Clifford Chance

Welcome to this week's global fintech round-up, summarising fintech regulatory developments that have happened around the world along with our Clifford Chance fintech publications and upcoming events.

Details of these and previous developments can also be found on our Fintech Topic Guide on the Clifford Chance Financial Markets Toolkit.

SPOTLIGHT

How to Manage AI-Specific Cybersecurity Risks in the Financial Services Sector: A Guide for Financial Institutions

Artificial intelligence (AI) is not a new phenomenon in the financial services sector. For decades, financial institutions have used AI to automate processes, enhance customer service, detect and deter fraud, and optimize investment strategies. However, as AI becomes more advanced and ubiquitous, it also poses new and complex cybersecurity risks that require careful management and mitigation.  In response to the Biden Executive Order on Safe, Secure and Trustworthy Artificial Intelligence, the US Department of the Treasury recently released a report titled "Managing Artificial Intelligence-Specific Cybersecurity Risks in the Financial Services Sector", which provides a comprehensive overview of AI challenges and opportunities and offers a set of recommendations for financial institutions and regulators.

This article summarizes the main themes and insights from the Treasury Report and provides practical guidance for those in the financial services sector who are responsible for overseeing and advising on AI-related matters.

CLIFFORD CHANCE PUBLICATIONS

• (20 May 2024) Clifford Chance webinar – Regulation of artificial intelligence in the UK and EU insurance sectors

GLOBAL LEGAL AND REGULATORY UPDATES, INDUSTRY GUIDANCE AND PUBLICATIONS

International

• (16 May 2024) Basel Committee on Banking Supervision report on the implications of the digitalisation of finance on banks and supervision. The report considers both the benefits and risks of new technologies and the emergence of new technologically enabled suppliers on the provision of banking services. It identifies eight implications for banks and supervisors relating to macro-structural elements, specific digitalisation themes, and capacity building and coordination. | Press release

Americas

US:  

• (16 May 2024) The US Department of the Treasury has issued the 2024 National Strategy for Combatting Terrorist and Other Illicit Financing, which provides a blueprint of the US Government’s goals, objectives, and priorities to disrupt and prevent illicit financial activities. Amongst other things, the strategy envisages possible updates to the regulatory requirements and supervisory framework for virtual asset activities, as well as an enhanced use of artificial intelligence (AI), data analytics, and additional technological innovations in government efforts to combat illicit finance. | Press release

APAC

Hong Kong and the People's Republic of China:

• (17 May 2024) The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC) have expanded the scope of an e-CNY pilot for cross-boundary payments to facilitate the set up and the use of e-CNY wallets by Hong Kong residents, as well as the top-up of e-CNY wallets through the Faster Payment System (FPS). | Press release

Europe

EU:

• (21 May 2024) EU Council conclusions on the future of EU digital policy, which set out the main priorities that will be developed in the upcoming legislative cycle. | Press release
• (21 May 2024) EU Council conclusions on the future of cybersecurity, which are intended to provide guidance and set the principles towards building a more cybersecure and more resilient EU. | Press release
• (16 May 2024) EU Parliament briefing entitled 'Digital finance legislation: Overview and state of play'.

Italy:

• (8 May 2024) Following a public consultation that ended on 22 January 2024, the Bank of Italy has published a new regulation (in Italian) intended to fully implement Regulation (EU) 2020/1503 on crowdfunding service providers for businesses in Italy. The new regulation applies to supervised intermediaries as well as specialised entities duly authorised to engage in the provision of crowdfunding services, and sets out new rules governing the applicable reporting obligations and/or requirements towards the competent authorities.

Switzerland:

• (15 May 2024) The Swiss Federal Council has launched a consultation on extending the international automatic exchange of information in tax matters (AEOI). Set to apply from 1 January 2026, the extension concerns the new AEOI concerning cryptoassets and the amendment of the standard for the automatic exchange of financial account information. Deadline for comments: 6 September 2024. | Press release

UK:

• (21 May 2024) Speech by Bank of England (BoE) Financial Policy Committee member Randall Kroszner on balancing the productivity opportunities of financial technology and AI against the potential risks.
• (16 May 2024) BoE Point-of-sale proof of concept digital pound experiment report, which details an experiment conducted by the BoE to assess the technical feasibility of using existing point-of-sale (POS) hardware, as currently used in the UK, to initiate digital pound payments. | Webpage

EVENTS

• Global Financial Markets Perspectives Series: AI Series: Contracting for AI (online, 13 June 2024): What makes procuring AI different from procurement of other software or services? How does this affect your contract terms and supplier onboarding and management processes? When there is limited scope for negotiation, where should you focus your efforts? In this session we will discuss strategy and practical tips for contracting for AI. | To register, please see the event series registration form