Key Learnings from the 2020 Tax & Regulatory Global Forum
Key Learnings from the 2020 Tax & Regulatory Global Forum
January 2021
By Mariano Giralt
The recent BNY Mellon Tax and Regulatory Global Forum provided insights on key industry initiatives, including the geopolitical environment and the continued drive toward digitization. Across three days of virtual sessions, two areas of focus were prevalent. Here’s what you need to know.
Tax and Regulatory Areas of Focus for 2021
- Continued tax and regulation change. As the pace of change accelerates, BNY Mellon helps clients understand the impact of new regulations, working closely with governments and regulators to help shape the future of tax and regulatory.
- In the EU, there is ongoing review of existing legislation, including Central Securities Depositories Regulation (CSDR), AIFMD and UCITS V, and MiFID II. In many cases, these reviews are being undertaken to create greater harmonization and alignment between frameworks. The introduction of many new regulatory initiatives, such as the Capital Markets Union Action Plan and the Sustainable Finance Action Plan, has the potential to provide further regulatory complexity over the coming 12 to 18 months.
- While Brexit has already happened on paper, the two parties are still locked in negotiations about what the future EU-U.K. relationship will look like. A memorandum of understanding concerning the delegation of fund management activities confirmed that it would continue beyond December 31. While the economic breakdown from a no-deal Brexit would impact financial services indirectly, we don’t see anything that would directly affect our clients.
- The momentum of ESG and sustainable finance continues to increase, driven by client demand. As a result, regulatory activity has increased. Policymakers are looking at how these factors integrate into the investment and distribution process and how sustainable finance is defined. New regulations, such as the EU International Platform on Sustainable Finance, are being proposed to move toward more international standards of understanding and definition on sustainable finance. More alignment will likely make it easier for investors to understand, compare and access various investment opportunities that play to their individual preferences.
- In the EU, there is ongoing review of existing legislation, including Central Securities Depositories Regulation (CSDR), AIFMD and UCITS V, and MiFID II. In many cases, these reviews are being undertaken to create greater harmonization and alignment between frameworks. The introduction of many new regulatory initiatives, such as the Capital Markets Union Action Plan and the Sustainable Finance Action Plan, has the potential to provide further regulatory complexity over the coming 12 to 18 months.
- The digital revolution in financial services. We have an opportunity to embrace the digital revolution, across the industry and particularly in the tax and regulatory arena. We are harnessing this transformation with advanced technology, including embracing machine learning and artificial intelligence (AI) to identify and mitigate emerging tax risk. But as the industry’s digital transformation continues, so does regulatory change. One example is the evolution from paper to electronics. With the growth of e-delivery and increased use of e-signatures during the COVID-19 crisis, there is a recognition that regulations need to modernize to incorporate these features for the long term, rather than issuing exceptions in a crisis.
- The European Commission (EC) published a digital finance package in September that focuses closely on operational resilience, cyber resilience and crypto assets. A draft resolution in the package sets out the legislative framework for markets in crypto assets (MiCA) for the first time. These items are very high on the agenda of global regulators, and their importance can’t be overstated.
- As the volume and complexity of regulatory change increases, firms are challenged to understand, prioritize and comply with regulations and reporting requirements. The need for a more accurate and scalable way to manage regulatory change is becoming business critical. To address these challenges, firms are looking for technology solutions that provide horizon-scanning practices to track and analyze regulatory change and assess the potential impact to their business. Such solutions create efficiencies by streamlining monitoring, reducing manual processes and freeing up resources.
- AI and machine learning can be employed to identify and mitigate emerging tax risk, streamlining analysis for custody banks that can see up to 2 million transactions per day. These are just two examples of how AI can facilitate faster and more efficient control than a manual system, helping to reduce errors and providing a better client experience with fewer queries to clients and more reliable results.
- The European Commission (EC) published a digital finance package in September that focuses closely on operational resilience, cyber resilience and crypto assets. A draft resolution in the package sets out the legislative framework for markets in crypto assets (MiCA) for the first time. These items are very high on the agenda of global regulators, and their importance can’t be overstated.
For more information on accessing the Tax & Regulatory global forum content, please reach out to your BNY Mellon relationship representative.
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