Payment services authorisation update Dec 22

Dec 16, 2022 11:09:23 AM

What has happened?

During a recent regulatory compliance forum, a keynote speech made by Nicholas Webb, the manager of the FCA’s e-money supervision team, emphasised that the FCA has been studying the payments sector very closely and that the closer the regulator looks, the worse the picture becomes.

Nicholas Webb also said that if any payments or e-money firm comes to the FCA’s attention for any reason, whether through a notification, an error in its regulatory returns, a complaint, or a negative story in the media, the firm could be subject to a review where the FCA will ask questions about the firm’s whole business, including its governance, safeguarding AML/financial crime arrangements, prudential matters and liquidity. The FCA has said that during this process it will be taking account of a wide range of intelligence including social media and online review sites such as Trustpilot.

What are the key points for firms?

The FCA has powers under section 165 of the Financial Services and Markets Act 2000 to require information and documents from firms to support its supervisory and enforcement functions and it is increasingly using these powers to demand information from firms. The requirement to respond to an s165 can be applied within a very short timescale, in some cases less than a week from the date of the letter.

If a firm is unable to provide the documentation required within the specified timescale, the FCA is likely to conclude that it does not have appropriate systems and controls in place and is therefore in breach of its regulatory obligations.

In order to be able to respond quickly to an FCA request for information, it is vital that firms understand what they are required to do to be compliant and ensure that they have the evidence to prove to the regulator that they are doing it.

The FCA’s focus on the payments sector and its view that it is a problem area means that the regulator is likely to be keen to take action where a firm cannot show that it is compliant. This may start with the FCA requiring a voluntary undertaking from the firm to stop doing business until the issue is rectified. If it then concludes that rectification is not possible within a reasonable time, it could ask the firm to voluntarily relinquish its permission, under threat of enforcement action to remove the permission if voluntary action is not forthcoming.

Firms wishing to avoid this experience need to be properly prepared and be able to show that they are taking all reasonable steps to be compliant. This includes having independent audits and reviews and ensuring proper minuting of Board discussions on key regulatory matters such as their level of own funds, liquidity testing, safeguarding, wind-down planning, complaints, operational resilience, and the Consumer Duty.

How can we help you?

If you’ve not already done so, now may be a good time to consider a compliance health check to ensure that your compliance arrangements are adequate. If you’d like to know more about how we can help you with your payment services regulatory obligations, including a high-level review of the effectiveness of your compliance arrangements, the Consumer Duty, or any other regulatory compliance issues, our specialist team is here to help.

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