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New US company ownership database under attack – Industry roundup: 18 January

Criticism grows of new US company ownership database

A landmark company ownership registry aimed at combatting dirty money flows in the United States has been met with political attacks, the spread of misinformation, amid ongoing tensions around the transparency tool, reports the International Consortium of Investigative Journalists (ICIJ).

The new database was officially launched by the United States Treasury Department on 1st January, as part of the government’s response to years of reporting by ICIJ and others that exposed the ease with which criminals can move illicit cash through the US economy.

The Beneficial Ownership Information (BOI) Report registry is compiled by the Financial Crimes Enforcement Network, aka FinCEN, the Treasury office tasked with implementing the new system. FinCEN is tasked with collecting the names of companies’ owners to unmask anonymous shell companies commonly used by criminals to hide dirty money and nefarious business activities. The information will only be disclosed to law enforcement agents, bank compliance officers and relevant regulators.

Within days of its 1 January launch, Treasury Secretary Janet Yellen announced that 100,000 US companies had already submitted their ownership information to the database. “We’re closing a loophole and sending a clear message: The United States is not a haven for dirty money,” said Yellen.

But ICIJ reports that the database’s apparently successful launch spurred a new round of criticisms and challenges from business groups and their allies on Capitol Hill, which some advocates fear could spread misconceptions about the new law. Last week, a Republican-led committee in the US House of Representatives attacked the new database for presenting small businesses with a “mountain of red tape,” and claimed that noncompliance could result in jail sentences for small business owners.

“Every single small business in America will be forced to comply with these new, onerous, and overly complex regulations,” asserted a statement released by the House Committee on Financial Services.

Reports suggest that many US business owners remain unaware of the law. In a recent survey of its members, the National Federation of Independent Business found that 90% of respondents did not know of the law.

“A lot of people have no idea this is even a thing,” said Marissa Mehler, an account manager at CorpNet, a California-based firm that helps set up and administer businesses. A new task of Mehler’s as of this month is helping clients submit ownership information to FinCEN’s new database. Mehler said that, after some back-and-forth with a business to obtain information needed for the ownership form and necessary copies of identification cards, it takes roughly 20 minutes to complete the new FinCEN form.

However, this will be a one-time process for many business owners, says Erica Hanichak, government affairs director for the FACT Coalition, a Washington, DC-based nonprofit that advocates for financial accountability. “Take a small pizza shop,” Hanichak said. “As long as they don’t switch ownership, they won’t have to file again for 30 years or maybe never.”


UK government unveils plan to protect supply chains

Britain will establish a body to identify risks to critical imports, the UK government announced as it outlined a strategy to make supply chains more resilient against global shocks.

Renewed conflict in the Middle East, including the targeting of international shipping lanes by Yemen's Iran-backed Houthi group, has threatened trade, and comes after war in Ukraine and the Ccvid-19 pandemic also challenged global supply chains.

The UK has sought to work closely with allies including the US on securing supplies of critical minerals such as lithium, nickel, cobalt, graphite and manganese, which are used in electric cars, smartphones and solar panels.

The government said the 'Critical Imports and Supply Chains Strategy' would help secure supplies of critical minerals, semiconductors and medicines by providing a portal to let businesses report disruption quickly.

"With this strategy we're equipping business so they no longer have to rely on unpredictable partners for supplies of the goods that keep our country going," junior business minister Nusrat Ghani said in a statement.

The business ministry said it would establish a Critical Imports Council for government and business to work together to mitigate risks and plan supply chain resilience.

It added it would work to attract international investment to domestic projects, such as plans by British Lithium in partnership with France's Imerys IMTP.PA to mine Lithium in Cornwall, southwest England.

The government also said that supply chain considerations would be taken into account in negotiating future free trade deals with other countries.

ECB on track but job not done, says Lagarde

The European Central Bank (ECB) is on track to get inflation back to its 2% target, but victory has not yet been won, said ECB President Christine Lagarde who is attending the World Economic Forum (WEF) summit in Davos, Switzerland.

She cautioned against premature optimism in markets, which could hinder the ECB's inflation control efforts. “Too optimistic markets don't help the ECB’s inflation fight,” she said.

Lagarde said it would be in the "“late spring” when the ECB gets data from this year's collective wage agreements, which could then give it a good idea of the direction in which household incomes and therefore inflation is going.

She declined to push back on market bets for six rate cuts this year but said that if investors are mispricing its future moves, that could be counterproductive to the fight against inflation.

Lagarde was questioned about the possibility of garnering majority support within the ECB for upcoming rate cuts, amid signs that other policymakers are supportive of such a move.

While acknowledging the possibility that the ECB's interest rates have peaked, Lagarde emphasised the bank's reliance on economic data, noting ongoing uncertainties and still unanchored indicators.

Her comments came as Eurostat data showed a rise in the annual inflation rate in the Euro Area to 2.9% in December, up from the 2.4% recorded in November, the lowest in more than two years. This increase, primarily influenced by energy prices, marked the first inflation climb since April. The breakdown of inflation contributors included services (1.74 percentage points), food, alcohol, and tobacco (1.21 points), non-energy industrial goods (0.66 points), and energy (-0.68 points).


JPMorgan says hacker attempts are on the rise

Hackers are getting smarter and increasingly directing their attacks on JPMorgan Chase, according to Mary Callahan Erdoes, the bank’s asset and wealth management chief.

In a panel session at the World Economic Forum (WEF) conference in Davos, Switzerland, the executive said the observed activity collected from internal monitoring has ramped up significantly in the past year.

Erdoes said that the bank spends US$15 billion on technology and employs 62,000 technologists as part of the effort to keep its systems safe from hackers.

“The fraudsters get smarter, savvier, quicker, more devious, more mischievous,” she said. “It’s so hard and it’s going to become increasingly harder and that's why staying one step ahead of it is really the job of each and every one of us.”

The activity is not always targeted and is sometimes automated, a JPMorgan spokesperson confirmed. A 2023 KPMG survey of bank executives found that more than two-in three respondents considered cybercrime a top concern moving forward.

A survey of bankers last June by American Banker found than nine in 10 cited cybercrime as their biggest concern, ahead of legacy technology and talent shortage issues.


Commerzbank merger speculation revives

Five years after Deutsche Bank and Commerzbank ended talks on a possible merger, reports suggest that an uncertain outlook for bank profitability and Germany’s need to plug a hole in its budget have rekindled speculation about a potential deal.

The German government has said it is examining all options to raise funds by selling stakes in some of the 100 or more companies it owns.

While a sale of its remaining 15% holding in Commerzbank is apparently not imminent, Finance Minister Christian Lindner is open to a disposal and ultimately would prefer the government exiting the stake, according to an insider.

A merger with Commerzbank would allow Deutsche Bank to further diversify away from volatile investment banking earnings, bolstering its longer-term stability, another factor that could sway the German government, said the anonymous individual person.

Deutsche Bank, which has completed the bulk of a multi-year restructuring plan, has recently stepped up internal discussions on deals, including possible purchases of banks such as Commerzbank and ABN Amro, according to recent reports.

Deutsche Bank in recent months has come closer to reopening the idea of a merger with Commerzbank, even if there are no live discussions, another informed source told Reuters.

Germany's stake in Commerzbank dates back to the global financial crisis of 2008 and is still loss-making for the government.

In an emailed statement on Monday, a German finance ministry spokesperson said no decision had been made on the government exiting its Commerzbank stake, and if it did the proceeds from such a sale would not flow into the federal budget.


UniCredit raises Bulgaria’s 2024 growth forecast to 3%

Italy's UniCredit said it has raised its projection for Bulgaria’s economic growth in 2024 to 3% from 2.8% forecast in September to reflect the Balkan country’s improved absorption of European Union (EU) funds and a tight labour market.

EU fund absorption is expected to stimulate investment, while the labour market will help strong wage growth drive private consumption, UniCredit said in the latest edition of its CEE Quarterly report.

In 2025, Bulgaria's gross domestic product (GDP) is seen to grow by 3.3%, fuelled by a rebound in private capital expenditure and exports amid higher foreign demand, the lender said.

Private consumption will be a key driver of GDP, supported by disinflation, rising incomes and increased public transfers, including a 20% minimum wage hike and a 12% increase in average pensions. Real consumption growth, however, is expected to lose momentum this year.

Average consumer price inflation in 2024 is forecast at 4.3% against 4% projected in September, but then seen to decelerate to 3% in 2025. At the same time, the budget deficit will rise by 0.7 percentage points to 2.9% of GDP this year and further to 3% in 2025, UniCredit said. Higher sovereign funding needs in 2024 will be met through increased external borrowing and additional spending from fiscal reserves.

“Euro adoption remains a key priority that will shape policymaking in the forecast period. To this end, the government aims to achieve a budget deficit below the 3% of GDP mark and to concentrate on the reforms needed to unlock the significant volume of EU funding that Bulgaria is entitled to receive in the next several years,” UniCredit noted.


Saxo Bank integrates FairXchange liquidity management solution

Denmark’s Saxo Bank has integrated FairXchange’s liquidity management data analytics platform, Horizon, in a bid to maximise opportunities for the bank, its liquidity providers, and their clients.

The Danish investment bank said that officially joining FairXchange’s ecosystem will its bolster global online trading and execution services, as it aims to further optimise its operations in the dynamic foreign exchange (FX) markets. Saxo reports that there has already been an uplift in engagement from its liquidity partners leading to better results.

James Dewdney-Herbert, associate director – eFX sales and liquidity strategy commented that “relevant insights in real-time are profoundly helpful for an eFX brokerage”.

“Additional to the LP key performance indicators (KPIs) and yield curves we use today we are also interested in FairXchange’s monitoring capabilities, namely being alerted to changes in spreads, skews and client trading behaviours.”

He added that through working with a credible, third-party application the bank is able to mitigate conflicts of interest whilst replacing subjective perceptions with quality data. 

Guy Hopkins, chief executive and founder of FairXchange, said: “Liquidity management has really been around as long as trading, and certainly as long as trading has been electronic. In recent years however, it has seen a huge increase in sophistication and usage, particularly as margins continue to face pressure while technology becomes ever more efficient.

“A process that used to be undertaken quarterly or monthly now needs to happen daily or even in real-time, as liquidity dynamics change. Rapid access to actionable data is essential, and the audience for it has also grown significantly. Everyone who works in a business that relies on liquidity – be they in trading or sales – now relies on data-driven decision making as a key component of their working life.” 


Volopa joins forces with Yapily for open banking innovation

UK payments fintech Volopa has entered into a strategic partnership with Yapily, a provider of open banking application programming interface (API) solutions and aims “to redefine the payment experience for finance teams.”

In a statement, the company added: “The essence of this partnership lies in harnessing the capabilities of Open Banking. It is designed to seamlessly connect clients directly to their bank accounts for transfer authorisation. This integration is a game changer for CFOs, FDs, and Treasurers, as it allows for easy loading of company wallets and funding of international payments without the need to leave the Volopa platform. Additionally, this partnership brings in a feature to alert clients when their balances fall below a preferred threshold, coupled with a quick top-up function.

Initially rolling out in the UK, the Volopa-Yapily partnership is set to expand across key European markets, aiming to simplify and speed up payment processes for SMEs at a larger scale.


Cross-border payments fintech Neo moves into profit

Spain’s cross-border payments and FX fintech Neo announced that the firm is now profitable as an increasing number of SMEs explore alternatives to banks for managing their international business needs.

The Barcelona-based fintech which provides a one-stop-shop multi-currency account for corporate treasurers recorded an annual revenue in excess of €5 million (US$5.5 million) and an annual profit of €1 million. It also saw cleared volume double in just under a year, reaching over €7 billion in 2023 alone, reflecting growing demand from businesses for alternatives to traditional banks.

“Research shows that when working with traditional banks, SMEs with international operations suffer from unfair pricing, slow execution and difficulties in reporting transactions,” said the firm “As a result, 92% of SMEs are having conversations about virtual account solutions such as digital wallets to help solve these problems.

There has also been an increased bank diversification drive since the banking crisis which highlighted the risks of relying on one or two banking partners. This has prompted company treasurers to diversify their banking pools and look to fintech providers as an alternative. These factors have helped Neo acquire new clients and receive an increasing number of enquiries from corporates that are doing more business abroad and are looking to move away from their traditional banking providers.”


Deutsche Bank, Société Générale join FIA Tech ownership consortium

FIA Tech, the US futures industry technology provider, today announced that Deutsche Bank and Société Générale have joined its ownership consortium and recent funding round, bringing the total funds raised to $84.2m. Both will also join FIA Tech’s board of directors.

Washington, DC-based FIA Tech said that with the addition of these two institutions, its ownership consortium will comprise 11 global clearing firms as well as the Futures Industry Association (FIA). Investors now include Bank of America, Barclays, BNP Paribas, Citi, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley, Société Générale, UBS and Wells Fargo. This investment adds US$14.8 million to the US$25.4 million raised in April 2023 for the strategic growth of the Trade Data Network (TDN).

Gordon Alexander, Global Head of Workflow Solutions, Listed Derivatives and Clearing at Deutsche Bank said, “We see value in the industry coming together to realise best in class solutions for the Exchange Traded Derivatives market. Joining FIA Tech is an opportunity for Deutsche Bank to demonstrate its commitment as a leading global clearing Bank, contribute to developing the ETD market offering to meet client needs, and collaborate effectively with our peers to enhance transparency and efficiency across the industry.”

Scott Andersen, Americas Head of Listed Derivatives and OTC Clearing at Société Générale said: “FIA Tech has a history of developing innovative tools to address challenges facing our industry and becoming part of the consortium that owns FIA Tech will enable SG to further partner with them to deliver solutions to better support our customers.”

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