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  • Writer's pictureAmiran Azaladze

FCA Scolds Payment Firms over 'Lack of Controls' (United Kingdom)

Updated: Apr 22, 2023

The Financial Conduct Authority, the UK’s top financial regulator, has scolded many payments firms in the country, including payment institutions (PIs) and electronic money institutions (EMIs) for lacking “sufficiently robust controls,” thereby posing “unacceptable risks” to their customers. Additionally, the watchdog said it has evidence of financial crimes in the operations of payment firms in the country over the last two years.

Matthew Long, the Director of Payments and Digital Assets at the FCA, disclosed these in a 10-page-long letter addressed to chief executive officers of payment firms under the authority’s supervision. The Financial Times reported that the letter was addressed to 291 CEOs.

"The ability to provide bank-like services, willingness to service high-risk customers, and weaknesses in some firms’ systems and controls, make PIs and EMIs a target for bad actors," Long noted.

FCA Speaks on Elevated Frauds, Safeguarding Customers’ Funds

In the letter, Long noted that the regulator in its work with PIs and EMIs over the past two years has identified “material issues” with the firm’s financial crime systems and controls. These include failure to carry out adequate know-your-customer procedures and regularly review and refresh risk assessments and control frameworks in an evolving threat landscape.

FCA Faults Unauthorized Acquisitions, Poor Service Delivery

Writing further in the letter, Long noted that while the regulator had seen good examples of positive innovation by payment firms, it has also identified cases where products and services “do not consistently deliver good customer outcomes” and where payment firms do not act in customers’ best interests.

In addition, the director noted that the regulator has seen instances where payments services and electronic money firms finalized acquisition plans without the approval of the FCA. The regulator described this as a criminal offence, warning that it may use its prosecution powers.

“We will continue to intervene using our full range of supervisory tools. In cases where firms can’t meet the conditions for authorization, we will take more assertive action sooner and will remove or sanction firms who cannot or will not meet our standards,” Long noted.

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