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FCA takes aim at payment firms over 'unacceptable' risks

FCA takes aim at payment firms over 'unacceptable' risks

The Financial Conduct Authority has written to nearly 300 payment companies warning that it will shut them down if they do not take prompt action to address "unacceptable" risks to consumers and financial system integrity.

In a letter to the CEOs of 291 payment firms, the FCA's director for payments and digital assets, Matthew Long, says the watchdog welcomes the competition and innovation that has flourished in the UK's payments sector.

"However," he writes, "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."

The letter highlights a number of common failings at payment firms regarding the safeguarding of customers' money in the event of insolvency, including inadequate reconciliation processes and a lack of processes for identifying which funds are 'relevant funds' and must be safeguarded.

Long also highlights a lack of appropriate liquidity risk management and the failure to consider whether firms should hold capital above their regulatory requirement.

Companies are also failing to put in place adequate money laundering and sanctions systems and processes, as well as falling short on tackling fraud.

Conclude the letter: "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."

To learn more about payments innovation, register for NextGen Nordics to take place on 25 April 2023.

Read the letter:

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