Simont Braun strengthens Financial Services and FinTech capabilities with top hires

Simont Braun boosts the capabilities of its Fintech and Financial Services practices by welcoming Partner Joan Carette and Senior Associate Jean-Christophe Vercauteren. These strong additions to the firm enhance our Digital Finance Team’s position on top of the Belgian market.

The highly respected Joan Carette joins our Fintech and Financial Services team as a partner next to Catherine Houssa and Philippe De Prez, where she will reinforce our regulation and FinTech skills and allow to improve our focus on the Tech aspect of our expertise.

Joan Carette has 20 years of experience in FinTech, payments, e-money, AML and more generally banking and financial services and the prudential supervision of financial institutions. She worked as a regulator in the prudential supervision department of the FSMA, and in Belgian and international law firms for over 15 years.

Clients admire her “very flexible, pragmatic approach,” as well as her “deep knowledge of financial regulation.” (Chambers & Partners)

FinTech, Payments and Financial Services play key roles in our economy and require to combine strong legal knowledge with tech-savviness and proactivity. In this context, I am delighted to join the strongest Digital Finance Team on the Belgian legal market. Together, we will be able to offer the best possible guidance to our clients,” says Joan Carette.

Jean-Christophe Vercauteren has solid regulatory expertise in FinTech, payment services and e-money, AML and more generally banking and financial services. He gathered experience as a lawyer in Belgian and international business law firms, and as a legal counsel in a Belgian bank.

I could not think of a more stimulating environment than Simont Braun’s Digital Finance Team to further develop my expertise. Being part of the pioneer FinTech law firm in Belgium will be a daily motivation, and I am happy to contribute to broadening its capabilities,” says Jean-Christophe.

We are proud to welcome top talents like Joan and Jean-Christophe in the team. With them on board, our Digital Finance Team strengthens both its financial services and tech capabilities,” adds Philippe De Prez, partner in FinTech and Financial Services.

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Simont Braun’s pioneer Digital Finance Team is one of the best and most-qualified teams in Belgium. “The firm has proven itself as one of the very leading players in the market, having advised on groundbreaking projects involving areas such as alternative lending, micro-savings, robo-advisory, blockchain, ICOs and virtual currencies.” Simont Braun is the only law firm ranked in Band 1 in Belgium in FinTech by Chambers & Partners. The firm is also ranked Tier 1 in FinTech by the Legal 500, and Tier 1 in Financial Services Regulatory by IFLR 1000.

Simont Braun assists AION in building the new next generation Challenger Bank

Brussels, 10 March 2020  |  Simont Braun successfully assisted AION in building an entirely digital and mobile bank, making it the first of its kind next generation Challenger Bank in Belgium. AION has officially launched its services on 3 March 2020.

AION is the former Banca Monte Pasci Belgio and was purchased by the American fund Warburg Pincus in 2018 in order to transform it into a fully digital financial services provider. AION offers an unrivalled broad spectrum of financial products and services, and beyond banking services, benefitting from an impressive technology and IT support.

Simont Braun’s team has been involved for over a year in developing the new digital products and services in close and successful collaboration with AION’s team,” comments Philippe De Prez, Partner at Simont Braun in Digital Finance and Financial services. “We had the pleasure to collaborate with a very motivated and talented group of people at AION, all working towards an ambitious goal. It has been an intense ride during which we often explored innovative solutions which were so far not available on the Belgian market. This is a space where our team is at its very best. We would like to sincerely thank our clients for this great opportunity to both assist and learn.”

Simont Braun’s Digital Finance Team advised AION on the compliance of their services and products with the applicable regulation, was involved in numerous contract drafting, screen-by-screen compliance analysis and negotiations with the regulator.

The Simont Braun team was led by partner Philippe De Prez, with the assistance of partners Catherine Houssa and Axel Maeterlinck, counsel Thomas Derval, and associates Sander Van Loock, Charlotte De Thaye, Amine Chafik and David-Alexandre Sauvage.

For any question, please contact Nelly Chammas (Marketing & Communication Manager).

Insurance – National Bank of Belgium published the Multilateral Memorandum of Understanding on supervisory cooperation and exchange of information

Recognising the need and the benefit of mutual assistance in ongoing supervision and on-site inspections and in the exchange of information concerning (re)insurance undertakings with cross-border establishments in the UK and the EEA, the UK authorities and EEA authorities responsible for the supervision of the insurance industry have agreed on the establishment of cooperation agreements between the UK authorities and each single EEA authority, subject to the Multilateral Memorandum of Understanding (MMoU).

The MMoU, being a statement of intent and hence not legally binding on the signatory UK authorities and EEA authorities, serves to establish a formal basis for co-operation between the UK authorities, on the one hand, and each single EEA authority, on the other hand. The MMoU is therefore not intended to create commitments for the UK Authorities in relation to each other, nor for the EEA Authorities in relation to each other. The supervisory cooperation includes the exchange of supervisory information (where permitted or not prevented under applicable law) and supervisory assistance in order to ensure adequate levels of policyholder protection and to promote the prudential soundness of the insurance industry and the financial stability in their respective countries.

Although it does not create directly or indirectly any legally enforceable rights or obligations for the signatory authorities or third parties, this MMoU shows the intent to safeguard prudential supervision of (re)insurance undertakings with cross-border establishments in the UK and the EEA after the finalisation of the Brexit. This ensures that the prudential supervision of those undertakings does not merely fall back on the regime for supervision regarding (re)insurance undertakings established in or with cross-border establishments in third countries as is provided by the Law of 13 March 2016 on the status and supervision of insurance or reinsurance undertakings. Also, this memorandum and the cooperation agreements that will normally follow may have an impact with regard to supervisory activities on outsourcing arrangements between such (re)insurance companies and undertakings in third countries.

The MMoU enters into force on the date the European Treaties and EU secondary legislation have ceased to apply in the UK. To view or read the MMoU in full, please click here.

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For any question, please contact Thomas Derval or Charlotte De Thaye

 

Our Digital Finance Team interviewed on the latest FinTech Trends

Catherine Houssa, Partner in our Digital Finance Team, was interviewed on the latest FinTech trends by La Libre Belgique in a special edition dedicated to the take-off of tech in Brussels.

An opportunity to also highlight the advantages of Brussels as a set-up point for FinTechs willing to reach all of Europe.

The full article is available here.

Our Digital Finance Team has authored the Belgian chapter of Chambers’ FinTech Global Guide 2019

Our Digital Finance Team has authored the Belgian chapter of the FinTech Global Guide 2019 released by Chambers & Partners, providing practical insight on key FinTech topics, such as Payments, Open Banking, Robo-advisory and InsurTech. The guide is available here: http://bit.ly/2UfuBxy

 

Our Digital Finance Team hosted the Vlerick FinTech Bootcamp

Yesterday, Simont Braun’s Digital Finance Team hosted the Vlerick FinTech Bootcamp. Philippe De Prez highlighted the impact of regulation on FinTech ventures and the students had the chance to hear 8 FinTechs pitching: Ibanity, DigiTribe, Accountable, POM, Itsme Belgian Mobile ID, 0smosis and GAMBIT.

Thank you to Bjorn Cumps from Vlerick Business School and FinTech Belgium for their trust.

2019, the year of truth for open banking (RTS – SCA)

Introduction

In the world of Payments and FinTech, PSD2 has been a hot topic for several years now. Last year was already a crucial year with the transposition deadline of this directive scheduled for 13 January 2018. This transposition gave rise to significant (and by now very well-known) changes such as the introduction of regulation on Account Information Services Providers (AISPs) and Payment Initiation Services Provers (PISPs), commonly referred to as Third Party Payment Service Providers (TPPs)[1].

The most important promise of PSD2, i.e. the instalment of an actual ‘open banking’ payment culture in Europe, was, however, not yet realised by this 2018 implementation.

By ‘open banking’ is meant the (forced) sharing of payment account data by so-called account servicing payment service providers (ASPSPs) with other service providers such as TPPs. These ASPSPs are very often banks[2] who will be obliged -without any contractual relationship- to open up their account data, for (usually) FinTech companies to build services around them.

This open banking principle will only go live with the entry into force of the Regulated Technical Standards 2018/389 of 27 November 2017 on Strong Customer Authentication (RTS SCA), scheduled for 14 September 2019.

Prepare for Open Banking

Prior to the entry into force of the RTS SCA, all ASPSPs (basically the banks) need to develop and implement technical solutions that will allow this open banking to take place in a secure and controlled manner. According to the RTS SCA, this should be done by putting in place a so-called ‘dedicated interface’ (which is, in practice, an Application Programming Interface or ‘API’), although also a fall back solution (or ‘contingency mechanism’) must be foreseen, whereby the TPPs can access the data through the interface used for the authentication of and the communication with the ASPSP’s payment service users. In other words: in case the API provided by a bank does not work properly, the TPPs could still access the data through the web-banking service this bank uses itself with its customers. This last technique is often referred to as ‘screen-scraping’ which is rather controversial since many banks claim this screen-scraping to pose significant security risks, as it implies that their clients need to share their security credentials (login and password) with third parties (TPPs).

The screen-scraping contingency mechanism, as proposed in the RTS, does, however, impose that measures are in place so that banks know at all times who is accessing the data (i.e. either their own customer or a TPP on behalf of this customer). This is opposed to the classic/contested way of screen-scraping where banks were under the impression that a client was logging in to their web-banking service, while in reality a TPP was accessing the data with the client’s consent (and passwords).

14 March 2019 – Intermediary deadline

Banks that want to avoid this screen-scraping technique, even only as a fall back solution, are however given a way out by the RTS SCA. But they will need to hurry.

According to article 33(6) of the RTS SCA, ASPSPs such as banks can be exempted from having to provide a contingency mechanism (screen scraping solution) under the condition that their dedicated interface solution (API) is available for testing by TPPs no later than 6 months before the entry into force of the RTS SCA, this means that banks should have their API ready for testing by 14 March 2019.

Industry experts believe this 14 March deadline to be too short for most banks to have a performing API in place since this implies also the provision of testing facilities and technical documents for the TPPs and the supervisors. As a result, those institutions will also have to deliver a screen-scraping based fall back solution (with identification function) by September 2019, which risks to slow them down even more in their API development.

The RTS aren’t technical enough…

Regulatory Technical Standards (RTS) are level 2 legislative measures as opposed to the PSD2 itself which is a level 1 legislative act in accordance with the Lamfalussy regulatory process for financial services[3].  Level 1 legislation such as the PSD2 is supposed only to set out general framework principles that need further technical implementation (through the level 2 RTS).

Part of the problem here is that the RTS SCA only cover so-called legal-technical aspects and do not impose any operational-technical standards. Chapter V on common and secure open standards of communication of the RTS SCA provides general requirements for communication and set out theoretical requirements for the common and secure open standards of communication. In practice, however, all of this is still very high level from a pure operational-technical point of view.

The RTS only impose certain requirements and finalities on the dedicated interface and the contingency matters without indicating how these results should be obtained. Although it is logic for a legislator not to impose industry standards, this could in practice, without further guidance, lead to as many different interfaces and systems as there are banks in Europe. Certain organisations such as ‘Open Banking’ in the UK and the ‘Berlin Group’ on the continent are trying to work out some sort of harmonisation throughout the sector, but do not involve all market participants which certainly poses a threat in terms of competition. There is also a concern that individual member states / supervisors will handle things differently and be either more or either less pragmatic in assessing whether certain requirements are met. Such an approach is potentially harmful since financial services are very often offered on a cross-border basis and industry players will want to avoid local adaptations to their systems.

Many questions remain unsolved

Next to this, many other questions remain unsolved. What will happen with those banks that do not have an API (and potentially also no fall back solution) in place by 14 September 2019? They will for sure be in breach of the law, but how will supervisors handle this concretely?

What about the large numbers of very small (often private) banks throughout Europe that are also subject to these rules and are facing high investment and development costs to put technical solutions in place, that are similar to those of large retail banks? We see that in this respect, the market has started developing a tendency towards the pooling of smaller players, but a lot remains unclear.

As generally known, the PSD2 rules (and thus also the open banking principle) only concern payment accounts. The Luxembourg based CJEU recently ruled that saving accounts do not qualify as payment accounts and therefore data related to such accounts does not fall under the open banking rules[4]. Banks and TPPs could still contractually decide to open this up to other data (for example on saving and security accounts). However, this could lead to situations where certain data shared through the same API falls under the PSD2 liability scheme (i.e. payment account data), while other data is not covered by this protection (i.e. data on saving and security accounts).

Conclusion

An interesting year lies ahead of us, but it is clear that all market participants (banks, TPPs but also supervisors) struggle with the implementation of the open banking principles. Nowadays, financial institutions are all focussing on the near future Brexit obstacle, but will soon be forced to shift, or at least divide their attention in order to tackle this highly topical issue.

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For more information, please contact Simont Braun’s Digital Finance Team (digitalfinance@simontbraun.eu).

 

[1] Please click here the for more information on these acronyms.

[2] Please also note that FinTech companies such as payment and e-money institutions can be subject to this.

[3] This process is entailed to provide more convergence in the national implementations and should lead to more consistent interpretation. It has been applied for major financial regulations such as MiFID, the Prospectus Regulation, Market Abuse Directive etc.

[4] Bundeskammer für Arbeiter und Angestellte v ING-DiBa Direktbank Austria Niederlassung der ING-DiBa AG (Case C 191/17) (4 October 2018)

Durable medium: Conceptual and legal harmonisation

Since the late 1990s, the Belgian legislator has been referring to the notion of ‘durable medium’ in order to indicate a bearer of information. The concept of ‘durable medium’ originally stems from European consumer law[1]. However, various definitions as well as different use cases, often in combination with a link to paper,  could be found spread across a variety of Belgian laws.

The Law of 20 September 2018[2], harmonising the concept of durable medium, should end this double shortage of legal coherence, with regard to the definition of a durable medium on the one hand and regarding its coexistence with paper on the other.

Harmonisation of the concept ‘durable medium’

The conceptual ambiguity caused by the diversity of definitions across a wide range of regulations[3] gave rise to questions on what might be considered as a durable medium, as well as to questions with regard to regulatory disclosure, the use of innovative media such as videos for that purpose and the validity of electronically concluded – paperless – contracts.

This should be solved now through the Belgian legislator’s general adoption of the European definition of a durable medium and the implementation thereof in article I.1, 15° of the Code of Economic Law (CEL), being:

“any instrument which enables a natural or legal person to store information addressed personally to the natural or legal person in a way accessible for future reference for a period of time adequate to the purposes of the information and which allows the unchanged reproduction of the information stored”[4].

The legislator adds that, in so far as these functionalities are preserved, paper or, in a digital environment, an e-mail received by the addressee or an electronic document stored on a storage device or added to an e-mail received by the addressee can be considered as a durable medium.

The general definition shall apply to any notion of durable medium in any Belgian legal or statutory provision. As a consequence, a durable medium referred to in, for instance, the Civil Code also needs to be understood in accordance with the definition laid down in the CEL.

Erasure of explicit references to paper

Before the aforementioned Law of 20 September entered into force, apart from the presence of multiple definitions, the various references to durable medium in relation to paper also caused a lack of clarity.

The legislation mentioned the obligation to provide certain documents differently, namely ‘in writing, or in another durable medium’, ‘on paper, or in another durable medium’, or simply ‘on a durable medium’. Following this recent law, these wordings have now all been modified (hence harmonised) to ‘by means of a durable medium’.

This modification was adopted throughout the Belgian CEL, the Civil Code, the Company Code, the Code governing miscellaneous duties, levies and taxes and the Social Criminal Code (as well as other laws and Royal Decrees) and will hence affect the conclusion of contracts across different sectors.

It should be noted that a durable medium and paper should both perform the same three functions, which are the following:

  1. To ensure the continued existence of the information so that it remains accessible in the future;
  2. To ensure the protection of the integrity of the information so that an identical reproduction of the information is possible and changes are prevented as much as possible;
  3. To ensure readability of the information so that the information can be read and referred to.

Paper and durable medium are therefore generic terms, forming two functionally equivalent solutions, both usable for different methods deployed in a traditional environment (on paper) or in a digital context (on ‘another’ durable medium, e.g. an e-mail).

The harmonisation of the use of the concept of durable medium led to the removal of explicit references to paper as well as to ‘another’ durable medium, which is consistent with the fact that paper is considered a durable medium and further explicit distinction appears unnecessary.

Adaptation to modern times?

The erasure of the explicit reference to written, paper documents could be seen as an attempt of the Belgian legislator to (further) enter into the digital era. Contracts are more and more concluded electronically, without information or other documents being provided in paper form. By removing any such a reference to documents on paper or in writing, there should no longer be any doubt about the possibility to use another medium as long as they respect all necessary functionalities inherent to a durable medium.

Exceptions: circumstances in which paper has the upper hand

Unfortunately, the harmonisation has not been implemented in the same way throughout all Belgian laws. In the 2014 Insurance Act for instance, the legislator maintains a reference to the provision of information ‘in paper or in another durable medium’. For the purpose concerned therein, it is, however, only permitted to provide information on a durable medium in those cases in which the consumer has ‘specifically chosen for the other medium’. Nonetheless, in practice, this specific ‘choice’ will not be a problem when the contract is concluded in an online environment.

Furthermore, a written contract will continue to be required in those cases where a judge ascertains practical barriers to meet a legal or statutory formal requirement in the context of the conclusion of an electronic contract (art. XII.16 BCEL).

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For more information, please contact Simont Braun’s Digital Finance Team (digitalfinance@simontbraun.eu).

 

[1] Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees

[2] Law of 20 September 2018 on the harmonisation of the concepts of electronic signature and durable medium and on the withdrawal of restrictions with regard to the conclusion of electronic contracts.

[3] Different definitions could be found in the Civil Code, in various books of the Code of Economic Law and in several other laws such as those on financial securities or on pensions and social security.

[4] In our Newsletter of February 2017 we referred to the decisions of the European Court of Justice in Content Services (ECJ 5 July 2012, C-49/11, Content Services Ltd v Bundesarbeitskammer) and BAWAG (ECJ 5 January 2017, C-375/15, BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG v Verein für Konsumenteninformation), setting out the conditions to meet this definition and with regard to the qualification as durable medium of emails and hyperlinks.