2020 year-in-review and 2021 outlooks: Italian AML, payment services and FinTech related main developments

2020 has been a challenging year under many aspects. The COVID-19 pandemic had of course a massive impact both on the agenda of the Italian legislator and regulators as well as on the strategic and business priorities of financial institutions. Moreover, several important developments occurred in the anti-money laundering (“AML”), payment services and FinTech related Italian legal frameworks.

Summarised below are some of the main relevant developments with a view to the 2021 expected news.

AML

• Further reduction of cash limits: from 1 July 2020 the general cash limit was lowered from EUR 2,999.99 to EUR 1,999.99 (save for exemptions). Such limit will apply until 31 December 2021 and will be furtherly lowered to EUR 999.99 from 1 January 2022.
• New provisions on on-line KYC and SCA: the Italian AML legal framework was amended in order to facilitate the customer on-line KYC and on-boarding. To this end, among other things, Italy introduced the possibility to rely on strong customer authentication (“SCA”) under PSD2 for AML identification purposes in specific cases. Looking at 2021, guidelines from the Bank of Italy are expected in this regard (please see here our previous newsflash).
• Consultation on the register of beneficial owners: the Ministry of Economy and Finance (“MEF”) consultation on a draft decree regarding the register of beneficial owners ended on 28 February 2020. The final version of the decree is still to be enacted and is expected in 2021 (please see here our previous newsflash).
• New Bank of Italy record-keeping Regulation: on 24 March 2020 the Bank of Italy issued the long-awaited new record-keeping Regulation, thus completing from its side the implementation at a secondary level of legislation of the Italian provisions transposing 4AMLD. The Regulation is applicable from 31 December 2020.
• New FIU Regulation on reporting of aggregated data: on 25 August 2020 the Italian Financial Intelligence Unit (“FIU”) issued new provisions on aggregated data reporting, applicable from the reporting related to January 2021 (to be made by 2 April 2021).
• COVID-19 related measures: in the context of the COVID-19 emergency, the Bank of Italy and the FIU stressed the need for financial institutions to apply the full range of AML requirements, calibrating the latter in the most efficient manner in order to face the new potential risks arising from the COVID-19 scenario. In addition, the deadlines for the fulfilment of certain AML requirements were postponed in order to support financial intermediaries dealing with the unprecedented emergency situation (please see our previous newsflashes here and here).
• Transposition of 6AMLD in Italy: Directive (EU) 2018/1673 (“6AMLD”) is among the EU legislative acts to be transposed into Italian law listed under the draft annual European Delegation Law, currently under scrutiny by the Italian Parliament. The term for the implementation into national law of 6AMLD elapsed on 3 December 2020 and the transposition law is expected in early 2021.

Payment Services

• News on PSD2 implementation: corrective and supplementary provisions were introduced under the Italian legal framework implementing PSD2: (i) repealing the requirement for AISPs to join the Bank of Italy out-of-court dispute resolution system (ii) extending the applicability of the right of recourse under PSD2 (iii) clarifying reporting requirements on payment card schemes towards the Bank of Italy and (iv) reviewing the sanctions regime for failing to comply with the IFR (please see here our previous newsflash).
• Reporting obligations on acquirers: reporting requirements – both toward merchants and the Italian Revenue Agency – have been imposed on acquirers which have entered into agreements with Italian merchants in order to allow the latter to benefit from a tax credit of 30% of the fees charged for the acceptance of card payments or payments made with other traceable electronic payments instruments (please see here our previous newsflash).
• SCA and contingency measures: on 8 April 2020 the Bank of Italy issued instructions on: (i) the criteria to be met in order to benefit from the corporate SCA exemption; (ii) the exemption from the requirement to adopt fallback solutions where the ASPSP avails of dedicated interfaces and (iii) the reporting of issues related to said interfaces (please see here our previous newsflash). In addition, SCA requirements in relation to online card payment transactions will apply from 1 January 2021 since no further grace period for the fulfillment of such requirements has been granted by the Bank of Italy.
• Interchange fees: on 8 September 2020 a draft legislative proposal aimed at reducing the interchange fees cap for domestic consumer credit and debit card transactions and removing interchange fees for transactions of less than 20 EUR was submitted to the Italian Parliament (still to be examined). One would expect news in this regard in 2021 as further proposals aimed at reducing the interchange fees cap are also under review of the Italian Parliament in order to foster electronic payments in the context of the COVID-19 emergency.
• Potential repeal of tax on money remittances: the draft Annual Financial Law for year 2021, currently under the scrutiny of the Italian Parliament, includes the proposal to repeal the tax on money remittances outside the EU, introduced in 2018, in light of the issues emerged in the context of the enactment of the relevant implementing measures and in line with the requests of the market and financial institutions.
• Bank of Italy communication on contactless cards: in light of the fact that certain debit cards do not feature the contactless functionality for the domestic payment scheme (and thus automatically switch to international payment schemes), the Bank of Italy recommended banks, payment and e-money institutions to illustrate the features of said cards to cardholders and acquirers and to replace them within 31 December 2021.
• Adjustment of the Italian legal framework to EU rules on cross-border payments charges: the draft annual European Delegation Law, currently under scrutiny by the Italian Parliament, also delegated the Italian Government to adopt the necessary measures to adjust the Italian legal framework to Regulation (EU) 2019/518 on charges on cross-border payments in the EU and currency conversion charges.
• COVID-19 related measures: the Italian Legislator introduced simplified procedures for the remote subscription of, among other things, banking, financing, payment services and payment accounts switching agreements, applicable until 31 December 2020. It is however likely that an extension of the applicability will be decided before year-end. Also in the payment services area certain deadlines for the fulfilment of regulatory reporting requirements were postponed both by the Bank of Italy and OAM.
• Brexit: in light of the forthcoming end on 31 December 2020 of the transition period set out under the Withdrawal Agreement of the UK from the EU, the Bank of Italy published a number of communications during 2020 aimed at drawing the attention of UK financial institutions operating in Italy to the measures to be taken in order to avoid disruption of business continuity and to transparently inform their customers.
• Cashless Italy Plan: new provisions have been introduced aimed at: (i) fostering the use of electronic payments in the public transportation sector (ii) establishing a dedicated fund at the MEF (expected to be implemented in 2021) for the reimbursement of costs incurred by merchants in relation to the fees due for debit/credit card payment transactions and (iii) introducing rewards programs for purchases made through electronic payment instruments. Further related initiatives can be expected in 2021.

FinTech

• Italian FinTech Sandbox: during 2020 the MEF issued for public consultation a draft decree setting out the criteria for the establishment and functioning of an Italian Fintech regulatory sandbox. Final rules have not yet been enacted. In the meantime, some amendments have been recently introduced to the legal framework at a primary level of legislation also postponing the deadline for the adoption of the final MEF decree at 31 January 2021 (please see here our latest newsflash).
• Consultation on DLT and blockchain: on 18 June 2020 the Italian Ministry of Economic Development (“MiSE”) issued for public consultation recommendations on the use of DLT and blockchain technology. The MiSE suggested that the development of such technologies would allow the Italian market to become an important hub at a global level in the payment services field and would significantly reduce time and cost to comply with AML obligations (including KYC) (please see here our previous newsflash).

Authored by Jeffrey Greenbaum, Claudia Colomba and Elisabetta Zeppieri.