The UK’s top financial regulator has warned it will shut down payments companies offering bank-like services without a banking license unless they urgently address problems that pose an “unacceptable” risk to customers and the wider system.
in condemnation letter At 291 chief executive on Thursday, Matthew Long, the Financial Conduct Authority’s director of payments and digital assets, criticized payments companies for not adequately safeguarding customers’ money or for failing to carry out anti-money laundering checks and governance.
Long said the watchdog welcomed “the competition and innovation we’ve seen in the payments sector and the improved choice, convenience and value this can provide for consumers”, pointing to the explosion of groups such as Revolut since the introduction of e-money licenses in the UK. 2000.
But he warned that the FCA “remains[ed] is concerned that many payment companies do not have strong enough controls and, as a result, some companies present an unacceptable risk of harm to their customers and the integrity of the financial system”, adding that the cost of living crisis “extends the customer’s risk. loss”.
A person familiar with the matter said the regulator’s concerns reflected its “longer-term priorities” and were unrelated to the collapse of Silicon Valley banks last week, which sparked widespread fears about the fragility of financial institutions in the UK, Europe and the US.
Among the FCA’s criticisms of the e-money group – none of which were named – was its failure to comply with the requirement to make plans that would allow for an orderly wind-down from 2020, or to make plans that were “more optimistic” about how the wind-down would work. will do
Long also criticized significant issues with governance, oversight and leadership in the portfolio of e-money companies. These include “a lack of appropriately knowledgeable and experienced staff” in critical areas such as compliance and “risk processes 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 payment groups were “targets for bad actors” because of their “ability to provide bank-like services, willingness to carry high risk.” There are weaknesses in customer service and some companies’ systems and controls.
Ordering the companies to make a series of reforms, Long vowed to take “swift and firm action to protect consumers and ensure the integrity of the market” if they did not comply.
“In case companies do not meet the conditions for authorization, we will take more decisive action sooner and remove or approve companies that cannot or will not meet our standards,” he said.