The problems of extraterritorial financial regulation

Financial Stability Oversight Council (FSOC) established after financial crisis of 2008 is to oversee the stability of all financial sector and prevent new financial crisis in future.

OFAC

US treasury has a special “office”, created in 1950- Office of Foreign Assets Control which “administers and enforces economic and trade sanctions”.

Appendix 6. Russian regulator: Central Bank of Russia (CBR)

In Russia since 2013 Central Bank has been in charge of regulation and supervision of whole financial sector. It regulates institutions (Investment funds, insurance companies, banks, non-credit organization); some type of financial markets (securities, interbank) and of course oversees the systematic risk of Russian economy, setting relevant prudential ratios for banks. At the same time the same authority is responsible for national currency stability, inflation targeting and monetary policy.

Bank of Russia has got a long list of functions. Below is the list of the main functions, which might be relevant to this paper:

ь protection of the currency and its stability

ь monetary policy in cooperation with Government

ь function of creditor of last resort,

ь setting the settlement rules

ь supervision and oversight of the national payment system

ь issues and revocation of banking licences

ь supervision of banking activity (and activity of other supervised entities)

ь registration of securities issues

ь control and supervision of proper securities issues

ь foreign exchange activities regulation

ь compiling of Russia's balance of payments

ь financial statistics publishing

So overall the goal number on is stability and safety of financial market.

Appendix 7. Anti money laundering international cooperation

· FATF Members and Observers

· APG: Asia/Pacific Group on Money Laundering

· CFATF: Caribbean Financial Action Task Force

· EAG: Eurasian Group

· ESAAMLG: Eastern and Southern Africa Anti-Money Laundering Group

· GAFISUD: Financial Action Task Force on Money Laundering in South America

· GIABA: Inter Governmental Action Group against Money Laundering in West Africa

· MENAFATF: Middle East and North Africa Financial Action Task Force

· MONEYVAL: Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism

Appendix 8. Swiss regulator: FINMA

In Switzerland FINMA is responsible for financial markets legislation and supervision, including its participants (banks, insurance companies, stock exchanges, securities dealers, collective investment schemes, distributors and insurance intermediaries) and supervision while at Central Bank of Switzerland is responsible for economic stability of the country and acts as a lender of last resort.

The Swiss Financial Market Supervisory Authority FINMA is to protect the interests of market participants (investors, creditors, insured person) and to ensure that financial market is functioning properly. “Protection for individuals includes protection against insolvencies among financial institutions, unfair business practices and unequal treatment in securities markets. Safeguarding the functions of the financial markets means maintaining the stability of the financial system and promoting confidence in the orderly functioning of the financial markets.” Also this authority is to ensure that its supervised institutions are in compliance with applicable laws, instructions and regulations. Combatting money laundering is also within the scope of its responsibilities.The Swiss Financial Market Supervisory Authority FINMA, mandate:

URL: http://www.finma.ch/E/FINMA/Pages/Ziele.aspx

Appendix 9. Interbank settlement systems

Globalization and modern technologies opened new opportunities for money flow. Today funds can be transferred within very limited period of time all over the globe using just internet access and with minimal transactional cost.

There are 5 main interbank settlement systems, which made it possible:

1) CHIPS (Clearing House Interbank Payment System), operated by The Clearing House Payments Company L.L.C., used for cross-border transfers in USD (about 95% from all volume). This system US authority, state New York;

2) CLS (Continuous Linked Settlement), operated by CLS Bank International used for currency deals and regulated by English and American (state New York) legislations.

3) VISA, MasterCard, operated by the corporations with similar names. The systems are used to service for settlements related to usage of banking cards. Regulation is international one.

4) TARGET 2 (Trans-European Automated Real-time Gross settlement Express Transfer), operated by European Central bank. The system is used for transactions in Euro. Operations of TARGET 2 are regulated by Guideline on TARGET 2 dated 2007, by European Central bank. Operations are also regulated by agreements concluded between participants and services provider - European central bank.

5) EURO 1, operated by European banking association for transfers I Euro and regulated by French law.

From one side, idea of those systems is to speed up and facilitate the cross-border settlements making possible international economic and financial activity and minimizing liquidity risks via a number of rules used by all members. But from another side, illegitimate funds derived from criminal activities has a possibility to widespread faster, they reach any required jurisdiction (data secrecy and tax havens, jurisdictions with law anti-money laundering controls etc).

Appendix 10. Key banking regulations in USA, Russia, Switzerland

Table 11

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