FCA compliance and authorisation is fundamental to any financial services firm operating in the UK. As the UK’s financial market continues to thrive, and as a growing number of startups get involved in financial services, good governance and clear regulations are essential, both to protect customers and to ensure the sector remains reliable and trustworthy. Until the pandemic hit, the financial sector had been booming with many new businesses being set up, and more tech companies getting involved in the fintech, digital banking, cloud accounting and online payment sectors. However, any sector dealing in financial data, transactions and assets has an inherent risk level, hence the need for them to be regulated and meet FCA compliance requirements.
What is FCA compliance?
The Financial Conduct Authority (FCA) is responsible for regulating all of the UK’s financial services industries. Through its regulation, the FCA aims to protect customers, promote healthy competition and increase the overall integrity of the financial services market.
FCA compliance is the gold standard for financial regulation and can increase customer confidence and trust in a business which has met its compliance requirements. However, ensuring your business is compliant, and remains so, is a time-consuming task that many businesses find overwhelming. To help you on your compliance journey, here are some necessary requirements for becoming FCA compliant and how you can prepare you application to the FCA if your business intends to issue e-money or perform payment services.
FCA compliance requirements
A requirement of FCA compliance is that a business has effective communication channels in their organisation. It needs to be clear to FCA regulators how management decisions are relayed to staff. This evaluating of a firm’s communication structure is part of evaluating compliance and according to the FCA, all elements, procedures, and policies are important in communication.
The FCA sees individuals in management positions as playing an essential role in guiding their staff by their behaviour. Communication from management therefore goes beyond verbal or written. Practices such as corporate governance and ethics are fundamentals of FCA compliance and must be carefully considered.
Responding to clients
Receiving client feedback is valuable for any business and how a business responds to that feedback is equally important. Client feedback can help firms identify shortcomings as well as guidance on how to enhance and improve the services they provide. The FCA requires that management ensure client responses are collected and teach staff how to effectively respond to feedback.
There are specified training requirements relating to compliance and anti-money laundering. New methods and practices, particularly concerning FCA compliance, may also require training. To keep employees up to date on important information, management should schedule regular training or workshops. Training is also essential to refresh the skills and knowledge of employees.
The FCA requires that a firm must ensure that a communication or financial promotions is clear, fair and not misleading. Financial promotions that are not accurate, disguise important information and are not likely to be easily understood by the target group, will receive negative attention from the FCA.
Record keeping requirements
For the FCA to carry out its supervisory tasks, it is essential that they have sufficient records from a firm, such as personnel and assessment records. As well as records of actual transactions and client activity, these records should also contain documents of training, competence, supervision and recruitment. There are set regulations and guidance on how long different records need to be kept.
Third party relationships
The FCA requires that firms store contracts and agreements of their work with third party suppliers. Collecting intelligence before engaging with third-party suppliers is necessary as the degree of keenness is critical in compliance and regulation.
Preparing your FCA application
If your business intends to issue e-money or perform payment services within the UK, you will need to submit an application to the FCA to be regulated. This application covers all areas of your business and, if your application is successful, the FCA will continue to monitor your business through a combination of baseline monitoring of your returns, thematic reviews, post implementation reviews and complaints data.
There are three stages in gaining authorisation.
1. Developing your Compliance Processes and Documentation
The first stage is to develop compliance processes and documentation and embed these within your operations, to ensure you organisation understands and meets it regulatory obligations. Your compliance framework is the total of all your procedures and controls that ensure that you are meeting Regulatory requirements within your business operations.
This framework needs to be documented to Regulatory standards in the format of operating manuals for your business. The FCA will focus on this documentation when considering your application. The areas the framework should cover include:
- The Regulatory Business Plan based on the envisioned operating model
- Compliance, risk and anti-financial crime framework
- Monitoring Plan
- Data Protection/Information Security
- Business Continuity/ Disaster Recovery
- Customer service obligations including Terms and Conditions
- Audit arrangements
- Corporate Governance and Reporting
- Initial and on-going capital
- Training and Competence Regime
In order to meet the FCA’s regulatory obligations, you will need to have in place certain key personnel with compliance experience and training, such as a Money Laundering Reporting Officer.
2. Completing and Submitting your FCA Application
At this second stage the application can be completed and submitted to the FCA along with the necessary supporting documentation. There are several forms which need completing, which cover the business operations, compliance frameworks and controls, business financing, IT systems and key personnel.
The application process includes:
- Completion of all the required application forms relevant for your business
- Gathering and review of all supporting documentation, including your compliance framework, to ensure consistency across all documentation submitted.
- Independent third party audits if applicable
- Application submission
3. Regulatory Liaison
Following the application submission, the FCA assigns the firm a Case Officer, who will be the main point of contact with them. The Case Officer will:
- Keep you up to date on the progress of your application
- Contact you for any additional information or concerns they may have
- Arrange for meeting with your senior management if appropriate
How we can help your business
Neopay leads the market in navigating companies through the FCA compliance process. We have a 100% success rate in gaining authorisation for our clients and, through our ethos of knowledge sharing and partnership, we deliver confidence and understanding as well as a successful application.
If you would like more information on how we can support your business in meeting your FCA compliance requirements, contact us here.