10 Jul 2020
The City regulator has warned non-bank payments businesses that serve millions of consumers and small businesses that they face a crackdown over a series of failings.
The Financial Conduct Authority told chief executives of regulated payment service providers and electronic money businesses that they must strengthen the way in which they safeguard customers’ money as it highlighted a litany of shortcomings in their businesses.
Payment service providers and e-money businesses offer some of the services that a consumer or small business might want from a bank, but have lighter regulatory oversight. They provide a platform for the creation of non-bank services, such as accounts to people frozen out of mainstream banking.
An accounting and alleged money-laundering scandal at Wirecard, the German payments company, has brought fresh scrutiny to the industry. Wirecard’s UK division is regulated as an e-money business and was temporarily frozen by the FCA after the insolvency of its parent company, causing chaos within the financial technology industry and for hundreds of thousands of customers.
The authority highlighted six areas of particular concern, including continued fears that e-money firms are mishandling customer funds.
It said that it was finding “material issues”, including not holding appropriate safeguarding accounts and failures to check that customers’ funds were safe. Supervisory work also revealed that “several firms were failing to take appropriate steps to properly manage their financial crime risks”.
An Open Democracy investigation published by this newspaper yesterday revealed an open Russian trade in UK shell companies offering e-money accounts and licences.
By James Hurley and Katherine Griffiths, The Times, 10 July 2020
Read more at The Times
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