Page 68 - BIPAR Annual Report 2020_EN

Brexit

EBA Consultation on customer due diligence and ML/TF risk On 23 June 2016, the UK voted to leave the European Union. to do so, they must submit applications for UK authorisation
factors The UK had been due to leave the EU on 29 March 2019, but and complete any necessary restructuring.
the departure date was revised and the UK in fact left the EU
In February 2020, the European Banking Authority (EBA) published a on 31 January 2020. The UK has entered a transitional period EIOPA Recommendation and other measures
consultation on its draft Guidelines on money laundering and terrorist which is currently due to end on 31 December 2020.
financing (ML/TF) risk factors. These Guidelines will amend the 2017 EBA Further to its December 2017 Opinion urging insurance
risks factors Guidelines. They set out factors that financial institutions, Once the UK becomes a “third country” under EU legislation, undertakings to take necessary steps in good time to ensure
including insurers, insurance and financial intermediaries, should consider the IDD will no longer apply to UK intermediaries (only the the continuity of cross-border insurance contracts between
when assessing the ML/TF risks associated with a business relationship or UK requirements will continue to apply) and UK intermediar- the UK and the EEA30 after the withdrawal of the UK, in Feb-
transaction. Measures for enhanced and simplified customer due diligence ies will be no longer treated as EU intermediaries. UK inter- ruary 2019 EIOPA issued 9 recommendations for the insur-
are also proposed. Guidelines 14 and 15 are particularly addressed to mediaries will lose the IDD passporting rights they currently ance sector in light of the UK withdrawing from the EU with-
life insurers and investment firms. The consultation is open until 6 July have and similarly, EU intermediaries will lose the IDD pass- out a withdrawal agreement.
2020. BIPAR has launched an internal consultation amongst its member- porting rights in relation to the UK.
associations and based on the feedback collected it will submit its The Recommendations provide guidance on the treatment
contribution to the Commission (post-mortem analysis). In most EU Member States, EU governments have adopted of UK insurance undertakings and distributors with regard
legislative acts on the UK’s withdrawal from the EU provid- to cross-border services in the EU after the withdrawal of
ing for contingency measures should there be a ‘hard Brexit’ the UK from the EU without a withdrawal agreement. EIO-
Other AML initiatives (i.e., UK withdrawal with limited alignment), ensuring that PA explains that the objective of its Recommendations is to
policyholders that hold existing life and non-life insurance minimise the detriment to policyholders with cross-border
On 24 July 2019, the Juncker Commission adopted a Communication and policies with UK insurance undertakings, operating in their insurance contracts. The Recommendations addressed to
four reports that aimed at supporting European and national authorities respective countries in FOE or FOS under the Solvency II National Competent Authorities are to foster supervisory
in better addressing ML/TF risks. The reports stress the need for full single licence, will not be affected by these undertakings los- convergence and to ensure consistent supervisory practices.
implementation of AML/CTF rules while underlining that a number of ing their passport rights. Most of these national acts of the
structural shortcomings in the implementation of the Union’s anti-money EU Member States provide for a temporary run-off regime The 9 EIOPA Recommendations range from the authorisa-
laundering and counter terrorist financing rules still need to be addressed. which, subject to a number of conditions, will enable UK tion of third country-branches, the lapse of authorisation,
Following the request from the Council in December 2018, the European insurers to continue to fulfil their obligations, contracted to the cooperation between the national competent authori-
Commission has analysed in one of the reports ten recent publicly known their EU customers prior to Brexit, for a transitional period ties, the communication to policyholders and beneficiaries
cases of money laundering in EU banks to provide an analysis of some of after the date of the UK’s withdrawal from the EU. Howev- to distribution activities.
the current shortcomings and outline a possible way forward. er, in many countries, UK insurance intermediaries are not
included in the relevant local legislations. With regard to distribution activities,
Furthermore, EBA adopted in July 2019 an Opinion highlighting the Recommendation 9 states the following:
importance of money laundering and terrorist financing risks in the BIPAR regrets this situation. It believes that it is important
prudential supervision. Prudential supervisors are required to take into to have UK intermediaries included in these national acts. “Competent authorities should ensure that UK intermediar-
account AML/CTF information in the context of authorisation, ongoing Without their UK intermediaries being there to help during ies and entities which intend to continue or commence dis-
supervision, supervisory review and in the context taking administrative this transitional period, EU 27 clients may, for example, have tribution activities to EU27 policyholders and for EU27 risks
measures. On the other hand, AML/CFT supervisors will use the information problems to get claims paid on multiple insurers’ London after the UK’s withdrawal are established and registered
from prudential supervisors to inform their approach to the AML/CFT policies. BIPAR, therefore, suggested to its member associa- in the EU27 in line with the relevant provisions of the IDD.
supervision of institutions. The management body of the institutions tions to contact their respective regulator to ensure that UK Competent authorities should ensure that intermediaries,
should be adequately skilled to identify, assess and manage such risks. intermediaries are included /referred to in their respective which are legal persons and are established and registered
Brexit national act or get the confirmation that their Brexit in the Union, demonstrate an appropriate level of corporate
act on the insurance sector covers insurance intermediaries. substance, proportionate to the nature, scale and complex-
ity of their business. These intermediaries should not display
In the UK, European insurance intermediaries currently the characteristics of an empty shell. Moreover, the profes-
operating in the UK can continue to carry out insurance sional and organisational requirements of the IDD must be
business, including writing new contracts as well as servicing met on a continuous basis. This is without prejudice to the
existing contracts, for a temporary period after even a ‘no- right of the Member States to introduce special provisions in
deal’ Brexit (i.e., UK withdrawal without agreement). In order their national law for third country intermediaries, provided

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