By Matt Smith, CEO of SteelEye
The second Markets in Financial Instruments Directive (MiFID II) was supposed to introduce the largest overhaul of the financial services industry in decades. With over 1.4m paragraphs of rules, MiFID II had a number of laudable, far-reaching aims covering virtually all asset classes traded within the EU, including the goals of increased transparency, reduced costs for investors and a clampdown on market misbehaviour in the financial industry.
However, despite coming into force on 3 January 2018, MiFID II is starting with more of a whimper than a bang and has not yet even been introduced into the national laws of 17 EU countries, including the Netherlands and Spain. Rather than signifying a radical shakeup of the financial industry, MiFID II has been marked by a series of delays and uncertainties, including major exchanges failing to implement the regulation on time, postponement of the dark pool caps, unpredictability surrounding Brexit, and even the possibility of a MiFID III.
The situation so far
MiFID II was meant to open the clearing of futures contracts to competition through a policy known as ‘open access.’ However, on the date of implementation, regulators in Germany and the UK, and later Sweden, granted a reprieve to their domestic exchanges, not of three or six months but of 30 months. This extension was blamed on uncertainty surrounding the status of the UK’s capital markets following Brexit; however, many in the industry have cited it as an example of regulators bowing to vested interests. As market leaders have found themselves unable (or unwilling) to meet MiFID II’s demands, with many voicing concerns over the new open access rules and their impact on industry competition, another MiFID II policy has been postponed – this time, for more than two years.
Another MiFID II target was ‘dark pooling’ – the practice of allowing investors to trade without having to reveal what they are buying or selling. Under MiFID II, a cap was put in place on these dark pools in an effort to move investors back onto “lit” public stock markets. These caps were meant to be accompanied by a list of European equities that were to be excluded from trading via dark poolsbut the publication of this list was delayed for three months by the European Securities and Markets Authority (ESMA)due to a lack of data. Legally, the MiFID II dark pool caps still came into force on 12 January but,without data showing which instruments would be excluded, it was difficult for ESMA to know ifthe cap had been reached, leaving it unable to enforce penalties for breaching the rules. This meant that the hundreds of European equities that would have been caught out were granted a last-minute respite, and one of MiFID II’s biggest changes is not yet being enforced.
Another aim of MiFID II was to make the market more competitive by introducing an unbundling requirement for fund managers to charge analysts for research rather than receiving it for free in return for supplying brokers with trading business. The end of such inducements was supposed to spark the growth of a new generation of independent research boutiques. However, this has yet to be seen. It seems that most managers are choosing to payt out-of-pocke for research, putting further pressure on profit margins. This removes or at best delays the benefits of fragmenting the market, as firms continue to use their familiar bank and broker analysts in fear of contravening the ban on unsolicited research.
What does the future hold for MiFID II?
Although the future of MiFID II is far from clear at this juncture and may continue to be for the next few years until its full impact is evident, it is likely that MiFID II will have a far-reaching, broadly beneficial impact on the financial industry across Europe, though with still many issues to address before it can delivernew opportunities for financial firms. These include questions about consistent implementation of the rules in every jurisdiction affected.
ESMA published the list of equities affected by the dark pool limits in early March, which should allow regulators to police these pools more effectively under MiFID II. According to new research from Thomson Reuters, dark pool trading has halved in the wake of these rules being introduced earlier this month. There is still some concern in the market, however, that in the long term trading will migrate to registered systematic internalisers (SIs), a group of banks and dealers that operate under an off-exchange trading regime. Critics have argued that SIs will simply become a new version of dark pools, a private alternative to regulated public exchanges. This could prompt more action and a toughening of the rules by regulators as they try to increase the transparency of such activity.Once the data accompanying dark pool caps has been published, regulators can begin to analyse the market to see where improvements to the regulation are required.
Additionally, the UK’s impending exit from the EU in 2019 leaves considerable uncertainty. There is speculation that the UK could opt for ‘MiFID II-lite’ in some or all areas, with the government choosing to translate diluted MiFID II’s standards into UK legislation to better align with the UK’s financial markets. On the other hand, there is still the risk of a hard Brexit wherein no regulatory technical standards are agreed – leaving the financial industry in a state of limbo.It should however be borne in mind that the FCA was the architect of many of the record-keeping and reporting principles embedded in MiFID II. Moreover, with the aftermath of the UK’s previous dalliance with “light touch regulation” still fresh in memory, the national regulator is unlikely to favour watered-down standards that could see London regarded as a less safe or transparent marketplace for global capital.
Whatever the outcome, the strength of the UK’s regtech and fintech offering means the City will be well-placed to adapt to Brexit’s realities and their effect on the resulting regulatory regime. Fintech and regtech firms’ flexibility and agility means that they can easily adapt and update their offerings as the market changes, helping them to quickly validate any future offerings as the post-Brexit landscape begins to take shape.
There is also the question of a MiFID III. Already, hiccups with MiFID II’s implementation have caused regulators to consider the creation of a third iteration of the regulation and a speedy rewrite of the rules, with Brexit set to make this more likely by presenting a significant challenge to some of MiFID II’s core objectives such as improving transparency in financial markets. Many suspect that if the UK and the European Commission fail to harmonise the financial services landscape post-Brexit in a way that includes MiFID II’s core objectives, a third iteration of the regulation, and another major overhaul of the market,may be required.
In the meantime, we will likely see UK financial businesses benefit from the new regime in a number of ways. MiFID II has already encouraged the rapid growth of an innovative regtech industry and this is set to continue in the future, as businesses increasingly look to technology to help them improve their working practices, cut costs and risk, improve agility and gain new insights – all while ensuring regulatory compliance. Requiring businesses to review their data has led to the emergence of a number of new technologies that capitalise on this valuable resource, and in the long-term this will allow businesses to become better-informed about the decisions they make, identify patterns and trends within their organisation and the wider industry, launch new products and improve customer satisfaction.
As the industry adjusts to this new regulatory landscape, attention will shift from mere compliance to the opportunities provided by this new frame work of rules. MiFID II certainly has the power to accelerate a reshaping of the financial sector and, once the dust settles and uncertainty fades, a more transparent, competitive and trustworthy industry should emerge.
Top 8 Tax Scams to Watch Out For
It is tax time and that means finding the best way to file your taxes and to get a refund of any amount you’ve overpaid. Unfortunately, tax time also means plenty of scammers are thinking of new and clever ways to try and get their hands on your money or on your personal information (which they can use to get money).
Those who specialize in IRS tax scams are clever and can be very convincing. Your first line of defense is to always know what to be looking for in terms of common tax fraud in order to avoid being another victim.
8 Most Common Tax Scams
Protecting yourself from IRS tax scams can be tricky if you’re not aware of what the threats are. A good tax scam seems legitimate, and that is what makes them dangerous. Always be on the lookout for the eight most common tax scams, including:
- IRS Phone Scams
- Fake IRS Emails
- Fraudulent Tax Preparers
- Fraudulent Tax Refunds
- Fake Charities
- Set Up Offshore Accounts
- Empty Promises
- Frivolous Returns
To know what exactly you need to watch out for, let’s look at them in more detail.
1. IRS Phone Scams
If someone calls you claiming to be from the IRS, it is almost certainly one of many IRS phone scams. The IRS will never call you to demand money for back taxes or to confirm your personal information, so be immediately alert. Never give personal information over the phone, and don’t head to the bank to follow the demands for money.
If you do wind up on the end of an IRS phone scam, don’t become flustered by aggressive tactics by the fake “agent”. They are good at sounding threatening and demanding information or payments. Remain calm and ask for contact information. Tell the scammer you’ll call them back with the information. Either the scammer will give you fake information or he will work to avoid leaving any information at all. Regardless, don’t call him back. Simply report the call to the local police or the IRS.
2. Fake IRS Emails
Another very common fake IRS scam is phishing, or sending fake IRS emails, in a ploy to gather personal information. Fake emails will look authentic and will ask you to click on a link or to log in to a fake IRS website. The purpose of these emails is to simply gather your personal information to be used for other fraudulent purposes.
Just like with IRS phone scams, you should be immediately wary if the IRS appears to send you an email. The IRS does not contact citizens through email. All official IRS communication will come through standard mail. If you do find a fake IRS email in your inbox, forward it to the IRS. The IRS investigates these scams and has a dedicated email address for this very purpose: [email protected].
3. Fraudulent Tax Preparers
Some scam artists show up in a suit, open a storefront and offer to prepare your tax return for you. These tax preparers appear by all accounts to be absolutely legitimate, and many go to great lengths to convince customers of their years of experience and authenticity.
As a fraudulent tax preparer, however, the person is not legitimate. The scam artist can use your tax return in many ways for his own benefit. He can inflate your refund and skim off the top. He can charge outrageous fees for filing on your behalf. He can file your return correctly this year and gather all of your information to make a fake return for his benefit next year.
If you are going to have someone else prepare your taxes, be sure to look carefully through tax service reviews. Tax service reviews are available on many different websites that offer feedback on companies and services. These reviews will give you a very good idea about the legitimacy of the business and the reliability of the preparer. If a company doesn’t have any tax service reviews on any website, like e.g PissedConsumer.com, or BBB, that may be a sign that it’s a pop-up company that will disappear as soon as the scammer has what he wants.
4. Fraudulent Tax Refunds
Another very popular tax scam starts well before the tax season. To file a fraudulent tax return, the scammer must gather all pertinent personal information including a social security number. He then uses the information he gathered to file a fake tax return on your behalf. Naturally, he’s not going to send you the refund he’s claiming – that goes into the scammer’s pocket.
The best way to prevent a fake tax return is to guard your personal information close at all times. If nobody is able to steal your identity, they can’t file a tax return. Another good step is to file your own tax return as early as possible. That way, even if your information was stolen somehow, you will get your refund correctly and the IRS will be alerted when someone files a second return using your information.
5. Fake Charities
Charitable donations are tax-deductible if you’re itemizing your deductions. This creates possibilities for scammers to take advantage of others who are looking to reduce their tax burden and increase their refund by making donations. Fake charities can take on many shapes and forms.
Some may appear conveniently around tax time or be affiliated with fraudulent tax preparers. The claim is that by donating to a fake charity you will help others and reduce your own tax liability. Instead, you’re giving someone free money and you won’t be able to deduct the donation as it’s not a real charitable organization. Other fake charities involve you in a scam by promising to give you back your donation as soon as the tax return is filed, for example. It goes without saying that claiming a donation you didn’t actually make is tax fraud and highly illegal.
At the advice of his tax preparers, a famous country singer Willie Nelson moved some of his money into tax shelters and charities to help reduce his tax bill. The IRS grew suspicious of the moves and investigated. In one of the most famous IRS cases in the United States, Willie Nelson was hit with a tax bill in the millions when his charities and shelters were found to be invalid.
Willie didn’t have the funds to make the payments, so the bill continued to grow until the IRS finally grew so frustrated they raided and seized all of Willie Nelson’s properties including a recording studio, a ranch, and his home. Even that wasn’t enough to pay the bill, so eventually, Willie made a deal with the IRS. He recorded an album and all proceeds from that album went directly to the IRS to whittle away his debt. Willie did file suit against the accounting firm that advised the tax shelters in the first place, but the two parties settled out of court.
6. Set Up Offshore Accounts
Some tax scams sound good but require your participation in illegal activities. For example, you may meet an unscrupulous tax “professional” who offers to help you move some of your money into an offshore account.
This sounds legitimate as many people use offshore accounts for valid reasons, but by moving your funds into an offshore account with the intent of hiding that income from the IRS, you’re committing tax fraud. Additionally, if you’re working with a shady professional, it’s highly likely that neither you nor the IRS will see your extra income ever again. And you can still wind up with a legal case with your money stolen and gone.
7. Empty Promises
The tax preparer who encourages you to sign a blank tax form is nobody you want to work with. These preparers encourage you to simply sign the form because he or she is going to work out the numbers for you so that you can get the highest possible refund. If you do this, you are almost certainly subjecting yourself to tax filing scams.
Signing a blank tax form is potentially worse than simply signing a blank check for a stranger. Not only are you at risk of losing your personal information and any refund you might be owed, but you are also at risk of legal action by the IRS for signing your name on a refund that is almost certainly going to contain false and fraudulent information.
8. Frivolous Returns
The IRS sees a ridiculous number of what they call “frivolous returns” every year. A frivolous return is a tax return that is filed with the intent of simply wasting time. These frivolous claims have already been thrown out in court, so filing a tax refund making a frivolous claim is simply opening yourself up to additional action by the IRS including fines of at least $5,000. The top “frivolous claims” include:
- Refusing to pay taxes on moral or religious grounds
- “Opting out” of paying taxes
- Invoking the First Amendment to “protect” you from taxes
- Claiming only Federal Employees pay federal taxes
- Claiming you have no income and therefore no tax liability (when you clearly do)
Top 3 Tips on How to Protect Yourself from IRS Tax Scams
Protecting yourself from tax fraud is a matter of being vigilant and mindful that there is always a possibility of something going wrong. Work with a trusted advisor or study up and file taxes yourself to avoid the uncertainty of allowing others to handle your financial matters. Often a bit of knowledge goes a very long way.
1. Know How the Tax System Works
One of the most common negative IRS reviews is that the tax refunds aren’t released immediately. In many IRS complaints, customers complain that they don’t get their refunds immediately.
While frustrating to wait, the IRS is usually very clear about processing times and has never sent refunds immediately after the filing window opens. The government doesn’t move quickly and reviews of documents and financial information submitted in your returns are necessary.
Additionally, relying on others to help you file your taxes every year can open you up to the possibility of fraudulent activities. Reviewing the tax codes and reading through the laws and requirements may not be exciting, but it will give you at least a basic understanding of how the process works so that you can look out for problems if you are trusting someone else with your information and money.
2. Always Read Carefully
The safest way to file your taxes is to do them by hand on the original IRS paper forms and to mail them using certified mail. Many people don’t choose to do this, however, as it can be very tedious and confusing if you do not know the tax system backward and forwards.
Instead, many filers rely on tax software and paid tax preparers. When using software or allowing someone to use the software on your behalf, it never gets too comfortable. There might be hidden fees in the software or glitches to overcome.
Reviewing choices carefully as the software takes you from screen to screen is a good way to avoid accidentally accepting hidden fees. Another option to avoid paying for fees you aren’t comfortable with is to simply abandon the return on one piece of online software and to try again with another – there are multiple tax return software options available.
3. Always Look for Tax Filing Scams
If you always expect to find a scam, you’ll never be surprised when one appears. Even tax preparers who have been in business for years can have some deceptive business practices that others assume are necessary or haven’t noticed them at all.
Tax time can be exciting if you’re entitled to a large refund, but it can be stressful if you don’t feel in control of the tax filing process. Educate yourself on the risks and tax scams that exist, and always exercise caution when choosing a method to file your taxes. Your personal information is closely tied to your money, so protecting both of them is often simply a measure of keeping your eyes wide open and using your knowledge to avoid traps and scams.
These 5 Payments Trends Once Seemed Revolutionary. In 2021, They’ll Continue to Become the Norm
By Warren Hayashi, President, Asia-Pacific, Adyen.
The pandemic forced brands to transform their businesses in ways that are here to stay
After a year of such great uncertainty, attempting to predict the future may seem risky. But even as brands and retailers faced unprecedented upheaval in 2020, one constant has held true. The pandemic has accelerated trends toward digitisation—and that’s as true in payments as in so many other areas of business and society. The stark reality of needing to avoid close contact with others has driven transformations for retailers and brands in a matter of months that in the past might have taken years. In the process, behaviours and expectations have changed for good.
As 2021 begins, much uncertainty remains but we feel confident that the digital transformation of payments will only get faster. Even after the pandemic has receded and consumers have the option to go back to their old behaviours, many won’t. The rapid increase in e-commerce seen under COVID-19 will persist, especially among previously digital-hesitant consumers. Merchants can no longer assume that their digital customers are limited to younger, tech-savvy shoppers. As brands have shown flexibility during the pandemic, consumers have also come to expect the flexible arrangements to continue. On that note, these are the key trends in payments that should be top-of-mind for brands and retailers in Singapore and Asia Pacific in 2021:
- Contactless will extend its reach into every corner of retail
From the start, the pandemic forced merchants to find ways to minimize the amount of physical contact necessary to complete a transaction. Customers and workers alike sought to avoid handing over credit and debit cards, touching keypads, and handling cash. According to our 2020 Agility Report 58% of APAC respondents preferred to use contactless payment methods because of hygiene concerns.
Our data also showed that the use of services such as Apple Pay and Google Pay has significantly increased over the last year too. Research from Kantar reiterates this, revealing that the frequency of e-Wallets transactions in Southeast Asia rose from an average of 18% pre-COVID-19 to 25% post-COVID-19, indicating a shift from one payment method to another.
In the post-pandemic world, the transition to contactless will only become more widespread now that the bar has been raised among consumers for what checking out can be, from one-click payments to same-day delivery options. Not to mention, the value of QR codes has also been made apparent in anchoring a seamless experience, not just at point-of-sale but at multiple points along the customer journey too, such as viewing menus and placing orders. The pandemic may have driven the change in behavior, but the superior user experience will cement contactless as the new normal.
- The distinction between offline and online will fade into irrelevance
As countries went into different forms of lockdown, many shoppers were unable to enter brick-and-mortar stores throughout 2020. Unifying offline and online became an issue of survival for retailers, who quickly pivoted to make app-powered deliveries and self-pick up options a reality.
Even while most physical stores in Singapore have opened their doors to consumers again, the digital infrastructure will remain in place. Many shoppers continue to prefer the convenience of deliveries and expect the options to continue, and retailers will find they’re able to forge better customer relationships thanks to the rich data generated by digital transactions.
One of the biggest learnings for the industry is the need to rethink the traditional split between offline and online stores. With lines increasingly blurred, retailers will benefit from adopting a unified commerce approach where brand interactions on and across all channels are important.
- The membership model will reign in retail and also in food and beverage
The membership model is another emerging trend for 2021. Amazon Prime is a great example of this, where customers pay an annual fee that in effect encourages them to buy more from Amazon in an effort to ensure they’re getting their money’s worth from their Prime memberships. Quick-serve restaurants especially are seeking to seize some of that flywheel effect. In addition to improved incremental spend, membership programs enable QSRs to get to know their customers in ways that were never possible when they were just anonymous faces standing in line.
Meanwhile, subscription passes encourage loyalty and more frequent use. Our 2020 Agility Report found that 38% of Singapore respondents (compared to 27% in APAC and 22% in Europe) signaled their interest in using these for products, including food passes, to reduce the amount of times they need to shop. Expect to see more retailers offering memberships in 2021 as brands seek to own the customer relationship and the data that goes along with it.
- Installments will become an everyday way to pay
The twin forces of increased convenience and tightened household budgets have brought pay-by-installment options mainstream, a trend that will only grow in 2021. Machine learning algorithms have become more adept than ever at assessing risk instantaneously, making it easy to offer “buy now, pay later” options right at checkout. For small and mid-ticket items, shoppers know that, say, instead of paying $100 now, they’ll pay $25 per month for four months. That kind of transparency makes it easier for shoppers on the fence to commit, which appeals to merchants hoping to avoid the dreaded abandoned shopping cart.
In 2021, providers of “buy now, pay later” options themselves will start to diverge, as some focus on higher-end, multi-year agreements, while others seek to offer installment plans for shopping baskets as small as $50. For households increasingly accustomed to paying by the month for everything from streaming services to food delivery premium memberships, installment plans start to look like subscriptions that just happen to have a fixed end date.
- The checkout-less experience will draw shoppers back to brick-and-mortar
In 2020, the appeal of an in-store experience offering limited human contact took on a new dimension, accelerating interest in doing away with the checkout counter altogether. For instance, in Singapore, BHG is looking to expand its endless aisle offering. By using interactive screens in-store, customers are able to check on inventories across all of BHG’s stores and e-commerce platform and can opt to have items to be delivered directly to their homes. Post-pandemic, shoppers will still find appeal in the human touch. The physical store continues to be relevant, especially in Asia Pacific and eliminating checkout counters frees staff to interact with shoppers in a more personal way, while also making lines a thing of the past.
In 2021, more stores will find various ways to make checkout a less prominent part of how people shop in-store. Multiple providers are creating their own versions of checkout-less experiences, where instead of going to the counter, customers will scan their items with their phones’ cameras, pay via app, and head out the door—a combination of increased trust and decreased friction that helps cultivate customer loyalty. In the case of Love, Bonito in Singapore, if customers are unable to find a particular item in store, they can go to an iPad within the premises, buy it online and have it shipped to their homes.
Across the five trends, this paradigm shift in the retail sector is underpinned by the under-tapped potential of technology to elevate the customer experience. Looking ahead in the new year, we expect retailers to increasingly harness digital solutions. Not only does this streamline operations, it also gives retailers the flexibility to pivot in line with changing preferences, and provide a seamless consumer journey across multiple channels.
Bitcoin heads for worst weekly loss in months
By Tom Westbrook
SINGAPORE (Reuters) – Bitcoin wavered on Friday and was heading toward its sharpest weekly drop since September, as worries over regulation and its frothy rally drove a pullback from recent record highs.
The world’s most popular cryptocurrency fell more than 5% to an almost three-week low of $28,800 early in the Asia session, before steadying near $32,000. It has lost 11% so far this week, the biggest drop since a 12% fall in September.
Traders said a report posted to Twitter by BitMEX Research https://twitter.com/BitMEXResearch/status/1351855414103715842 suggesting that part of a bitcoin may have been spent twice was enough to trigger selling, even if concerns were later resolved.
“You wouldn’t want to rationalise too much into a market that’s as inefficient and immature as bitcoin, but certainly there’s a reversal in momentum,” said Kyle Rodda, an analyst at IG Markets in Melbourne, in the wake of the BitMEX report.
“The herd has probably looked at this and thought it sounded scary and shocking and it’s now the time to sell.”
Bitcoin was trading more than 20% below the record high of $42,000 hit two weeks ago, losing ground amid growing concerns that it is one of a number of price bubbles and as cryptocurrencies catch regulators’ attention.
During a U.S. Senate hearing on Tuesday, Janet Yellen, President Joe Biden’s pick to head the U.S. Treasury, expressed concerns that cryptocurrencies could be used to finance illegal activities.
That followed a call last week from European Central Bank President Christine Lagarde for global regulation of bitcoin.
Still, some said the pullback comes with the territory for an asset that is some 700% above the 2020 low of $3,850 hit in March.
“It’s a highly volatile piece,” said Michael McCarthy, strategist at brokerage CMC Markets in Sydney. “It made extraordinary gains and it’s doing what bitcoin does and swinging around.”
Second-biggest cryptocurrency ethereum intially slipped to a one-week low on Friday before rising 6% late in the Asia session to $1,177.
(Reporting by Tom Westbrook; editing by Leslie Adler & Simon Cameron-Moore)
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