RE: FCA17 Mar 2023 08:38
Managed to copy.
The UK’s top financial regulator has warned that it will shut down payments companies offering bank-like services without banking licences unless they urgently fix problems that pose an “unacceptable” risk to consumers and the wider system.
In a scathing letter to 291 chief executives on Thursday, Matthew Long, director of payments and digital assets at the Financial Conduct Authority, criticised payments companies for not adequately safeguarding clients’ money or conducting anti-money laundering checks and for failures of governance.
Long said the watchdog welcomed “the competition and innovation we have seen in the payments sector and the improved choice, convenience and value this can provide for customers”, alluding to the explosion of groups such as Revolut since the UK introduced e-money licences in 2000.
But he warned that the FCA “remain[ed] 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”, adding that the cost of living crisis had exacerbated “the risk of customer harm”.
One person familiar with the matter said the regulator’s concerns reflected its “longtime priorities” and were unrelated to the collapse last week of Silicon Valley Bank, which triggered broader fears about the fragility of financial institutions in the UK, Europe and the US.
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.
Long also criticised “significant issues with governance, oversight and leadership in the portfolio” of e-money companies. These included 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”.
“Our work with firms over the past two years has identified material issues with financial crime systems and controls,” he said, 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”.
Ordering companies to make a range of improvements, Long vowed to take “swift and assertive action to protect customers and ensure market integri
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