicstability. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  16. P age |16 Astoshadowbankingitself,theFSOCrecentlyproposedoptions toaddressthestructuralvulnerabilitiesinmoneymarketmutualfunds,withaneyetowardrecommendingactionbytheSecuritiesandExchangeCommission. AndtheFederalReservehasbegunusingitssupervisoryauthority topressforareductionin intradaycreditrisk inthetripartyrepomarket. Butthesemeasuresare incomplete,anddonotextend to allformsofshort-termfundingthat canposerunrisks,auniversethatislikelytoexpandasprudentialconstraintsbegintoapplytolargeexistingshadowbankingchannels. MonetaryPolicy Whilethefirsttwo policy challengesareshared amongregulatoryandfinancialagencies,thethirdliessolelywithcentralbanks. In thewakeofthecrisis,weneed toconsidercarefullytheviewthatcentralbanksshouldassesstheeffectofmonetarypolicy onfinancialstabilityand, in someinstances,adjusttheirpolicy decisionsto takeaccountoftheseeffects. Thedramaticriseinhousingprices,andtheassociatedhighamountsofleveragetakenonbybothhouseholdsandinvestors,occurredduringanextendedperiodoflow inflation. Somehavesuggestedthat,bynotraisingratesbecauseinflationremainedsubdued,monetarypolicy intheUnitedStatesandelsewheremayhavecontributed to themagnitudeofthehousingbubble. Whateverthemeritsofthatmuch-contestedpoint,itseemswisetoaddressthisissueaswefacewhatcouldwellbeanotherextendedperiod oflow inflationandlow interestrates. Itisimportanttonotethatincorporatingfinancialstabilityconsiderationsintomonetarypolicydecisionsneednotimplythecreation ofanadditionalmandateformonetarypolicy. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  17. P age |17 Thepotentiallyhugeeffectonpricestabilityandemploymentassociatedwithboutsofseriousfinancialinstabilitygivesamplejustification. HereIwanttomentionsomecommentsbymycolleagueJeremySteinacoupleof weeksago. Afterreviewingthetraditionalargumentsagainstusingmonetarypolicy inresponsetofinancialstabilityconcernsandrelyinginsteadonsupervisorypolicies,GovernorSteinofferedseveralreasonsforkeepingamoreopenmindonthesubject. First,regulationhasits ownlimits,nottheleastofwhichistheopportunityforarbitrage outside theregulatedsector. Second,whateveritsbluntness,monetarypolicyhastheadvantageof beingableto"getinallthecracks"ofthefinancialsystem,anattributethatisespeciallyusefulifimbalancesarebuildingacrossthefinancialsectorandnotjustinaparticulararea. Finally,byalteringthecompositionofitsbalancesheet,centralbanksmayhaveasecondpolicyinstrumentinadditiontochangingthetargetedinterestrate. So,forexample,itispossiblethatacentralbankmightundersomeconditionswanttouseacombinationofthetwo instrumentstorespondtoconcurrentconcernsaboutmacroeconomicsluggishnessandexcessivematuritytransformationbyloweringthetarget(short-term) interestrateandsimultaneouslyflatteningtheyield curvethroughswappingshorterdurationassetsforlonger-termones. Tobeclear,Idonotthinkthatweareatpresentconfrontedwithasituationthatwouldwarrantthesekindsofmonetarypolicy action. Butforthatveryreason,itseemsthatnowisagoodtimetodiscusstheseissuesmoreactively,sothatifandwhenwedofacefinancialstabilityconcernsassociatedwithassetbubblesbackedbyexcessiveleverage,wewillhaveawell-consideredviewoftherolemonetarypolicymightplayinmitigatingthoseconcerns. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  18. P age |18 AdvancingtheInternationalReformAgenda Letmeturnnowtothewayinwhichourshiftsinpolicyapproachshouldinformtheagendafor internationalcooperationinfinancialregulation. Forobviousreasons,themonetarypolicyissuesarenotdirectlyrelatedtothisagenda,thoughourunderstandingoftheseissuesmayprofitfromdiscussionswithourcentralbankcolleaguesfromaroundtheworld. Itisequallyobviousthatthe othertwo setsofpolicychangesarequitecloselyrelated totheinternationalagenda. Morethaninmostotherareas,thefinancialspheresuffersfromabasiclackofcongruencebetweentheauthority to regulateandtheobjectofregulation. Thuswehaveasignificantlyinternationalizedfinancialsystem,inwhichshocksarequicklytransmittedacrossborders,butanationally-basedstructureofregulation. Withincountries,responsibilitiesmaybedividedbetweenprudentialregulatorsandmarketregulators,amongregulatorswithsimilarmandates,orboth. Centralbanksmayhaveexclusiveprudentialauthority,shareitwithotheragencies,orhavenoneatall. Internationalarrangementsbothreflect,andtrytocompensatefor,thiswebofdividedandoverlappingdomesticauthority. Thustherearesectoralstandardssetterslike theBaselCommittee,theInternationalOrganizationofSecuritiesCommissions(IOSCO),andtheInternationalAssociationofInsuranceSupervisors(IAIS)ontheonehand,butalsobroadergroupingssuchastheGroupofTwenty,theFinancialStabilityBoard(FSB),andtheInternationalMonetaryFundontheother. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  19. P age |19 In addition,undertheumbrellaoftheinternationalhomeofcentralbankers,theBankforInternationalSettlements,numerous othercommitteesworkacrossfieldsalsocoveredbyoneormoreofthegroupsIhavejustmentioned. Therearesomeobviousweaknesseswithsuchanassortmentofinternationalarrangements,notablythedifficultyofcoordinatinginitiativeswheremorethanonegroupisworkingonanissue. Thiskindofcoordinationchallenge canbefurthercomplicatedby theparticipationininternationaldiscussionsofvariousnationalofficialswithoutdomesticauthorityinaparticulararea. Thesheerproliferationofinternationalarrangements,eachwithitsownstaff,has attimesalsoledto aproliferationofstudiesandinitiativesthatbecomeburdensome to thenationalregulatorsandsupervisorswhohavebeenovertaxedathomesincetheonsetofthecrisisandensuingdomesticreformefforts. Yettherearealsosomestrengthsderivedfromthecrowdedinternationalfieldoforganizationsandcommittees. Onesuchvirtueisthatissuesnotfallingsquarelywithintheremitofaparticularkindofstandardssettercannonethelessbedealtwithinternationally. This,in fact, hasbeentheexperiencewiththeongoing internationaleffort to agreeonminimummarginrequirementsforderivativesthatarenotcentrallycleared. Anotheristhatdifferentperspectivesarefrequentlybroughttobearonasinglesetofproblems. Atsomepoint,itlikelywillbebeneficialto rationalizesomewhattheoverlapping,sometimescompetingeffortsofthesevariousinternationalarrangements. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  20. P age |20 Fortheneartomediumterm,though,itisimportanttohavesomeprinciplesfordecidingupontheinternationalagendathatshouldgovern theeffortsofthesearrangementsasawhole. First, initiativesshouldbeprioritized. Onepointofemphasisshouldbecompleting,andensuringimplementationof,theinternationallyagreed-uponframeworkforcontainingthetoo-big-to-failrisksassociatedwithsystemicallyimportantfirms. Anothershouldbedistillingthevariousideasrelatingtoshort-termfundingvulnerabilitiesintoafewthathavepromiseasdiscrete,relativelynear-terminitiatives,whilecontinuingstudyofother,morecomprehensivemeasures. Asecond,relatedprincipleisthatinitiativesshouldbefocusedand manageable,reflecting notonlythelimitedcapacityofparticipatingnationalauthorities,butalsothedesirabilityofreachingatleastatemporaryequilibriumatwhichfirmscangetonwiththebusinessof planningtheirstrategiesin aclearerregulatoryenvironment,andregulators canbeginto takestockofthecumulativeeffectsandeffectivenessofthechangesthathavetakenplaceinthatenvironment. Athirdprincipleisthat,inmostinstancesatleast,internationaleffortstodevelopnewregulatorymechanismsorapproachesshouldbuildonexperiencederivedfromnationalpracticein oneormorejurisdictions. Thechallengesencounteredduringtheinitialeffort to deviseanLCRintheBaselCommittee,withlittleornoprecedentofnationalquantitativeliquidityrequirementsfromwhich to learn,shouldcounselcautionintryingtoconstructnewregulatorymechanismsfromscratchattheinternationallevel. Therewilldoubtlessbeexceptionstothisgeneralprinciple,suchaswherethetransnationalarbitrage incentivesofaregulatorymeasurearesostrongas tomakenationaleffortsdifficulttoinitiateandsustainwithoutsubstantiallossoffinancialactivityto othercountries. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  21. P age |21 And,intheimmediateaftermathofthecrisis,therewasaneedtoharnessthebroad-baseddemandsforreformandmoveforwardonsomepriorityreformswithoutbenefitoflearningfromnationalinitiatives. Ontheotherhand,theremayalsobeareaswhere, notwithstandingtheimportanceofaparticularregulatoryobjectiveforinternationalfinancialstability,itmaybepreferabletomaintainavarietyofapproaches to achievingthatobjective. Bearing inmindboththeseprinciplesandthekeyareasforpolicychangeatcentralbanks andotherfinancialregulators,letmenowsuggestsomespecificsubjectsfornear-termemphasis. Astotheframeworkforsystemicallyimportantfinancialinstitutions(SIFIs),Iwouldurgethattwoongoinginitiativesbecompletedoverthenextyearandtwoideasthathavebeeninthediscussionstagebedevelopedintoconcreteproposals. First,theproposalforacapitalsurchargeforsystemicallyimportantbankingorganizationsisnearingcompletion. TheBaselCommitteecontinuestorefinethemethodologytobeusedin identifyingthefirmsandcalibratingthesurcharge amount--perhapsabyproductofthefactthatthismethodologyhadtobedevelopedintheBaselCommitteewithoutbenefitofpriorprecedent. ButIhaveconfidencethatthisworkwillbesuccessfullycompleted. Thesecondongoing initiative--workondesignatingnon-bankSIFIs--hastodatebeenpursuedmostlyintheIAISandthushasconcentratedoninsurancecompanies. Itisimportant to takethetime toevaluatecarefullythe actualsystemicriskassociatedwiththesecompanies,and tounderstandtheamountofsuchrisk relativetootherfinancialfirms,beforefixingonalistoffirmsandsurcharges. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  22. P age |22 Butthisseemstomearealisticgoaloverthenextsixmonths.Third,weshouldbuildontheverygoodanalyticworkintheBasel Committee,bothonsimplifyingcapitalrequirementsforcreditrisk andonfashioningstandardized capitalrequirementsformarketrisk,toapplystandardizedcreditandmarketriskcapitalmeasurestoallinternationally activebankingfirms. AsImentionedearlier,theUnitedStateshas already adoptedsucharequirementforcapitalrequirementsoncreditrisk. Thesestandardizedmeasuresserveasafloortoguardagainstthepotentialformodels-based capitalmeasurestounderstatecapitalneedsundersomecircumstances. Theyarealsosubstantiallylessopaquethan,forexample,theadvancedinternalratings-basedapproachofBaselII,andthuswouldprovidemorecomparablemeasuresthatarealsomoreamenabletointernationalmonitoring. Fourth,Iwouldhope to seearequirementproposedforlargeinternationallyactivefinancialinstitutions tohaveminimumamountsoflong-termunsecureddebt,whichwouldbeavailabletoabsorblossesintheeventofinsolvency. AsImentionedearlier,workonresolutioncontinues,albeitatdifferentpacesindifferentjurisdictions. Giventhecomplexitiesarisingfromtheindependent,oftendifferingnationalbankruptcyandinsolvencylaws,thegoalofachievingafullyintegratedresolutionregimeforinternationally activefinancialfirmsmaytakeagooddealoftime. Butaminimumlong-termdebtrequirementwouldatleastprovidenationalauthoritieswithsufficientequityandlong-termdebtin thesefirmstobearalllossesintheeventofinsolvency,andtherebycounteractthemoralhazardassociatedwithtaxpayerbailoutswithoutriskingdisorderlyfailure. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  23. P age |23 Thisrequirementwouldnotbreakbrandnewregulatoryground,sinceitwouldreallybeamodificationofexistingTier2gone-concern capitalconcepts,andwouldcomplementtherequirementforminimumequitylevelsincludedinBaselIII. Asimpliedinmyidentificationofshort-termfundingvulnerabilitiesasapriorityarea,thebestwayforwardhereisconsiderablylesseasytospecify. Short-terminitiativesonmoneymarketfundsandtripartyrepoareboth possibleanddesirable. In truth,though,becausemoneymarketfundsarelargelyAmericanand,toasomewhatlesserextent,European,theUnitedStatesandtheEuropeanUniontogetherhavetheability to addresstheglobalrunrisksassociatedwiththeseproducts. Ithinkwealsohavetheresponsibilitytodoso,butnotnecessarilyinidenticalways. Accordingly,IwouldhopethatboththeUnitedStatesandtheEuropeanUnionwouldeachtakeeffectiveactiontocountertherunrisk,tailoredasappropriate totheirregulatoryenvironments,andthenexplainthoseactionsatIOSCOandtheFSB,wheretheirefficacy canbereviewed. Similarly,sincethesettlementprocessfortripartyrepothatremainsofconcerniscenteredattwoinstitutions,bothofwhichareregulatedAmericanbanks,theUnitedStates cantake effectiveactionwithoutneed ofaninternationalagreement Astobroader initiatives,proposalsto requireminimumhaircutsforallsecuritiesfinancingtransactionshavebeententativelydiscussedintheFSB. Thisiscertainlyaripesubjectfordiscussion,insofarassecuritiesfinancingtransactionsfacilitateleverage,enablematuritytransformation,andproduce thekindofinterconnectednessthatcan spawnrunsandcontagion. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  24. P age |24 Atpresent,nosetofgenerallyapplicableprudentialstandardsgovernsthese activities. Evenwithinregulatedfirms,microprudentialrisk-weightedcapitalstandardshavelittleeffect,sincetheyarecalibratedagainstcreditriskandmostsuchtransactionsareshort-termandfully(orover)collateralized. Thusrequirementsthatwouldattachtoinstrumentsandtransactions,as opposed to firmsthathappentobeprudentiallyregulatedforotherreasons,haveconsiderableattraction. Ontheotherhand,universalhaircutrequirementsarethetypeofregulatoryinnovationthatIsuggestedearlierwasbestdevelopedinternationallyfollowingsomeexperiencewithinfinanciallysignificantcountries. Onemay,forexample,havesignificantconcernaboutsomeoftheunintendedconsequencesthatwouldensue. My instinct,then,isthattheanalysisofthisidea shouldcontinuewithintheFSBand,onehopes,in othervenuesbothinandoutoftheofficialsector. Thereshouldalsobeconcertedeffortsinternationally to gatherrelevantdata,someofwhichisatpresentuncollected. Butwearenotgoingto beinapositiontoestablishaninternationalsecuritiestransactionfinancingregimeinthenearterm. However,oneproposalalreadyontheinternationalagendamightbereconsidered,soastoaddressmoredirectlytheshort-termfundingproblem. FollowingcompletionoftheLCRearlierthisyear,theBaselCommitteeisturningitsattentionbacktotheNetStable FundingRatio(NSFR),aproposalthatwasintended to complementtheLCRbyregulatingliquiditylevelsbeyondthe30-dayLCRhorizon. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  25. P age |25 LiketheLCR,theNSFRproposalraisedmanyquestionseven amongthosefavoringrobustmeasures todealwiththeliabilitysideoffirmbalancesheets. Thereissomeappealto movingforwardwiththiscomplementarymeasurefairlyquicklybysimplymakingsomeincrementalchanges totheNSFRwhilekeepingitscurrentstructure. ButIthinkwemaybebetteradvisedtotaketheopportunityofthisreviewtoexaminewhetherthereareapproachesthatmightaddressmoredirectlythevulnerabilitiesforthefinancialsystemcreatedbylarge non-deposit,short-termfundingdependenceatmajorfinancialinstitutions. Idonotmean toprejudgetheoutcomeofsuchanexamination,orthedegreetowhichwemightbuildonmeasuresbeingconsideredinvariousjurisdictions to addressthesevulnerabilities.ButIdothinkitworththeeffort. Conclusion Responses to whatIhavedescribedasthethreechallengestopre-crisiscentralbankpolicieswillcontinue to evolve. Sowillthereenergizedinternationalagendaforcooperationin internationalfinancialregulation. Myaimtonighthasnotbeen to layoutacomprehensiveprogramforeither,buttosuggestthatthesechangingagendasareneithercompletelycorrelatednorcompletelyindependent. Insuggestingsomeconcretenextsteps,Ihavetriedtodefinesomeusefulandimportantpointsofintersectionbetweenthetwo. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  26. P age |26 GabrielBernardino,ChairmanofEIOPA IMD2andSolvencyII–TheroadtobetterpolicyholderprotectionandfinancialstabilityWorkshoporganisedbytheEuropean FederationofInsuranceIntermediaries(BIPAR)Brussels Goodeveningladiesandgentlemen, Iwouldlike tostartbythankingBIPARfortheinvitation tospeaktoyoutodayandfortheopportunitytomeetagainwiththerepresentativesofEUintermediaries. In myspeech,Iwillbringforwardsomepersonalreflectionsaboutthecurrentchallengesinrevisingtheregulatoryframework intheinsurancearea,namelyIMD2andSolvencyIIandwillfinishbypointingoutsomestrategicreflectionsontheway toachievefurtherconsistencyofEUregulationandsupervision. LetmestartwithIMD2. ThereviewoftheInsurance MediationDirectiveisveryrelevantforEIOPA,becausethisdirectiveaffectsalmostallourstakeholders. Intermediariesare,andwillcontinuetobe,akeylink intheretaildistributionchain. We recognisethatatEIOPA,inthesamewaythatweseeprotectionofconsumersasafundamentalgoalforusandanareawherewearerequiredtotakea“leadingrole”. Forus,intermediariesareanessentialpartoftheinsurancemarketand playacrucialroleinconsumerprotection. Therefore,wewelcomethepublicationoftheCommission’sproposaltorecasttheexistingIMD(“IMD2”)in July2012. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  27. P age |27 • ImustsaythatithascertainlybeenalongtimeinthemakingeversincethereviewofIMD1wasfirstintroducedintotheRecitalsofSolvencyIIby theEuropeanParliamentandthenourpredecessor,CEIOPSsubsequentlyprovidedadvicetotheCommissionontheDirectivein2010with39differentrecommendations. • WesupporttheCommission’sobjectivesofmakingretailinsurancemarketsworkbetterandpromotingamorelevelplayingfieldby,forexample,extendingthescopeoftheDirectivetoincludedirectsales. • Indeed,preventingregulatoryarbitrageandpromotingequalconditionsofcompetitionarekeyobjectivesforEIOPAtoo. • FromEIOPA’sperspective,itisimportantthatthefinallegislativetextcreatesaregulatoryregimeintheretailinsurancemarketthat canbeeffectivelysupervisedbothfromanationalandaEuropeanperspective,bearinginmindthewidevarietyofexistingstructuresatnationallevelforsupervisinginsurancedistribution. • IMD2alsoneedsto adoptaproportionateapproachasregardstheobjectivestobe achieved. • Thereneeds tobeproperconsiderationofexistingmarketspecificitiessuchasaverydiverserangeof distributionchannelsatnationallevel,fromhighstreetbrokers to multinationals. • AsIsay,IwelcometheCommission’sproposal. • Nevertheless,thereareanumberofpointswhereIwouldpersonallyrecommendfurtherreflection: • Transparencyofremuneration • Theproposalintroducesamandatorydisclosureofthefullamountofremunerationforlife insuranceproductsanda5yeartransitionalperiodallowingforan“onrequest”disclosureregimefornon-life products;attheendofthe5yearperiod,mandatorydisclosurewouldapply. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  28. P age |28 • Furthermore,insuranceundertakingsareonlyrequired to informthecustomeraboutthenatureandthebasisofthecalculationofanyvariableremunerationreceivedbyanyemployeeoftheirsi.e.notdisclosureofthefullamount. • Fornon-life insurance,Iconsideran“onrequest”regimeasabetterwaytomovefurtheratanEUlevel,whilemaintainingthepossibilityforMemberStates to imposestricterrequirements. • In myview,thiswouldbe thebestpossibleandbalancedsolutiontoimprovethetransparencyofremuneration. • Furthermore,bothinsuranceundertakingsandinsuranceintermediariesshouldhavetocomplywiththesamehigh-levelprinciplesasregardsinformationrequirementsandconflictsofinterestprovisions. • Ialsobelievethatdisclosureisnotapanaceatomanagingconflictsofinterest. • Theintroductionofageneral“dutyofcare”wouldhelpaswouldtheimplementationofproportionateandrobustadministrativeandorganisationalarrangementstohelpsystematicallyidentifyandmanageconflictsofinterest. • Scope–ComparisonWebsites • ComparisonwebsitesarecaughtundertheRecitals,butnotunderthedefinitionof“insurancemediation”,creatinglegaluncertainty. • In myopinion,itisimportantthatnewformsofon-linedistributionsuchascomparisonwebsites,areproperlycaughtunderthescopeoftheDirectivetoensurealevelplayingfield andadequateprotectionforconsumers. • SomewouldarguethattheyarealreadycaughtbyIMD1,butweneedmoreclarityonthisissue. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  29. P age |29 • Indeed,wearecurrentlyworkingonaReportonGoodPracticesregardingsupervisorystandardsrelatingtocomparisonwebsiteswhichwehopetopublishbeforethesummer. • ItwouldalsobeusefulifEIOPAcouldclarifybymeansofGuidelinestheapplicationoftheDirective to aggregatorsorpricecomparisonwebsites.Advice • “Advice”isdefinedundertheproposalas“theprovisionofarecommendation toacustomer,eitherupontheirrequest,orattheinitiativeoftheinsuranceundertakingortheinsuranceintermediary”. • Iamsurprisedthatthedefinitionof“advice”wasnotpersonalisedasatpresentitcapturesgenericadviceaswell. • Wethinkaclearerdefinitionofadviceisrequiredwhereadviceisprovidedonthebasisofa“personalrecommendation….” • Freedomtoprovideservices/Freedom ofestablishment • TheproposaldeletestheprovisionprovidingforaEuropeanpassportbasedonasingleregistrationandisnotre-statedinthenewChapterIVregardingfreedomtoprovideservicesandfreedomofestablishment • IamsurprisedthattheprovisionwasdeletedasitwasthefoundationofIMD1soastoencouragethecross-borderactivitiesof insuranceintermediaries. • In myview,thisneeds tobereinstatedtosendouttherightmessage. • Cross-selling • Theproposalrecognisesthepracticeandrisksofbundlingproductsandrequirescertaininformationdisclosureonsaleofbundledproducts. • TyingisoutlawedTyingandbundlingisanissuethathasregularlycroppedupindiscussionsinEIOPA(withregardtosalesofPPIorlinkinglife insurance to salesofmortgages). InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  30. P age |30 • SeveralofourMembershavetakenactionalreadyatnationalleveltocombatthispractice. • Isupportactionontyingbutablanketbanonalltyinghasimportantimplications,asthereareanenormousamount oftiedproductsonthemarketintheEU. • Weneedalsotoconsiderthatacompletebanmightalsopreventconsumersfromgettingcheaperdeals. • Itisimportant tohavethesameapproachin IMD2,MiFIDIIandMortgageCreditDirectivetoensureconsistencyonthisissue. • Thisisanarea wehaveforeseenworkundertheJointCommitteeoftheESAs. • InsurancePRIPs • Theproposalintroducesspecialrequirementsforinsurance PRIPs e.g.requirementtoidentify,prevent,manageanddiscloseconflictsofinterestwhensellinginsuranceinvestmentproducts. • IbelievethattheseprovisionsshouldbekeptwithinIMD2andweshouldavoidasimple“cutandpaste”asthedistribution channelsinvolvedareverydiversesoa“onesizefitsall”approachcouldhavemajorimpactonthemarket. • Furthermore,IwoulddefinitelyincludeinIMD2,theorganisationalrequirementsneededbydistributorsinordertomanageconflictsofinterest. • AtEIOPA,wearefollowingcloselythenegotiationsintheCouncilandParliament. • Itisveryinterestingtoseethewiderangeofdifferentopinionscomingtotheforeonthisissue. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  31. P age |31 ThisisnotsurprisingbecauseIMD2seeks to performaverytricky“balancingact”:enhancingthepossibilitiesforcross-borderretailtrade,butatthesametime,raisingthebarin termsofadequatesafeguardsforconsumers. Thisbalancingactisevenmoredifficultin theaftermathofthefinancialcrisis. EIOPAstandsreadyto supporttheEUpolitical institutionsinthenegotiationprocess. LetmeknowturntoSolvencyII. TheEUisfacedwithanoutdatedandfragmentedregulatoryregime in insurance. SolvencyIIhasbeendevelopedduringthelast13yearstoanswer toconcreteneeds. Itincreasespolicyholderprotectionbyusingthelatestdevelopmentsinrisk-basedsupervision,actuarialscienceandriskmanagement. WeshouldbeproudthatSolvencyIIisbasedonsoundcoreprinciples. Obviously,thefinancialcrisishadanumberofconsequencesonSolvencyII. Somelessonswereincorporatedearlyonin theregime,butotherchallengesarestillcreatinguncertaintiesonthefinaldesignandcalibration. Thehugemarketvolatilityprovedtobeachallengeina market-consistentregime,especiallyforlong-termguarantees. Thesovereigncrisisledto questionsontheconceptoftherisk-freerate. Thechangesinbankingregulationcreatepressureontheroleofinsurersasprovidersoflong-termbankfunding. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  32. P age |32 Thelowinterestrateenvironmentisthreateningsomeinsurancebusinessmodels,especiallyinlife insurance. ThisyearwillbeacrucialyearforSolvencyII.So,whatarewedoing? FollowingtheagreementbytheEUpolitical institutions,EIOPAhavelaunchedthelong-termguaranteeassessmentthataimstotestvariousmeasuresthathavebeendiscussedintheOmnibusIInegotiations. Weareencouragedbythelevelofparticipationinthedifferentmemberstates,coveringbig,mediumandsmallerplayers. EIOPAwillpresentitsfinalreportinJune. ItisessentialforpolicyholderprotectionandfinancialstabilitythatSolvencyIIappropriatelyreflectsthelong-termfinancialpositionandriskexposureofundertakingscarryingoutinsurancebusinessofalong-termnature. Weneedarobustframeworkthatwouldpricecorrectlyanyoptionsembeddedinthecontracts. Weneedtorecognisethatguaranteeshaveaprice;thereisno“freelunch”. Ontopofthelong-termguaranteeassessment,EIOPAseesitasofkeyimportancethattherewillbeaconsistentandconvergentapproachwithrespecttothepreparationofSolvencyII. Thatiswhy,inDecember2012,weissuedourOpiniononinterimmeasuresregardingSolvencyII. OurplanistodevelopGuidelinesthatwillensurethatnationalsupervisoryauthoritieswillstartin2014toputinplacecertainimportantaspectsofthenewprospectiveandrisk basedsupervisoryapproach. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  33. P age |33 TheseGuidelineswillcoverthesystemofgovernance,includingriskmanagementandtheprocessofdevelopinganownriskandsolvencyassessment,pre-applicationof internalmodels,andreportingtosupervisors. WearenotanticipatingSolvencyII,butpreparingsupervisorsandundertakingsforthenewregimeinaconsistentway. Theguidelinesareaddressed tonationalsupervisoryauthoritiesandwillbesubject tocomplyorexplainprocedure. WeareworkinginclosecooperationwiththeEuropeanCommissionandmaintaininganinformaldialoguewithEIOPA’sInsuranceandReinsuranceStakeholderGroupandthedifferentstakeholders. Weplan to haveapublicconsultationontheGuidelinesinApril/May2013andtheywillbetabled to EIOPABoardofSupervisorsintheautumn. Goingforward,oneofthemostcriticalchallengesintheEUsupervisorylandscapeistoensureconsistencyofsupervisorypractices. Ibelievethattheconvergenceofsupervisorypracticesisasimportantasthesinglerulebook. Byassuringthatday-to-daysupervisoryoversightoffinancialinstitutionsisdonewithinaconsistentframework,wecaneffectivelycontributetoanincreasedlevelofprotectionofpolicyholdersandbeneficiariesintheEuropeanUnion. ThesinglemarketrequiresitandEIOPAiscommittedtodeliverit. AfirststepshouldbethedevelopmentofaSupervisoryHandbookthatwouldworkasaguidebookforsupervisioninSolvencyII,settingoutgoodpracticesinalltherelevantareasofsupervision. Thishandbookwillfostertheimplementationofamoreconsistentframeworkfortheconductofsupervision. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  34. P age |34 EIOPAisstartingtowork in thisarea. Ibelievethatitisfundamentaltobuildontheexperienceofwhathasbeen achievedbyEIOPAunderthecurrent Regulationandstartareflectiononthefurthersteps(tasksandpowers)neededtodeliveratrulyconsistentsupervisoryprocessand, inparticular,to assuretheconsistentoversightofcross-borderinsurancegroups. Furthermore,EIOPAneedstohaveresourcestoplayitschallengingoversightroleaccordingtotheRegulation,byconductinginquiriesintoaparticulartypeoffinancialinstitution,ortypeofproduct,ortypeofconductinordertoassesspotentialthreatstothestabilityofthefinancialsystemandmakeappropriaterecommendationsforaction tothecompetentauthoritiesconcerned. In ordertoperformthisindependentassessmentinatransparent,efficientandriskbasedway,EIOPAneeds to reinforceitshumanresources,shouldhave accesstotherelevantindividualinformationavailabletothenationalsupervisorsandalsohavedirectaccesstotheindividualinstitutions. Anotherstrategicchallengeisthelevelofregulatoryconsistencyinthefinancialsector. Ibelieveitisveryrelevantto achieveanappropriatelevelofconvergenceoftherulesprotectingretailconsumersinthedifferentareasofthefinancialsector. Nevertheless,proportionalityandgoodsenseshouldprevail. Bycoveringthedifferentanglesofdisclosureandsellingpracticesintheinsurancemarket,IMD2shouldavoidthe tendencytoapplya one-size-fits-allapproach. Insurancebusinessandinsuranceproductshavetheir ownspecificitiesthatneedtobecarefullyconsidered. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  35. P age |35 Somemayarguethatthesespecificitiesarea sufficientargumenttomaintainthestatusquo.Idon’tbelievethatthisisthe case. Weneedto recognizethatanevolutionisalsoneededinthewayconsumerprotectionisensuredinthedifferentdistributionchannels. Weneedtolearnfromthemis-sellingeventsthatoccurredincertainmarketsinvolvingproductslike PPI,unit-linkedproductsandpensions. Consumer’sattitudesandneedsarechanging,andthatshouldbeviewedpositively. Theinsurancemarketcannotandwillnotbeoutofthisevolution. Insuranceintermediariesshouldsupportthistrendandshouldview IMD2asagoodopportunity to improveconsumerprotection,preservetherelevantinsurancespecificitiesandincreaseconsumerconfidence. Thankyouforyourattention. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  36. P age |36 SubmittingaSuspiciousActivityReport(SAR)withintheRegulatedSector ThisisaUnitedKingdomFinancialIntelligenceUnit(UKFIU)communicationsproduct,producedinlinewiththeSeriousOrganisedCrimeAgency's(SOCA)commitmenttosharingperspectivesontheSuspiciousActivityReports(SARs)Regime. Thisdocumentseeks to provideadviceandrelaybestpracticewhenmakingaSuspiciousActivityReport(SAR),apieceofinformationthatalertsLawEnforcementAgencies(LEAs)that certainclient/customeractivityisinsomewaysuspiciousandmightindicatemoneylaunderingorterroristfinancing. Personsintheregulatedsectorare requiredunderPart7oftheProceedsofCrimeAct2002(POCA)andthe TerrorismAct2000(TACT)to submitaSARinrespectofinformationthatcomestotheminthecourseoftheirbusiness,iftheyknow,orsuspectorhavereasonablegroundsforknowingorsuspecting,thatapersonisengagedin,orattempting,moneylaunderingorterrorist financing. ASARmustbesubmittedassoonasispracticable. ThisdocumentseekstocomplementtheMoneyLaunderingRegulationsandHMTreasuryapprovedguidanceinthisregard. ItisimportantthatwhensubmittingaSARtoSOCAthatreportersrefertothepublishedguidancefromtheirownregulatorybodyandtheir owninternalguidance. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  37. P age |37 BysubmittingaSARtotheSeriousOrganisedCrimeAgency(SOCA)youwillbeprovidingLEAswithvaluableinformationof potentialcriminalitywhilstensuringappropriatecompliancewithyourlegal obligationstoreportunderPOCAandTACT. Youareable tosubmitSARsinanyformatincludingbypost,faxorviatheSOCAwebsite(www.soca.gov.uk)throughtheSAROnlinesystem. OnceyouhavesubmittedyourSARyoushouldrememberyourobligationsnot to makeanydisclosureswhichmightconstituteanoffenceoftippingoffundersection333AofPOCAorsection21DofTACT2000. SOCAdoesnotprovideorapprovestandardwordingforyou to useinsuchcircumstances. Itisthereforerecommendedthatyougivecarefulconsideration tohowyouwillhandleyourrelationshipwiththesubjectonceyouhavesubmittedtheSAR,particularlyifthesubjectisaclientorcustomerof yourbusiness. Youmaywishtodiscusswithyoursupervisororprofessionalbodyifyouareunsure. SAROnlineisasecurewebbasedsystembywhichyoucansubmitSARstoSOCA. RegisteringwithSAROnlineisaverysimpleprocessandensuresSARsaredelivereddirectly to SOCA,includinganactivationprocesstocreatetheaccountforthesubmissionofSARs. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  38. P age |38 • SAROnlineisSOCA'spreferredmeansofSARssubmissionandprovidesastandardisedapproachtostructuringSARsthatreportersmayfind useful. • Itisimportanttoprovideasmuchcomprehensivedetailaspossiblewhenregistering. • In ordertoregisterforSAROnline,newusersrequireanactiveemailaccountasthisisusedasyouruseridentification. • Theregistrationisuniquetotheusersotheemailaddressneedstobedesignatedtotheappropriateperson. • ItisrecommendedthattheMoneyLaunderingReportingOfficer(MLRO),NominatedOfficerordesignatedofficerresponsiblefortheAnti-MoneyLaundering(AML)compliancewithintheorganisationistheregistereduser. • UseofSAROnlineisrecommendedas: • itwillprovideyouwithanautomated acknowledgementofreceipt • itwill helpyoustructureyourSARinthemosthelpfulway,therebyimprovingprocessingtimeinSOCA • itwillgiveyoutheopportunity to flagtheSARasaconsentissue. • ReportersthatsubmitSARsviaSAROnlinewillalsoreceiveanacknowledgementemailcontainingauniquereferenceoncethereporthasbeensubmitted. • ThesubmissionofconsentSARsisparticularlyvaluable toensureapromptresponse. • Thereisadedicatedsupportteamavailableduringofficehours todealwithanySAROnlineenquiries.TheSAROnlineHelpdeskcan becontactedon02072388282,option3. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  39. P age |39 FurthersupportisavailableontheSOCAwebsite(www.soca.gov.uk)orthroughyoursupervisororprofessionalbody. YoushouldnotethatSAROnlinedoesnotretainafilecopyforyourfutureuseandthereforeyoushouldensurethatyouretainyourownrecordofyoursubmission. SAROnlinehasanautomatictimeoutsessionof20minutesforeachpage. Youshouldsaveyourworkatregularintervalsto re-setthetimeoutclockbeforethesessionexpires. HoweverifyouarenotreportingelectronicallypleaseusetheSOCAPreferredFormsformanualreportingwhichcanbedownloadedfromtheSOCAwebsite. Reasonforsuspicion Makingaqualityreport,structuredinalogicalformatandincludingallrelevantinformation,willsignificantlyenhanceLEAs'abilities to extractgreatervaluefromsubmittedSARsandspeeduptheprocess. Oftenaseeminglyminorpieceofinformationtoyou canbecomeavaluablepieceofintelligencetoLEAs. Itishelpfultowriteabriefsummarytoexplainyoursuspicionandthenalsoprovideachronologicalsequenceofevents. Ithelpsifyoutrytokeepthecontentclear,conciseandsimple. Forexample,describetheevents,activitiesortransactionsthatledyoutobesuspicious,how andwhyyoubecamesuspicious,andwhereappropriate,thenatureofthebusinessactivityyouwereengagedin and detailsofdatesofanyactivitiesortransactionsetc. TheSARGlossaryofTerms (availableontheSOCAwebsitewww.soca.gov.uk)isused to identifyspecificcategoriesofsuspicious InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  40. P age |40 activityandiswidelyusedbylawenforcementenablingthemtoidentifySARsinwhichtheyhaveaspecific interest. TheinclusionoftheappropriateGlossaryTermcanbeusefulinensuringthedistributionoftheSARtoalawenforcementorgovernmentagencywhichmaybebestplacedtoutiliseoractontheinformationprovided. However,useoftheSARGlossaryofTermsisnotmandatory. Ifthereportedsubject(forexampleclient/customer)hasbeenthesubjectofapreviousSARsubmittedbyyourorganisation,itisvaluabletoincludethepreviousSARreferencenumber,and,ifappropriatetodoso,theglossarycodeXXS2XX. However,pleasealsorememberthatunderPOCAandTACT,eachSARyousubmitonthesameindividualmustcontainasuspicionandalltherelevantdetails;evenifyouhaveincludedthereferencenumberforapreviouslysubmittedSAR. Asabasicguide,whereveryou can,tryto answerthefollowingsixbasicquestions tomaketheSARasusefulaspossible: Who?What?Where?When?Why? How? Remembertoincludethedateofactivity,thetypeofproductorservice,andhowtheactivitywilltake placeorhastakenplace,when documentingthereasonforsuspicion. Ifyouaresuspiciousbecausetheactivitydeviatesfromthenormalactivityforthatcustomer/businesssector,itwouldbehelpfulto brieflyexplainhow theactivitythatgaverisetoyoursuspiciondiffers. AvoidtheuseofacronymsorjargonwithinSARsastheymaynotbeunderstoodbytherecipientandmaybeopen tomisinterpretation. Ifyouaredescribingaserviceprovidedoratechnicalaspectofyourwork,itwouldbebeneficialto provideabriefsynopsisinyourSARtoaidthefinancialinvestigator. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  41. P age |41 WerecommendyoudonotsendattachmentswithyourSAR– alltherelevantinformationshouldbewithintheSAR. Iffurther informationisavailablewhichyouarewillingto sharewithanLEAthenreferencetothisandwhotocontactmayberecordedintheSAR. Subjectinformation Theamountofinformationareporterholdsonthereportedsubjectmaybedependentonthenatureoftherelationshipwiththesubjectwhichmayfrequentlybeaclientorcustomer,butmayalsoforexamplebeaprospectiveclient,someoneconnectedwithortradingwithaclient/customerorothersubjectseenintheordinarycourseofbusiness. Accordingly,theinformationmaybederivedfromCustomerDueDiligence(CDD)obtainedinlinewithguidancepublishedbyitsfirmandsupervisorybodyorother informationgatheredintheordinarycourseof business. ItishelpfultothosewhowilluseyourSARtobeascomprehensiveaspossible;howeveryouareonlyrequiredtoprovideinformationobtainedwithintheordinarycourseofyourbusiness. Whereknown,theinformationlistedbelowshouldbeprovided,andinthecaseofaddresses,whereverpossiblethestatusoftheaddress(e.g.current,business,residentialetc)shouldbeprovidedtogetherwith postcodesorequivalentforoverseasaddresses. TheinclusionofpostcodeallowstheSARtobeautomaticallyallocatedtolawenforcement. Pleasenote:IfyouaresubmittingaSARusingSAROnlineyouarerequestedtofillinthesubjectinformationwithinthefixedfieldsprovidedforthepurpose. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  42. P age |42 • Individuals • Pleaseprovideallrelevantdetailsknownabouttheindividualreported.The amountofinformationyouwillhavemaywelldependontherelationshiptothereportedsubject. • Pleaseprovideall identifyinginformation. • Thisshouldinclude,asfaraspossible:fullname/s,dateof birth,nationalityandaddress. • Itisimportantthatthestatusoftheaddress/es canbefullyunderstood • current,previous,home,business,and otherknownproperty,ensuringthatpostcodesareincluded. • Iffurther informationisheldabouttheindividual– forexample: • identificationdocumentdetails(includingrelevantreferenceordocumentnumbers)e.g.passport,drivinglicence,NationalInsurancenumber • cardetails(registrationnumber) • telephonenumbers(clearlymarkedhome,business,mobileetc) • fulldetailsofbankaccountsorotherfinancialdetails(includingaccountnumbersetc) • occupation • thentheinformationcanbeprovidedincontextwithyoursuspicion. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  43. P age |43 • Businesses,trustsandotherentities,incorporatedandunincorporated • Incorporated • Pleaseprovideallrelevantdetailsknownabouttheincorporatedentity.Theamountofinformationyouwillhavemaydependontherelationshiptothereportedsubject.Pleaseprovideallidentifyinginformationsuchas: • fullname • designatione.g.Limited,SA,GmbH • tradingname • registerednumber • VATand/ortaxreferencenumber • countryofincorporation • business/tradingaddress • registeredofficeaddress. • Additionallyifrelevanttoyoursuspicion,pleaseprovidedetailsoftheindividualsorentitiesthatarethedirectors(orequivalent)anddetailsoftheindividualswhoownorcontrolorexercisecontroloverthemanagementoftheentity. • Unincorporated • Pleaseprovideallrelevantdetailsknownabouttheunincorporatedentity. • Theamountofinformationyouwillhavemaydependontherelationshiptothereportedsubject. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  44. P age |44 • Pleaseprovideall identifyinginformationsuchas: • fullname • business/tradingaddress • VATand/ortaxreferencenumber. • Additionally,ifrelevanttoyoursuspicion,pleaseprovidedetailsofallpartners/principalswhoownorcontrolorexercisecontroloverthemanagementoftheentity. • Trusts • Pleaseprovideallrelevantdetailsknownaboutthetrust. • Theamountofinformationyouwillhavemaydependontherelationshiptothereportedsubject. • Pleaseprovideall identifyinginformationsuchas: • fullnameofthetrust • address • natureandtypeofthetrust. • Additionally,ifrelevanttoyoursuspicion,pleaseprovidedetailsofalltrustees,settlors,protectorsandknownbeneficiariesasappropriate. • Descriptionofcriminalpropertyand itswhereabouts • Whenthesuspicionbeingreportedrelatestoafinancialtransaction,thereportshouldincludetherelevantdetailsofthebeneficiary/remitterofthefundsand,ifknown,thedestination/originatingbankdetailse.g.sortcode,correspondentbankdetails. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  45. P age |45 Itisimportant to accuratelyrecordthedateonwhichthetransactionhasoccurredorwilloccur. Itisalsousefultounderstandthetypeoftransaction–forexampleonlinepayment/receipt,debitorcreditcard,ATMwithdrawal,cheque,electronictransfer(BACS/CHAPS),orcash. Ifthebeneficiary/remitterofthetransactionisbelievedtobecomplicitinthesuspicious activitythenconsiderationshouldbegiventoprovidingtheirdetailsasanassociatesubject. Anassociatedsubjectisapersonorentitythatislinked tothemain person/entityinsomedirectwayandisinvolvedin thesuspiciousactivity. Iftheactivitydoesnotinvolveafinancialtransactionthenanexplanation ofthesuspiciousactivitythathasoccurredorwilloccurshouldbegiven. WhensubmittingaSARusingSAROnlinetherearefieldsfordocumentingspecificfinancialtransactions. Equally,transactionsoractivitycanbedocumentedwithinthe‘reasonforsuspicion’fieldprovided. Appropriateconsent Obtainingconsentprovidesadefenceagainsttheprincipalmoneylaunderingoffences. ShouldyouwishtoavailyourselfofthisyoushouldrefertoaseparatedocumentwhichhasalsobeenpublishedontheSOCAwebsite(www.soca.gov.uk)entitled‘ObtainingconsentfromSOCA’. Thisprovidesspecificguidanceontheprocesstobefollowedandwhattoexpectifyouwish toapplytoSOCAforaconsentdecision. IfyouareusingSAROnlineyouareremindedtoensureyoutick theappropriateConsentBoxwhencompletingyourSAR. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  46. P age |46 In allcasesitisimportanttospecifyclearlytheactivityforwhichconsentisrequired. ThresholdRequests Section339AofPOCAmakesprovisionforathresholdinthecaseof deposit-takinginstitutionsinoperatinganaccountifitis£250orlesswithouttheneed toseekconsent. Iftheproposedactivityexceeds£250,permissiontovary the‘threshold’paymentisrequiredfromSOCAbeforethe activitymaybeconducted. Thereportershouldstillmakeadisclosure inrespectoftheinitialopeningofanaccountor,ifdifferent,thetimewhenthedeposit-takingbodyfirstsuspectsthatthepropertyiscriminalproperty. IfyouaresubmittingaSARwithaThresholdRequest, pleasesubmittheSARinthenormalwayandspecifythethreshold amountsought,theaccountitrelatesto,anddetailsofthefrequency,natureandvalueoftheactivity to whichthethresholdwillrelate. Ifathresholdisalreadyinplaceandyouwishtoseekavariation,thenthereasonsforthevariationwillneed tobesetoutinanadditionalSARandsubmittedtoSOCA. Pleasenote: Athresholdrequestisnotthesamethingasaconsentrequestandtherearenostatutorytimescalesfordealingwiththem. Howevertofacilitatethresholdrequests,SOCAusestheconsentdesk toprogresstheresponsesanditishelpfuliftheconsentboxistickedontheSARtoenablethedesk to identifytherequestsquickly. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  47. P age |47 Courtordersandlawenforcementenquiries Insomeinstances,youmaybeservedwithorhavenoticeofacourtordersuchasaproductionorder,madein respectofaparticularindividualorentity. Thismayactasacatalystforyoutoreviewtheactivitywhichyouconductorhaveconductedinrelation tothatindividualorentity. If,followingsuchareview,youfeelthatthereisanobligationtosubmitaSARorseekconsent,thentheSAR/consentrequestshouldreflectyoursuspicionsinthecontextofyourengagementwiththesubject. Acquisitiveorfraudrelatedcrime Whenyouhaveknowledgeorsuspicionofan acquisitiveorfraudrelatedcrime,youwillbefacedwithaparalleldecisionmakingprocess.Firstly,youwillhavetodecidewhetherornotyouwishtheoffencetobeinvestigated. In casesofallfraud(confirmedfraud,attemptedfraudorwhereinformationrelatingtofraudcanbeprovided),reportsshouldbemadetoActionFraudviawww.actionfraud.police.ukortelephone03001232040. SOCAdoesnottakecrimereports. Also,regardlessofwhetherornotacrimehasbeenreported,youwillwishtoconsideryourlegalobligationsundertheProceedsofCrimeAct2002(POCA). IfyouhaveknowledgeorsuspicionthatamoneylaunderingoffencehastakenplacethenyoumustsubmitaSARtoSOCA. SOCA’sadvicefromitspolicepartnersisthatwhereareporterwishesthecontentofaSARtobeformallyrecordedasacrimereporttheyshouldreportthisdirectlytotheirlocalpoliceforce. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  48. P age |48 Wherethereporterhasreportedacrimeand,inaddition,hassubmittedaSAR,itwouldbehelpfulifthecrimereferencenumbercouldbeincludedinthetoplineofthetextintheSARsothatitcanimmediatelybe cross-referencedbylawenforcement. Alertsandkeywords TheAlertsprocessisarecognisedandestablishedwaybywhichSOCAcommunicateswiththeUK'sprivatesector. Thesearewrittencommunicationsthatwarnofaspecificrisk,threatorproblem. AllAlertscontainakeywordoraglossarycode. IfyousubmitaSARasaresultoftheinformationcontainedinanAlertpleaseincludethekeywordwithinthefreetextfield. SARconfidentiality TheconfidentialityofSARsisthecornerstoneofthereportingregime.SARsareheldonasecurecentraldatabasewithinSOCAandaccesstothedatabasebylawenforcementisstrictlycontrolledbySOCA. TheuseofSARsisgovernedbyHomeOfficeCircularNo.53/2005(MoneyLaundering:TheConfidentialityAndSensitivityofSuspiciousActivityReports[SARs]AndTheIdentityOfThoseWhoMake Them). AlllawenforcementagenciesusingSARsarerequired to follow theguidanceoutlined IfreportershaveconcernsabouttheinappropriateuseofSARsbyLawEnforcementAgencies(LEAs),orbreachesofSARconfidentiality,theyshouldcalltheSARConfidentialityBreachLineonfreephone0800234 6657(9am-5pm,UKtime,Monday to Friday).Thisnumberisforreportingbreachesofconfidentialityonly. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  49. P age |49 ContactingSOCAUKFinancialIntelligenceUnit(UKFIU) SARsshouldnotbeusedasacommunication channele.g.asameansofgainingadvice.SARsareonlyforthereportingofsuspiciousactivity toSOCA. IfyouneedtoseekgeneralguidancerelatingtomoneylaunderingortheSARsRegimeinparticular,youareadvisedtocontactyourdesignated MoneyLaunderingReportingOfficer(MLRO)oryourregulatorybody. ForinformationorassistancewithsubmittingSARs,SAROnlineenquiriesandconsent,pleasevisitwww.soca.gov.ukorcontacttheUKFIUasfollows: Tel:02072388282 Press'2'-GeneralSARenquiriesPress'3'-SAROnlinehelpdeskPress'4'-ConsentSARenquiries WhencontactingtheUKFIUpleasehaveavailableyourSARreference numberifapplicable. GeneralUKFIUmattersmaybeemailedtoukfiusars@soca.x.gsi.gov.ukIfyouwish tomakeaSARbypostyoushouldaddressyourSARtoUKFIU,POBox8000,London,SE115ENorbyfaxon02072838286.YouareremindedthatpostandfaxareslowerthanSAROnlineandthereforeitwilltakelongerforyourSARtobeprocessed.Youwillnotreceiveanacknowledgementifyouusepostorfax. Disclaimer Whileeveryeffortismade to ensuretheaccuracyofanyinformationorothermaterialcontainedin orassociatedwiththisdocument,itisprovidedonthebasisthatSOCAanditsstaff,either individuallyorcollectively,acceptnoresponsibilityforanyloss,damage,costorexpenseofwhateverkindarisingdirectlyorindirectlyfromorinconnectionwiththeusebyanyperson, whomsoever,ofanysuchinformationormaterial. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com

  50. P age |50 Anyusebyyouorbyanythirdpartyofinformationorothermaterialcontainedinorassociatedwiththisdocumentsignifiesagreementbyyouorthemtotheseconditions. DialogueTeam TheaimoftheDialogueTeamis todrivetheUKFinancialIntelligenceUnit(UKFIU)agendaoninterfacingwithstakeholdersonSuspiciousActivityReports(SARs)activity. The teamstrives to improvecommunicationandunderstandingbetweentheSARsregimeparticipants,toincreasethevalueextractedfromtheSARsregime,toprovide,facilitateandcontributetovariousforumstoshareperspectivesontheoperationoftheregimeasawhole. In essencetheDialogueTeamseekstoimprovethequalityofSARsintelligence,andpromotethevalueandgreateruseofthisintelligenceinmainstreamlawenforcementactivity. InternationalAssociationofRiskandComplianceProfessionals(IARCP)www.risk-compliance-association.com