Matthew Long, Director of Payments and Digital Assets at the Financial Conduct Authority (FCA), criticized payments companies for not adequately safeguarding clients’ money or conducting antimoney laundering checks and for failures of governance. Financial Conduct Authority warns 291 companies of ‘swift and assertive action’ in cases of non-compliance.
Since the UK introduced e-money licenses in 2000, an explosion of groups such as Revolut brought convenience to customers and plenty of innovative solutions that we have seen within the payments sector in the last years.
What risks do payments groups pose?
FCA “remained concerned that many payments firms do not have sufficiently robust controls and as a result, some firms present an unacceptable risk of harm to their customers and to financial system’s integrity”, adding that the cost of living crisis had exacerbated “the risk of customer harm”.
The regulator’s concerns are based on its “longtime priorities”, which are related to significant issues with governance, oversight and leadership in the portfolio of e-money companies. Besides that, FCA mentioned a “lack of appropriately knowledgeable and experienced personnel” in vital areas such as compliance, and “risk procedures and controls that are not comprehensive and proportionate to the
nature, scale and complexity of the business”.
Another extremely important issue mentioned by the UK regulator is related to financial crime systems and controls, stressing that “payments groups were a target for bad actors because of their ability to provide bank-like services, willingness to service high-risk customers and weaknesses in some firms’ systems and controls”.
Among the FCA’s criticisms of e-money groups — none of which it named — is a failure to comply with a requirement from 2020 to create plans that would allow for their orderly wind-down, or creating plans that were “overly optimistic” about how wind-downs would work.
Conclusions
In cases where firms can’t meet the conditions for authorization, FCA is going to take more assertive action and will remove or sanction firms who cannot or will not meet the standards.
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