The Commission has set up a working group with EU authorities and industry to address the issues involved and to facilitate the transfer of derivatives contracts denominated in euro or other EU currencies to EU CCPs. From a supervisory perspective, UK CCPs have been recognised as third-country CCPs by the European Securities and Markets Authority (ESMA).3 And two UK CCPs have been recognised as being systemically important for the EU (Tier 2 CCPs). In line with the provisions of the European Market Infrastructure Regulation, this means that they are subject to ESMA’s supervision. This set-up helps to ensure that Tier 2 CCPs comply with EU regulatory standards. During this 18-month period of equivalence, ESMA will assess whether this set-up is sufficient to address risks to EU financial stability emanating from these two systemically important UK CCPs. As part of its responsibility for issuing the euro, the Eurosystem – which comprises the ECB and national central banks of the euro area – will develop its own stance on the matter and will contribute to ESMA’s assessment. At the end of this process, ESMA may recommend that the Commission deny the UK CCPs recognition to provide certain clearing services or activities in the EU if they pose excessive risks to financial stability. If this recommendation were to affect eurodenominated clearing services, the Eurosystem’s agreement would also be required.
20.Let me be clear that this is not technology at any cost. We must fully understand the pros and cons of what these changes will mean to banks’ AML systems and controls. At the same time we cannot outsource this responsibility to technology firms. Some of you will know from our work with a Regtech firm specialising in testing screening systems that we expect banks to understand why a machine makes the recommendations it does. 21.Going forward, if we are going to address the challenges, we need to be ambitious. The HKMA plans to move in the coming months from a one-to-one type engagement in our Chatroom, to a many-to-many type engagement where banks, stored value facility (SVF) operators, technology specialists and the regulator come together to tackle AML pain points. This will initially target one or two challenges, but will aim to build momentum and turn the successes into mainstream AML solutions that contribute to effectiveness and efficiency. 22.But that perhaps is still not enough. New technology comes at the right time not only for the regulatees, but also for regulators. With the advice from technology experts, we will embark upon a study to enhance the timely retrieval and transmission of AML/CFT related information and data from banks and SVF operators in a digitalised and efficient way, as opposed to the old-fashioned way of regulatory returns and surveys.