FCA Says Many Payments Firms’ Controls Aren’t ‘Sufficiently Robust’

A United Kingdom regulator has cautioned payments firms that it expects their controls to be “sufficiently robust.”

The Financial Conduct Authority (FCA) sent a letter to such firms on Thursday (March 16), saying they should ensure their customers’ money is safe, that their firm does not compromise the integrity of the financial system and that they meet their customers’ needs.

“We welcome the competition and innovation we have seen in the payments sector and the improved choice, convenience and value this can provide for customers,” the FCA said in the letter. “However, we remain concerned that many payments firms do not have sufficiently robust controls and that as a result some firms present an unacceptable risk of harm to their customers and to financial system integrity.”

To ensure customers’ money is safe, payments firms should make safeguarding customers’ funds a top priority, regularly review their prudential risk management arrangement and have an appropriate wind-down plan in place, according to the letter.

To ensure they do not compromise financial system integrity, firms should ensure that their anti-money laundering (AML) systems and controls are effective, protect their customers against the risk of fraud and ensure the firm is not being used to receive the proceeds of fraud, the letter said.

And, to ensure they meet their customers’ needs, payments firms should ensure compliance with the FCA’s Consumer Duty, per the letter.

Beyond that, the FCA said in the letter, firms should ensure their governance and leadership meets the regulator’s expectations, ensure they are operationally resilient and comply with FCA’s reporting requirements.

The FCA will take “swift and assertive action” when it identifies issues among payments firms, the regulator said in the letter.

“The FCA 2022/2025 strategy has committed to act earlier and more assertively in dealing with problem firms,” it said. “We will continue to intervene using our full range of supervisory tools. In cases where firms can’t meet the conditions for authorisation, we will take more assertive action sooner and will remove or sanction firms who cannot or will not meet our standards.”

The release of this letter comes about a month after FCA Director of Payment and Digital Assets Matthew Long sent a letter to eMoney company CEOs and directors ahead of the new Consumer Duty rules that are to take effect July 31.

“For many, meeting the Duty will require a significant shift in culture and behaviour,” Long wrote in the letter.