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FCA issues letter to payment firms over lack of controls and unacceptable risk

payment firms lack controls and pose unacceptable risk
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The Financial Conduct Authority (FCA) has issued a new “Dear CEO” letter to payment firms in the UK. The FCA “remain[s] concerned” that many payment firms do not have sufficiently robust controls and therefore “present an unacceptable risk of harm to their customers and to financial system integrity”.

In the letter, the FCA wrote they had identified “material issues” with anti-crime controls, along with “elevated fraud rates” in some firms. The nation’s cost-of-living crisis heightens the risk of customer harm and the regulator will take assertive action against problematic firms, according to the letter.

The FCA believes payment firms are a target for bad actors due to their ability to provide bank-like services, willingness to service high-risk customers and weaknesses in some firms’ systems and controls.

Key actions for payment firms

In the letter, the FCA highlighted the three key outcomes they have set for payments firms, which are:

  1. Firms should ensure that their customers’ money is safe through safeguarding controls, prudential risk management and wind-down planning.
  2. Firms need to ensure they are not compromising financial system integrity, covering areas such as money laundering and sanctions as well as fraud.
  3. Ensuring customers’ needs are met through high quality products and services, in accordance with the requirements under the Consumer Duty.

The letter highlights failings observed by the FCA and urges firms to take specific actions outlined in the letter. A copy of the letter can be accessed here.

The FCA encourages firm’s senior management to review these concerns and failings and where needed, take appropriate actions. Firms are expected to demonstrate to the FCA what actions they have taken in response to this letter.

The FCA said “Where we identify issues, we will take swift and assertive action to protect customers and ensure market integrity in accordance with the approach to supervision and enforcement described in our Approach Document. The FCA 2022/2025 strategy has committed to act earlier and more assertively in dealing with problem firms. 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.”

How we can help

Neopay can help by reviewing your overall compliance and regulatory framework, systems and controls to ensure that your business complies with the regulatory requirements. We can support your business in ascertaining where your business stands in respect of the concerns flagged by the FCA in the letter. To find out more, please contact our specialist team here.

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