Regulatory Updates

April 2020

Contact the PwC Malta Regulatory Team for further information in relation to any of the updates or if you wish to discuss how these may impact your business.

Welcome

Welcome to PwC Malta’s Regulatory Updates - giving a recap for this month of the main legislative updates and key regulator activity.

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Anti-Money Laundering

01/04/2020 - Consultation Document - Proposed Amendments to address technical compliance shortcomings identified in the 5th Round Moneyval Evaluation Report of Malta - Proposed Amendments to the PMLFTR and the FIAU Implementing Procedures Part 1

The FIAU has issued a Consultation Document which outlines a number of amendments to Subsidiary Legislation 373.01 - The Prevention of Money Laundering and the Funding of Terrorism Regulations, including a revision of Regulations 15(3) and (7) which set out the timeframes fo rthe submission of the STR and Regulation 21(7) which enables the FIAU to impose administrative sanctions on persons who have a senior managerial role within the subject person and found responsible for breaches of AML/CFT obligations. This document  aims to align the provisions contained in the PMLFTR with the FATF Recommendations and international standards. 

Link to Consultation Document can be found here.

02/04/2020 - FIAU Update - April 2020 

The FIAU shall be issuing a series of updates that demonstrate the results of its relentless work and will be mainly focusing on: (i) restructuring and recruitment; (ii) ongoing intelligence analysis work; (iii) supervision and enforcement; (iv) amendments to AML laws; (v) FIAU publications and outreach initiatives; and (vi) investment in dedicated software solutions. By virtue of this update, the FIAU has highlighted the following noteworthy updates: (i) increase in STRs; (ii) increased cooperation with other supervisory authorities and foreign FIUs; (iii) the introduction of new risk assessment methodology; and (iv) an update relating to enforcement procedures. 

Link to FIAU Update Document can be found here.

07/04/2020 - Testing of the new STR Submission System - goAML

The FIAU has developed a new STR Submission System - goAML - and would like to inform subject persons that it has published the Test Environment and Production Environment. In this respect: (i) reporting entities are encouraged to register to the new system for the purpose of testing the system and the training of internal staff; and (ii) By 29 April 2020, the FIAU is also requesting all the reporting entities to register on the new production environment in preparation of the data migration. 

15/04/2020 - The MGA and FIAU sign a Memorandum of Understanding 

The MGA and FIAU have entered into a Memorandum of Understanding (MoU) in order to consolidate the relationship between the two entities and aims at improving the sharing of information and cooperation in the areas of supervision of AML/CFT. 

Link to FIAU News Publication can be found here.

20/04/2020 - Reminder Submission of Risk Evaluation Questionnaire 2020

The FIAU would like to remind all Subject Persons who have not yet submitted the Risk Evaluation Questionnaire (REQ), to process their submissions without undue delay and by not later than the 4th May 2020 at 17.00pm.

Link to FIAU News Publication can be found here.

24/04/2020 - Registration on the STR Submission System – goAML

The FIAU is reminding  all Subject Persons who have not pre-registered on the new STR submission system (goAML) (https://goaml.fiumalta.org/prod), to proceed in registering without undue delay and by not later than 29 April 2020. 

Link to FIAU News Publication can be found here.

24/04/2020 - CBAR - Technical Workshop for the XML Schema and Validation Rules 

In Q4 of 2019, the FIAU held an introductory meeting with both credit and financial institutions on the eventual development and deployment of a centralised registry to hold data on determinate bank and payment accounts as well as on safe custody services. In this respect, the FIAU would like to notify interested parties that work  in relation to the Central Bank Account Registry (CBAR) Project is progressing and the FIAU is now in a position to provide more insights into, and explanations of, the XML Schema and the associated validation rules, to all entities that will be required to upload data through the CBAR system.  

Link to FIAU News Publication can be found here.

01/04/2020 - Statement by the FATF President: COVID-19 and measures to combat illicit financing

In light of the current situation with regards to COVID-19, the FATF encourages governments to work with financial institutions and other businesses to use the flexibility built into the FATF’s risk-based approach to address any challenges posed by the virus whilst remaining alert to new and emerging illicit finance risks. The FATF is informing subject persons to address COVID-19-related financial crime risks by remaining vigilant. FIUs and law enforcement agencies should continue to share information with the private sector to prioritise and address key ML risks, particularly those related to fraud, and TF risks linked to COVID-19. 

Link to FATF News Publication can be found here.

28/04/2020 - FATF extends its assessment and follow up deadlines in response to COVID-19

The FATF has agreed to temporarily postpone all remaining FATF mutual evaluations and follow-up deadlines. The Task Force has informed subject persons that these decisions were taken as a response to the gravity of the COVID-19 situation affecting countries globally and also in light to the measures that countries have adopted, such as lockdowns and travel restrictions. Accordingly, the reviews intended to be carried out vis-a-vis high risk jurisdiction subject to call-for actions and jurisdictions subject to increased monitoring, have been postponed to June.

Link to FATF News Publication can be found here.

30/04/2020 - Mutual Evaluation Report United Arab Emirates 2020 

In recent years, the UAE has made significant improvements to its AML/CFT frameworks. It has developed the National Risk Assessment to address deficiencies, strengthened its Financial Intelligence Unit and assigned supervisors to previously non-covered sectors. However, there is still much to be done. While the jurisdiction has demonstrated a positive impact on technical compliance, the UAE’s Effectiveness Ratings are low to moderate in the majority of the 11 categories.

Link to FATF News Publication can be found here.

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Asset Management

01/04/2020 COVID-19: Clarification of issues related to the publication of reports by execution venues and firms as required under RTS 27 and RTS 28

ESMA issued a public statement on 31 March 2020, in order to clarify issues relating to the publication obligations imposed on execution venues and firms by RTS 27 and RTS 28, including that the reporting deadlines in this respect have been extended to by not later than 30 June 2020. 

Link to Circular can be found here.

02/04/2020 - Circular on Regulation (EU) No 2019834 on the European Market Infrastructure Regulation (‘EMIR’) REFIT - Consultation on draft Regulatory and Implementing Technical Standards (RTS and ITS)

This circular is addressed to all market participants who enter into derivative contracts which fall within the scope of EMIR. ESMA has published a consultation paper covering technical standards on reporting requirements, procedures to reconcile and validate the data and access by the relevant authorities under EMIR REFIT. ESMA is also proposing to revise certain aspects of reporting to the Trade Repositories (TRs) in order to align the EU reporting requirements with the global guidance on harmonisation of ITC derivatives data elements reported to TRs.

Link to Circular can be found here.

03/04/2020 - ESMA Publishes Consultation Paper on Guidelines on Article 25 of Directive 2011/61/EU

ESMA issued a consultation paper on draft guidelines to address leverage risks in the Alternative Investment Fund (AIF) sector in order to obtain feedback on the proposed principles to set leverage limits under Article 25 of the AIFMD. The proposed Guidelines aim at ensuring that National Competent Authorities adopt a consistent approach when assessing whether the condition for imposing leverage-related measures are met.

Link to Circular can be found here.

06/04/2020 - Update on Circularisation Exercise - R4-3.2.7 of Part BI of the Investment Services Rules

The above-captioned rule provides that - “where a Licence Holder holds or controls clients’ assets, the letter of engagement shall also require a circularisation exercise by the Auditors in order to reconcile a representative sample of client’s assets in cases where the Licence Holder holds or controls client assets”. In this respect, the MFSA issued a circular to provide guidance on the sample sizes and the minimum acceptable response rates required to be carried out when conducting a Circularisation Exercise. 

Link to Circular can be found here.

08/04/2020 - Final Report: ESMA’s Technical Advice to the Commission on the impact of the inducements and costs and charges disclosure requirements under MiFID II

ESMA has published its report to the European Commission (EC) on inducement and costs and charges disclosures under MiFID II. The advice having been provided by ESMA includes, inter alia: (i) encouraging the EC to conduct further analysis on the topic of inducements; and (ii) advising that some disclosure obligations vis-à-vis eligible counterparties and professional investors are scaled back. 

Link to Circular can be found here.

14/04/2020 - ESMA publishes the ESEF Conformance Suite

ESMA published the ESEF Conformance Suite, which specifically targets XBRL software developers and aims to facilitate adherence to the ESEF Regulation and the corresponding requirements. The Suite helps to determine whether the software tool being used to create and/or consume filings can detect and flag noncompliance with the ESEF requirements. Market participants can access the Suite, packaged in a zip file, and the accompanying test cases through the ESMA website.

Link to Circular can be found here.

17/04/2020 - ESMA Publishes Guidelines on Performance Fees in UCITS and Certain Types of AIFs

ESMA published the Guidelines on Performance Fees in UCITS and certain types of AIFs to ensure supervisory convergence of performance fee structures and the circumstances where performance fees may be charged. In brief, the Guidelines cover, inter alia: (i) the methodology for the calculation of the performance fee; (ii) the The frequency for the crystallisation of the performance fee; (iii) negative performance (loss) recovery; and (iv) the methods of disclosure of the performance fee model. The Guidelines will become applicable within two months of their publication. 

Link to Circular can be found here.

17/04/2020 - Circular to Recognised Fund Administrators on the submission of regulatory reporting in relation to Non-Malta domiciled funds administered in Malta

The MFSA Licence Holder Portal will start facilitating the uploading of regulatory reporting in relation to Non-Malta domiciled funds administered in Malta. Returns covering the period ending 31 March 2020 are to be submitted through the LH Portal and no longer by email. 

Link to Circular can be found here.

17/04/2020 - Accounting for COVID-19 related rent concessions applying IFRS 16 - Leases 

The IASB has published educational material in relation to IFRS 16 and COVID-19, intended to focus on the impact of COVID-19 in the application of IFRS 16-Leases, particularly in view of the several changes in lease payments that have been noted and are expected to occur. Accordingly, the publication provides guidance with respect to, inter alia (i) assessing whether a change in payments is a lease modification; (ii) changes in payments that are not lease modifications; (iii) partial lease liability extinguishment; (iv) impairment of assets; and (v) disclosure requirements. 

Link to Circular can be found here.

17/04/2020 - ESMA Guidelines on Alternative Performance Measures (APMs)

ESMA published 18 questions in its Q&As document on the implementation of its ‘Guidelines on the Alternative Performance Measures (APMs)’ for listed issuers. The purpose of this Q&A is to promote common supervisory approaches and practices in the implementation of these guidelines.

Link to Circular can be found here.

30/04/2020 - Extension in relation to the circular of the Users of Benchmarks in terms of the European Benchmarks Regulation response date 

Reference is made to the circular issued by the MFSA on 18 February 2020, whereby the MFSA requested information on the use of Benchmarks in terms of the European Benchmarks Regulations. Considering the outbreak of COVID-19, the MFSA considers it necessary to extend the response date in relation to the circular of the Users of Benchmarks in terms of the European Benchmarks Regulation up to Tuesday 30 June 2020.

Link to Circular can be found here.

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Banking

02/04/2020 - Circular to Credit Institutions on Dividend Distributions or Share Buybacks

The ECB is recommending that credit institutions conserve capital. Accordingly, the ECB considers it appropriate that the significant credit institutions refrain from making dividend distributions and performing share buybacks aimed at remunerating shareholders during the period of the COVID-19 related economic shock. In order to maximize the support to the real economy, it is also considered appropriate that discretionary dividend distributions should also not be made by less significant credit institutions. The MFSA is adopting this recommendation at least until 1 October 2020.

Link to Circular can be found here.

06/04/2020 - Circular to Less Significant and Financial Institutions on timing of Regulatory Reporting

MFSA is granting an extension of two months for the submission of audited annual financial statements, the copy of the auditor’s management letter including the LSIs’ management reply thereto, the ICAAP and ILAAP documentation and the Recovery Plan document, by Less Significant Institutions. Similarly, the MFSA is also granting an extension of two months for the submission of the financial institution’s audited annual financial statements, the copy of the auditors’ management letter including financial institutions reply thereto.

Link to Circular can be found here.

06/04/2020 - Circular to Credit Institutions on IFRS9 in the context of the Coronavirus (COVID-19) pandemic

The ECB has previously advised banks to avoid procyclical assumptions in their models when determining provisions provisions - and banks that have not done so as yet, should opt for the IFRS 9 transitional rules. The EBA has also highlighted that when applying the IFRS 9 international accounting standard, credit institutions are expected to use a certain degree of judgement. In this respect, the ECB issued guidance on and references to the use of forecasts to avoid excessively procyclical assumptions in their expected credit loss (ECL) estimations during the COVID-19 pandemic.

Link to Circular can be found here.

06/04/2020 - Circular to Financial Institutions outlining COVID-19 measures on Timing of Statutory Reporting

MFSA is granting one additional month for the submission of the following statutory reporting: (i) financial and Statistical Information Data Requirements pursuant to BD/06, with reference date end-March 2020; (ii) other Banking Rules Data Requirements (Other BRs), with reference date end-March 2020; and (iii) prudential data requirements specific to the type of activity, with reference date end-March 2020. This means that the remittance date for the above statutory obligations is now set to 15 May 2020.

Link to Circula can be found here.

15/04/2020 - Circular to Credit Institutions and Foreign Branches outlining COVID-19 measures on timing of Supervisory Reporting

The MFSA is informing all Maltese credit institutions and foreign branches situated in Malta of the [postponement of the deadline for the following reporting obligations in light of the current COVID-19 related circumstances - (i) with respect to significant institutions, Supervisory Reporting Modules (with the exception of LCR and ALMM modules), Funding Plans and ECB recurring data requests (such as STE data), with a few exceptions; (ii) with respect to less significant institutions Supervisory Reporting Modules with remittance dates between March 2020 and May 2020 (with the exception of the LCR and ALMM modules) and (iii) with respect to foreign branches, all reporting with remittance dates falling between the period March 2020 to May 2020. 

Link to Circular can be found here.

17/04/2020 - Circular on the provision of services to the public by Credit Institutions during the COVID-19 period

Due to the COVID-19 situation, banks in Malta and Gozo have had to make a number of changes to the way they provide their services in order to ensure ongoing service to their customers. The MFSA encourages banking customers to use phone or digital banking services offered by their bank - however, if customers feel the need to visit a branch, the MFSA recommends that customers try to do so on weekdays rather than weekends when more queues are expected. 

Link to Circular can be found here.

02/04/2020 - EBA publishes Guidelines on treatment of public and private moratoria in light of COVID-19 measures

The aim of these Guidelines is to clarify the requirements for public and private moratoria intended to help avoid the classification of exposures under the definition of forbearance or as defaulted under distressed restructuring. The EBA sees the payment moratoria as effective tools to address short-term liquidity difficulties caused by the limited or suspended operation of many businesses and individuals resulting from the impact of COVID-19. 

Link to EBA Publication can be found here.

22/04/2020 - EBA provides further guidance on the use of flexibility in relation to COVID-19 and calls for heightened attention to risks

The EBA issued further guidance to mitigate the impact of exceptional volatility triggered by the COVID-19 pandemic on the prudential requirements for market risk, whereby the EBA is proposing to adjust the capital impact by amending its standards on prudent valuation, particularly by introducing the use of a 66% aggregation factor to be applied until the 31 December 2020 under the so-called core approach. EBA also intends to delay reporting for the first FRTB-SA figures to September 2021. In such circumstances, the EBA emphasises the importance of digital operational resilience. In this respect, the EBA calls on institutions to ensure business continuity, adequate ICT capacity and security risk management. 

Link to Circular can be found here.

08/04/2020 - Circular to Insurance and Reinsurance Undertakings - EIOPA statement on dividends distribution and variable remuneration policies in the context of COVID-19

In light of the current COVID-19 related circumstances, EIOPA has issued guidance with respect to the actions to mitigate the impact of Coronavirus/COVID-19 on the EU insurance sector, which primarily puts emphasis on the importance of insurance companies taking the necessary measures to ensure business continuity as well as adopting a prudent approach with regards to the preservation of capital including allocation of bonuses and dividend distribution. 

Link to Circular can be found here.

21/04/2020 - Amendments to the Insurance Rules in light of the Recommendations on supervisory flexibility regarding the deadline of supervisory reporting and public disclosure - Coronavirus/COVID-19 issued by EIOPA

MFSA amended Chapter 8 of the Insurance Rules and introduced a new Annex VI thereto, for the purposes of adopting the recommendations made by EIOPA. The said Chapter 8 indicates the time frames within which the SFCR, the Regular Supervisory Reporting, the Own Risk and Solvency Assessment, the annual quantitative templates and the quarterly quantitative templates are to be submitted. Accordingly, the amendments are intended to offer operational relief and support business continuity of insurance and reinsurance undertakings by extending the time frames of such reporting. 

Link to Circula can be found here.

23/04/2020 - Note for Information regarding Application Forms in terms of the Insurance Distribution Act

Article 6 of the Insurance Distribution Act (Cap. 487 of the Laws of Malta) requires a person to be registered and enrolled under article 13 in order to be able to act as an insurance intermediary and carry out or attempt to carry out, in or from Malta, insurance distribution activities and reinsurance distribution activities. In this respect, in line with the MFSA’s vision and continuous commitment to facilitate and enhance this process – the MFSA has introduced a facility to compile and submit an application through the MFSA Licence Holder portal. 

Link to Circular can be found here.

07/04/2020 - EIOPA publishes Opinion on the supervision of remuneration principles in the insurance and reinsurance sector

EIOPA has published an Opinion on the supervision of remuneration principles in the insurance and reinsurance sector. The Opinion addresses how to ensure consistent practices in the application of the remuneration principles included in Solvency II and provides guidance to national supervisory authorities on how to challenge the application of certain principles. 

Link to EIOPA Publication can be found here.

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Company Service Providers

01/04/2020 - Circular addressed to Companies and individuals registered to act as a company service provider in terms of the Company Service Providers Act

The MFSA has issued this circular, which is addressed to all companies and individuals registered to act as a company service provider in terms of the Company Service Providers Act, in order to clarify certain issues and questions that were addressed in the industry feedback received by the MFSA about the 2019 ACR. 

Link to Circular can be found here.

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Financial Markets

17/04/2020 - ESMA Public Statement - Actions to mitigate the impact of COVID-19 on the EU financial markets regarding publication deadlines under the Transparency Directive Part 2 

This circular is addressed to listed entities whose financial instruments are admitted to trading on the Malta Stock Exchange (MSE). Reference should be made to the Listing Authority policy, whereby securities listed on the MSE are automatically suspended once an issuer fails to publish the audited financial statements or the interim financial statements within the timeframes stipulated in the Listing Rules. In view of the exceptional times resulting from the COVID-19 pandemic, the Listing Authority has decided to temporarily suspend the policy until further notice. 

Link to Circular can be found here.

17/04/2020 - Circular on the Market Abuse Regulation (EU) 596/2014 (‘MAR’ or the ‘Regulation’) - Preventing Insider Offences in light of the COVID-19 Pandemic

This Circular is addressed to listed entities whose financial instruments are admitted to trading on a trading venue. This circular covers, inter alia: (i) inside information, whereby issuers should disclose as soon as possible any knowledge of a significant impact on the issuer, performance or prospects due to the COVID-19 pandemic should be promptly disclosed if it qualifies as inside information; and (ii) list of insiders, whereby entities have designated specific individuals to monitor the issuer exposure to the COVID-19 risk, such individuals, unless already included in the issuer permanent LOI, should be included on a temporary LOI.

Link to Circular can be found here.

29/04/2020 - Circular on Regulation (EU) No 596/2014 on Market Abuse - Onsite Compliance Meetings with Investment Firms: General Findings & Way Forward

This circular presents the MFSA’s findings relating to how investment firms control the risk of financial market abuse. This follows a number of onsite compliance meetings held by the MFSA with investment firms falling within the scope of the Market Abuse Regulation (MAR). Accordingly, by virtue of this circular, the MFSA highlighted the key findings and also provided recommendations, merely for guidance purposes, of what are considered to be good practices for investment firms to seek to adhere to their legal obligations under MAR.

Link to Circular can be found here.

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Gaming

06/04/2020 - MGA Notice on COVID-19 and Sports Integrity

The COVID-19 pandemic has also had an impact on sports worldwide and, as a result, the betting sector is facing unprecedented challenges. The fact that betting markets have come to a complete halt given the suspension of sporting events - betting operators are looking elsewhere, including betting on events with different risk profiles to those traditionally offered. Esports is one such betting market which may see a significant boost during these times. In this respect, in order to safeguard the integrity of such events, the Malta Gaming Authority has issued a number of recommendations.

Link to MGA Publication can be found here.

27/04/2020 - The Malta Gaming Authority publishes amendments to the Gaming Premises Directive

The Malta Gaming Authority has carried out a number of amendments to the Gaming Premises Directive (Directive 2 of 2019) in order to guarantee the proper functioning of the regulatory mechanisms applicable to gaming premises and controlled gaming premises. These amendments cover, inter alia: (i) the conversion of regular players into junket players; (ii) the identification of employees; (iii) the count procedure; and (iv) the ‘no objection procedure’ relating to the approval of controlled gaming premises. 

Link to MGA Publication can be found here.

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Insurance

08/04/2020 - Circular to Insurance and Reinsurance Undertakings - EIOPA statement on dividends distribution and variable remuneration policies in the context of COVID-19

In light of the current COVID-19 related circumstances, EIOPA has issued guidance with respect to the actions to mitigate the impact of Coronavirus/COVID-19 on the EU insurance sector, which primarily puts emphasis on the importance of insurance companies taking the necessary measures to ensure business continuity as well as adopting a prudent approach with regards to the preservation of capital including allocation of bonuses and dividend distribution. 

Link to Circular can be found here.

21/04/2020 - Amendments to the Insurance Rules in light of the Recommendations on supervisory flexibility regarding the deadline of supervisory reporting and public disclosure - Coronavirus/COVID-19 issued by EIOPA

MFSA amended Chapter 8 of the Insurance Rules and introduced a new Annex VI thereto, for the purposes of adopting the recommendations made by EIOPA. The said Chapter 8 indicates the time frames within which the SFCR, the Regular Supervisory Reporting, the Own Risk and Solvency Assessment, the annual quantitative templates and the quarterly quantitative templates are to be submitted. Accordingly, the amendments are intended to offer operational relief and support business continuity of insurance and reinsurance undertakings by extending the time frames of such reporting. 

Link to Circular can be found here.

23/04/2020 - Note for Information regarding Application Forms in terms of the Insurance Distribution Act

Article 6 of the Insurance Distribution Act (Cap. 487 of the Laws of Malta) requires a person to be registered and enrolled under article 13 in order to be able to act as an insurance intermediary and carry out or attempt to carry out, in or from Malta, insurance distribution activities and reinsurance distribution activities. In this respect, in line with the MFSA’s vision and continuous commitment to facilitate and enhance this process – the MFSA has introduced a facility to compile and submit an application through the MFSA Licence Holder portal. 

Link to Circular can be found here.

07/04/2020 - EIOPA publishes Opinion on the supervision of remuneration principles in the insurance and reinsurance sector

EIOPA has published an Opinion on the supervision of remuneration principles in the insurance and reinsurance sector. The Opinion addresses how to ensure consistent practices in the application of the remuneration principles included in Solvency II and provides guidance to national supervisory authorities on how to challenge the application of certain principles. 

Link to EIOPA Publication can be found here.

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Trusts and Fiduciaries

01/04/2020 - Circular addressed to Companies authorised to act as a Trustee of Family Trusts in terms of article 43B of the Trusts and Trustees Act 

01/04/2020 - Circular addressed to Companies and individuals authorised as Administrators of Private Foundations in terms of article 43(12)(b) of the Trusts and Trustees Act

01/04/2020 - Circular addressed to Trustees and other fiduciaries authorised in terms of article 43 of the Trusts and Trustees Act

The MFSA has issued these circulars, addressed to: (i) all companies authorised to act as a Trustee of Family Trusts in terms of article 43B of the Trusts and Trustees Act; (ii) all companies and individuals authorised in terms of article 43(12)(b) of the Trusts and Trustees Act; and (iii) all trustees and other fiduciaries authorised in terms of article 43 of the Trusts and Trustees Act - in order to clarify certain issues and questions that were addressed in the industry feedback received by the MFSA about the 2019 ACR.

Link to Circulars can be found herehere and here.

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