From August 2019, certain existing FCA rules and guidance will extend to payment service providers and e-money issuers in a signal that the FCA wants a consistent approach to consumer protection.

By Rob Moulton, Brett Carr, and Frida Montenius

The FCA has published a Policy Statement extending certain rules and guidance to the payment services and e-money sectors, following a Consultation Paper published in August 2018. The extensions concern the FCA’s Principles for Businesses (Principles) and the Banking Conduct of Business Sourcebook (BCOBS), along with new guidance concerning the communication and marketing of currency transfer services. The FCA has made these changes, aimed at payment institutions (PIs), electronic money institutions (EMIs), and registered account information service providers (RAISPs), with a hope to protect consumers by providing a clear and consistent set of rules that firms must abide by.

Background

The motivation behind the extensions is to standardise the current regulatory approach in order to better align customer expectations of firm behaviour and customer treatment, with the aim of protecting the interests of consumers. The FCA has noted that some firms have been guilty of bad practices, and the extension of rules is a step to foster an environment that prevents consumer harm. With consistent standards that apply equally to all firms — notably including a fast-evolving, ever-changing payments landscape — the new extensions are intended to enhance competition by allowing consumers to make more informed choices while ensuring that consumers are adequately protected by clamping down on misleading communications and other harmful practices.

Examples of good and poor practices provide helpful guidance, and a reminder of supervisory expectations.

By Frida Montenius, Jonathan Ritson-Candler, and Charlotte Collins

The FCA has published TR18/3, setting out the findings from its thematic review of the anti-money laundering (AML) and counter-terrorist financing (CTF) systems and controls in 13 Electronic Money Institutions (EMIs). Although the review only focused on EMIs, the findings have wider read-across and therefore are of interest to all firms within scope of the Money Laundering Regulations 2017 (MLRs 2017).

Indeed, given the FCA’s current focus on financial crime as a priority area in its supervisory (and enforcement) activities — and the fact that updating policies and procedures to reflect changes brought about by the MLRs 2017 perhaps may have been overlooked by some — now is a good time for firms to reflect on AML and CTF systems and controls and check that they are up to date and meeting expectations.

By Andrew Moyle, Stuart Davis, Fiona Maclean, Christian McDermott and Charlotte Collins

The Bank of England (BoE) announced on 19 July 2017 that it is extending direct access to its real-time gross settlement (RTGS) service to non-bank payment service providers (i.e., e-money institutions and payment service providers that do not have regulatory permissions to carry out the “core” banking activity of taking deposits), subject to appropriate safeguards.

For the first time, non-banks will be able to apply for a settlement account with the BoE, providing direct access to the UK’s sterling payment systems that settle in sterling central bank money, including Faster Payments, Bacs, CHAPS, LINK, Visa, and, once live, the new digital cheque imaging system.

This change to the BoE’s settlement account policy is part of a broader strategy to widen access to the UK’s payment systems, to help smooth the path for new entrants such as FinTech payment firms to compete on a more level playing field with incumbent banks. This is an important development for non-banks as, at present, non-bank payment service providers can only “plug in” to these essential BoE payment systems indirectly via settlement agent banks, limiting access and therefore the ability of non-banks to compete with their bank counterparts.