The Financial Conduct Authority has told almost 300 payment companies in a letter that they will be shut down if they don’t act quickly to fix “unacceptable” risks to consumers and the stability of the financial system.
In a letter to the CEOs of 291 payment companies, Matthew Long, the FCA’s director for payments and digital assets, says that the watchdog is happy with how competition and new ideas have grown in the UK’s payments industry.
“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 points out a few common mistakes that payment firms make when it comes to protecting their customers’ money in case they go bankrupt. These mistakes include not having good reconciliation processes and not having a way to figure out which funds are “relevant funds” that need to be protected.
Long also points out that there isn’t enough management of liquidity risk, and firms don’t think about whether they should hold more capital than is required by the government.
Companies are also not putting in place the right systems and processes to deal with money laundering and sanctions, and they are not doing enough to stop fraud.
End the letter with:
“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.”
