Regulator warns payment firms over “unacceptable risk” to consumers
The City watchdog has threatened to “remove or sanction” payment firms that do not have sufficiently robust controls in place to protect consumers.
The Financial Conduct Authority (FCA) has written to almost 300 chief executives of payment firms, including e-money providers, urging them to tighten up their processes.
“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,” said Matthew Long, director of payments and digital assets at the FCA, who authored the letter.
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“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. We consider that the risk of customer harm is heightened by the tightening economic
conditions and the cost-of-living crisis.”
The regulator told firms to “take appropriate action” to deliver three outcomes: to ensure that their customers’ money is safe; to ensure that their firm does not compromise financial system integrity; and to meet their customers’ needs, including through high quality products and services, competition and innovation, and robust implementation of the FCA consumer duty.
The letter highlighted a number of common issues at payment firms, including the failure to inadequately safeguard customers’ money in the event of insolvency; inadequate money laundering protections; inadequate liquidity risk management; a lack of stress-testing and poor wind-down plans.
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The FCA said it had seen increasing evidence of financial crime within the payments sector over the past two years, and called on firms to boost their due diligence processes.
“Where we identify issues, we will take swift and assertive action to protect customers and ensure market integrity,” said Long.
“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.”
Payment firms do not usually have banking licences so have to keep customer money in ringfenced accounts run by licenced deposit-takers.
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