Policy News

BAFT Submission to the UK Prudential Regulatory Authority on Their Proposed Basel 3.1 Framework

BAFT together with the ICC-UK and several industry associations, has made a joint submission to the UK PRA in response to their proposed Basel 3.1 Framework. Supporting documentation included the ICC Trade Register and the ICC GCD Guarantee Update. In parallel, BAFT made it’s own submission to the UK PRA that is reflective of the global nature of BAFT’s membership.

Updated Legal Opinions for English & New York Law Versions of the BAFT Master Participation Agreement (MPA)

BAFT (Website) has posted updated Legal Opinions (2022) covering BAFT Master Participation Agreements (MPA) issued in accordance with English Law (2008, amended in 2022) & (2018, amended in 2022) and New York Law (2019, amended in 2021). The Legal Opinions covering the MPA (New York Law Version) have been issued by Sullivan & Worcester, UK LLP London, and Sullivan & Worcester, LLP New York. The Legal Opinions for the MPA (English Law Versions) has been issued by Sullivan & Worcester, UK LLP London.

The BAFT MPAs were updated to accommodate LIBOR-related updates, and these newly issued Legal Opinions complete the documentation for utilization.

These documents are available for free to BAFT members and for a fee to non-members through the BAFT website “Members Tools” section.”

Payments Guide to What’s New in Trade Finance

This guide examines the state of trade finance, focusing on the two core trade products — letters of credit and documentary collections. It highlights some innovations that have been adopted and explains the hurdles that still prevent wholesale digitalization of global trade finance.

Underwritten by MUFG, a long-standing BAFT member, the guide includes input from our very own Scott Stevenson, SVP for Trade, and Deepa Sinha, VP for Payments and Financial Crime.

Read the full guide here.

Updated FinCEN Final Beneficial Ownership Reporting Rule

On September 29, FinCEN issued a final rule implementing the bipartisan Corporate Transparency Act’s (CTA) beneficial ownership information (BOI) reporting provisions. This rule will strengthen the integrity of the U.S. financial system by making it harder for illicit actors to use shell companies to launder their money or hide assets. The rule describes:

who must file a BOI report
what information must be reported, and
when a report is due

Specifically, the rule requires reporting companies to file reports with FinCEN that identify two categories of individuals: (1) the beneficial owners of the entity; and (2) the company applicants of the entity. According to FinCEN, the rule aims to minimize burdens on small businesses and other reporting companies but to help, FinCEN will develop compliance and guidance documents to assist reporting companies. Two other rules, covering access to the database and an update to the existing CDD rule, are still pending.

BAFT Comments to UNCITRAL on Guidelines for International Identity Management

At the end of April 2022, the United Nations Commission on International Trade Law (UNCITRAL) released their “Draft Model Law on the Use of Cross-border Recognition of Identity Management (IdM) and Trust Services“. BAFT received a Request for Comment, with a May 27, 2022 submission deadline.

BAFT Endorses UNCITRAL’s Efforts

The need for the establishment of the IdM cuts across numerous facets of international transaction banking including trade finance, supply chain finance, payments, and areas of compliance such as Know Your Customer (KYC) and Anti-Money Laundering (AML). The process of establishing standards in the universal acceptability of the IdM is also at the core of the digitization of trade initiatives. Accordingly, BAFT fully endorses UNCITRAL’s efforts in formulation of the Draft Model Law.

The Draft Model Law confirms that the international dimension is essential to the use of identity management and trust services and more generally, of electronic services. However, the text confirms that there are two obstacles: i) technical incompatibility leading to a lack of interoperability, and ii) legal obstacles to cross boarder recognition.

BAFT Advocates for GLEIF’s LEI

To provide direction on overcoming these two obstacles, BAFT advocates for the implementation of the work already done by the Global Legal Entity Identifier Foundation (GLEIF) in the establishment of the Legal Entity Identifier (LEI). The LEI is a global ISO 17442 standard that connects key reference information and enables clear and unique identification of legal entities.

Digital transformation in global transaction banking is capable of reducing costs, improving efficiency, better regulatory control with less risk and collaborative opportunities for stakeholders in the global economy. The LEI is the only global standard for legal identity identification which is why BAFT has endorsed its inclusion in the Draft Model Law.

Read the Full Comment Letter Here >

BAFT Comments on FASB and IASB Proposed Amendments to Accounting Standards for SCF Programs

In Q4 2021 the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) released proposed amendments to their accounting standards that will require buyers of goods/services who use supplier finance programs/arrangements in respect of their payables to disclose key terms of those supplier finance programs in their financial statements.

The purpose of the proposals is therefore to enable investors, creditors, and other stakeholders in respect of a buyer to assess the effects of supplier finance programs on such buyer’s liabilities and cash flows by requiring a buyer to provide both quantitative and qualitative disclosures regarding its use of supplier finance programs. Both FASB and IASB do make clear in their proposals though that the proposals will not deal with how a payable which forms part of a supplier finance program should be characterized on the balance sheet of a buyer.

BAFT, through the collaborative efforts of members of BAFT’s Supply Chain Finance Working Group, was invited by FASB and IASB to provide comment letters in response to their respective proposals.

BAFT strongly supports the goal to achieve increased transparency in the reporting of Supplier Finance Arrangements. However, we also believe that fostering increased understanding of supply chain finance, its benefits, and how it can be best used in line with standard market practice is crucial to achieving this goal.

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