FinTech and Blockchain Law Watch – Page 41 – At the Crossroads of Law, Innovation and Commerce

Voice biometrics and fraud prevention in payments

May 05 2017

By Claire de Koeyer and Jim Bulling

The ability to transfer funds from one account to another in near real-time using just an email address or mobile number is getting closer for Australians with the RBA advising that developments are on track to allow the first payments to be made through a new payment platform towards the end of 2017. The new platform, the development of which was commenced by the RBA in 2012, allows for near real-time funds transfer between bank accounts, regardless of who people bank with.

K&L Gates hosts FinTech event in Perth

May 03 2017

By Adam Levine and Ben Kiernan-Green

On 19 April 2017 the K&L Gates Perth office hosted a Perth FinTech Meetup, chaired by ASIC Commissioner John Price. The event provided clients, lawyers and members of the FinTech and crowd-funding communities an opportunity to hear about ASIC’s involvement and commitment to the development of the ASIC Innovation Hub, ASIC’s regulatory sandbox and RegTech.

European Commission to set up a blockchain observatory

May 03 2017

By Giovanni Campi and Jonathan Lawrence

The European Commission recently announced that it is working on setting up an EU blockchain observatory. This will be a pilot project to build up technical expertise and regulatory capacity on topics related to blockchain and distributed ledger technology (DLT).

The EU blockchain observatory is being developed under the framework of the European Commission’s Task Force on FinTech, which was established following the adoption by the European Parliament of an own-initiative report on virtual currencies on 26 May 2016. Co-chaired by the European Commission’s Directorate Generals on Financial Services (DG FISMA) and on the Digital Single Market (DG CONNECT), the Task Force was set up in November 2016 to explore policy responses to FinTech. It is expected to deliver its final recommendations in the course of 2017.

U.S. Government Accountability Office Issues Long-Awaited Report on Fintech Industry

May 01 2017

By Judith Rinearson and Eric A. Love

The U.S. GAO has issued a long-awaited report on the fintech industry, which focuses on the regulation of marketplace lenders, mobile payments, digital wealth management platforms and distributed ledger technology (“DLT” – often referred to as blockchain). For each of these fintech industry “subsectors,” the GAO report details the nature of the subsector and how it operates, as well as its potential benefits and risks. Moreover, the GAO report addresses industry trends, regulation and oversight for each subsector.

Marketplace lenders. The GAO report indicates that marketplace lenders may provide expanded and quick access to credit at lower cost than banks, although the report also notes risks related to loan term transparency and certain protections for small business borrowers. Read More

CFPB Finalizes Extension of Prepaid Account Rule Effective Date

May 01 2017

By Judith Rinearson and Eric A. Love

On April 20, the CFPB issued a final rule to delay for six months the October 1, 2017 effective date of its comprehensive Final Rule amending Regulation E and Regulation Z as applied to prepaid accounts. The Final Rule will now become effective on April 1, 2018.

In announcing the delay, the CFPB indicated that it has decided to “revisit at least two substantive issues” in the Final Rule through a separate rulemaking process. Based on CFPB Director Richard Cordray’s recent testimony before the House Financial Services Committee, the two substantive issues most likely relate to: (1) the Final Rule’s applicability to “the linking of credit cards to digital wallets that are capable of storing funds,” and (2) error resolution for unregistered prepaid cards. The CFPB can be expected to issue a proposal on these issues “in the coming weeks.”

Notably, the CFPB’s action could help to address concerns raised by Congressional Republicans about the scope of the Final Rule and its potential impact on industry participants and consumers, thus complicating ongoing efforts in Congress to repeal the Final Rule using the Congressional Review Act (CRA). In order to repeal the Final Rule utilizing the CRA, Congress would be required to pass a repeal bill by May 9, 2017.

Is abolishing the 457 visa putting Australian jobs first now, but putting Australia’s tech future last?

Apr 23 2017

By Nyomi Gunasekera

As the dust clears after the Australian Government’s shock announcement to abolish the Temporary Work (Skilled) 457 visa scheme and replace it with a new Temporary Skill Shortage visa scheme – a move touted by Prime Minister Malcolm Turnbull to be “in the national interest to put Australians and Australian jobs first” – there has been much talk about what effect this might have across the industries which rely on overseas talent the most.

With Australia looking to position itself as a FinTech hub, the changes could impact our ability to attract top talent and may make it less viable for startups to base their operations here.

While the 457 scheme itself is set to be scrapped in March 2018, changes are already at play – most notably as of 19 April 2017, 216 occupations were removed from the eligible skilled occupations list for temporary skilled migration – many within the IT field including Web Developer, ICT Support and Test Engineers NEC (‘Not Elsewhere Classified’) and ICT Support Technicians NEC.

Pending applications in these categories will be rejected. However, existing 457 visa holders will not be impacted by the changes.

Most 457s are granted for jobs requiring advanced skill and extensive experience, set by a national standard. The Department of Immigration and Border Protection statistics show that a large chunk of the 457s granted since 2014 have been in the Information Media and Telecommunications sector, and predominately in skill level 1 positions.

The question remains – will Australia have the local talent to plug this gap, or will roadblocks in the tech industry’s ability to bring in foreign skill and expertise before more Australians are adequately trained in IT harm the industry and the future of tech jobs in Australia?

FCA outlines FinTech and RegTech priorities for year ahead

Apr 20 2017

By Jonathan Lawrence

The UK Financial Conduct Authority (FCA) recently issued its Business Plan 2017/18 that deals with its FinTech and RegTech priorities for the year ahead. The FCA wants to engage more with regional and Scottish FinTech hubs. In its risk outlook, the FCA talks about more complex value chains that utilise FinTech posing a risk to consumer protection and market integrity. The issues associated with the oversight and controls of increasingly complex chains of third party relationships are reflected in the FCA’s priorities. The technological resilience of incumbent firms will also continue to be an area of focus because of the risk of disruption to financial markets. The FCA states that FinTech firms may not fully understand the scope of regulation and its impact on their business model. This could lead to cases of non-compliance with FCA rules, which could pose risks to consumer protection and market integrity. In addition, the FCA fears that greater reliance on technology poses increased operational risk, and risks to market integrity. The FCA believes that FinTech business models shift risk from financial firms to consumers without consumers fully understanding the implications or having adequate safeguards.

Blockchain Has a Perception Problem

Apr 20 2017

By Tyler Kirk

The International Monetary Fund (“IMF”) just wrapped up a panel on “FinTech and the Transformation of Financial Services” here in Washington, DC. Presenting 4 propositions, the IMF invited the panelists and the audience to vote on whether they agreed or disagreed with each. Following the panel’s discussion on each proposition, the votes were compared. To the exclusion of all other Fintech topics, there was an almost singular focus on blockchain in each panelist’s response to the propositions. This focus by itself is illuminating, however the audience and the panel diverged dramatically on one proposition, whether FinTech will help rather than hinder regulation of AML and combatting the financing of terrorism (“CFT”). The panel agreed, 92% to 8%, that FinTech would assist with AML and CFT efforts. The audience was essentially split, agreeing 57% to 43%. Similarly, 40% of the audience believed FinTech posed a threat to financial stability while only 17% of the experts shared that view. The takeaway here is that, while those of us who are intimately familiar with this technology clearly understand its benefits, the general electorate does not. So, does Congress? Financial regulators? Now is the time to engage counsel and shape public policy.

NetSpend Settles FTC Claim Regarding Prepaid Debit Cards

Apr 20 2017

By Julia B. Jacobson and Eric A. Love

NetSpend Corporation has reached a settlement with the U.S. FTC about the FTC’s claims that NetSpend’s advertisements deceived consumers about the availability of funds deposited on general purpose reloadable prepaid cards (GPR Cards).

On its website, NetSpend indicates that its target customers are those without a traditional bank account or who “rely on alternative financial services.” According to the FTC’s November 2016 complaint, NetSpend’s advertising promises “guaranteed approval” and “immediate access” to funds that are “always available.” Instead, the complaint alleges, cardholders experienced delayed or denied access to funds on their GPR Cards and NetSpend depleted account balances by charging inactivity fees and often delayed resolving and providing provisional credit for account errors. The FTC also noted in its complaint that thousands of customers “complained about NetSpend’s practices to government authorities, Better Business Bureau and NetSpend itself.”

RegTech Association launches in Australia

Apr 13 2017

By Claire de Koeyer and Jim Bulling

Launching in March 2017 the RegTech Association is focused on “promoting the achievements, partnerships, collaborations, incubations and seeding of RegTech in Australia” through advocating, educating and supporting businesses in the sector. This is likely to involve facilitating engagement with industry stakeholders, advancing the use of technology and improving regulatory compliance outcomes.