Using an image with a colour scheme reminiscent of a nearby overseas regulator with a similar senior executive regime, Ireland's Minister of Finance, Paschal Donohoe, has announced that today (27 July 2021) he has received agreement from Cabinet to approve the drafting of the Central Bank (Individual Accountability Framework) Bill, the main purpose of which is to improve accountability in the financial sector.

​What does this mean for regulated firms and individuals particularly senior executives? Read below where you can download both the (i) General Scheme - Central Bank (Individual Accountability Framework) Bill and (ii) Regulatory Impact Assessment - Central Bank (Individual Accountability Framework) Bill.

​If you need to know more, contact the team at CompliReg via the details here.

We will soon be announcing details of our S.E.A.R Hub website.  To find out more, follow Peter Oakes and CompliReg on Linkedin.

There are four main aspects to the proposed Heads along with necessary technical changes to existing legal processes. All of these make up the Individual Accountability Framework.
This draft legislation provides for:

1. The introduction of a Senior Executive Accountability Regime (SEAR), which places obligations on firms and senior individuals within them to set out clearly where responsibility and decision-making lies.

SEAR will apply to those in management roles within:

• Credit institutions (excluding credit unions);
• Insurance undertakings (excluding reinsurance undertakings, captive (re)insurance undertakings and Insurance Special Purpose Vehicles);
• Investment firms which underwrite on a firm commitment basis and/or deal on own account and/or are authorised to hold client monies/assets; and
• Third country branches of the above.

2. The introduction of:

a. Common conduct standards to apply to all persons in controlled function roles;
b. Additional conduct standards for individuals in senior positions; and
c. Business conduct standards for all regulated firms in the financial sector.
The introduction of these conduct standards will give the Central Bank powers to set and impose binding and enforceable obligations on all Regulated Financial Service Providers (RFSPs) and individuals working within them with respect to expected standards of conduct.

3. Enhancements to the Fitness & Probity Regime to ensure the effective operation of and ability of the regime to support the Individual Accountability Framework and the conduct standards for individuals and firms.

4. Breaking the “Participation Link”, which addresses the known deficiency in the legislation which requires the Central Bank to first prove a contravention of financial services legislation against an RFSP before it can take action against an individual.

Sanctions to apply under the Central Bank’s Administrative Sanctions Procedure for breaches of SEAR or Conduct Standards; and Technical amendments to improve existing legislation and clarify certain statutory processes.

The additional powers that will be provided to the Central Bank are significant and, in drafting these Heads, care has been taken to adopt the correct balance between these powers and the protection of individuals’ constitutional rights.

SEAR’s focus is on preventing misbehaviour or mismanagement by senior management. By requiring individual accountability from senior management, supported by enforcement powers, there is an incentive for senior management to comply with financial services law. SEAR also fulfils the purpose of incentivising and assisting regulated firms in strengthening their internal processes through management responsibility maps and clarification of senior management responsibilities.

The adoption of conduct standards across all regulated financial service providers sets out the standards expected of relevant individuals who work in such firms. Given that more junior staff will be in scope of the common conduct standards being introduced, there is a range of safeguards included, so that staff will be aware of what is expected of them.

Ultimately a key challenge will be the rebuilding of trust in the financial sector. The rebuilding of trust will require ongoing cultural and practical change in the banking sector and throughout the financial services industry. The Central Bank (Individual Accountability Framework) Bill will make a significant contribution to bringing about this needed cultural change.
​
It is anticipated that the introduction of the Framework will mean that:

• Customers will benefit from financial service providers that are fully accountable for the level of service and advice they provide;
• Employees of financial institutions will benefit from having greater clarity as to their exact roles and responsibilities and will be empowered to speak up when they see failings;
• Firms and their shareholders will benefit through the creation of real accountability for senior executives; and
• The wider economy and society will benefit from a more stable financial system by reducing the ability of senior decision makers to make risky decisions for which they will be unaccountable and will pay no cost.

Next steps
The Minister for Finance will write to the Chair of the Committee on Finance, Public Expenditure and Reform and the Taoiseach regarding pre-legislative scrutiny. Officials will engage with the Office of the Parliamentary Counsel to the Government to begin drafting the legislation on the basis of the General Scheme published today.

General Scheme - Central Bank (Individual Accountability Framework) Bill

Regulatory Impact Assessment - Central Bank (Individual Accountability Framework) Bill

Coinciding with Minister Donohue's announcement, the Central Bank of Ireland released a statement today (27 July 2021) saying:

"The Central Bank of Ireland welcomes today’s publication of the General Scheme of the Central Bank (Individual Accountability Framework) Bill 2021 by the Department of Finance.
The Central Bank has been actively engaged with the Department of Finance on these proposals and will continue to work with the Department of Finance throughout subsequent stages as the legislation progresses through the Oireachtas to enactment.

Experience has shown that in order for a regulatory framework to work well, it should stimulate strong and effective governance within firms. To achieve this:

• the allocation of responsibilities within firms needs to be transparent, clear and comprehensive; and
• individuals need to know what they are responsible and accountable for, be clear what standards of behaviour are expected of them, and recognise that where their actions fall short of expected standards, they will be held accountable.

​The following four key components of the Individual Accountability Framework (IAF), proposed in the Central Bank’s Behaviour and Culture Report into Irish Retail Banks, set out to achieve these behavioural, cultural and regulatory objectives:

• The Senior Executive Accountability Regime will require firms to set out clearly and comprehensively where responsibility and decision-making lie in order to achieve transparency as to who is accountable for what within firms.
• The enforceable Conduct Standards set out the behaviour expected of firms and their staff, including obligations to conduct themselves with honesty and integrity, to act with due skill, care and diligence, and in the best interest of consumers.
• The Central Bank’s Fitness & Probity Regime will be enhanced and will place a greater onus on firms to proactively certify that certain staff are fit and proper and capable of performing their roles with integrity and competence.
• The Central Bank’s Administrative Sanctions Procedure will be strengthened to ensure that individuals can be pursued directly for their misconduct rather than only where they have participated in a firm’s wrongdoing. The reforms will also provide for greater process efficiency, clarity and administrative consistency to all involved, including those who may be the subject of enforcement action. A continued focus by the Central Bank on proportionality and fair procedures is a key theme of its IAF proposals.

The various separate aspects of the IAF complement each other to achieve the ultimate goals of better outcomes for consumers and a more sustainable financial system by driving higher standards of behaviour for individuals in financial services firms.

The IAF is ultimately about incentivising positive behaviours and promoting an improved culture within firms while strengthening the Central Bank’s enforcement toolkit, particularly with respect to individuals, to allow the Central Bank to more effectively hold to account those that fall below the expected standards.

Once the Bill has been enacted the Central Bank intends to publicly consult on the implementation of the IAF."

Proposed 5 year strategy issued by Payment Systems Regulator.

The PSR's strategy  sets out  an approach that  aims to make sure payments and payment systems  work  well for everybody and that there is fair competition and access to payments for all. The approach is to protect and embrace what’s working well, change what’s not,  and lay the foundations for new products, ways to pay and new payment systems so that they develop with the needs of real people and businesses in mind. ​  
 
Key elements of the PSR Strategy   
The strategy sets out the PSR’s perspective on payment systems and the markets they support. It considers what is going well, where there is scope for improvement, and the risks and issues that need to be tackled.   

• Priority 1: Ensure users have continued access to the payment services they rely upon and support effective choice of alternative payment options.  
• ​Priority 2: Ensure users are sufficiently protected when using the UK's payment systems, now and in the future. 
• Priority 3: Promote competition in markets and protect users where that competition is not sufficient, including a) between payment systems within the UK and b) in the markets supported by them.   
• Priority 4: Ensure the renewal and future governance of the UK's interbank payment systems supports innovation and competition in payments.

​
What this looks like in practice   
In the strategy the PSR also sets out a number of actions it will take to deliver these priorities. Some of the key actions it is proposing include:   

• Promoting  competition between payment systems  so that, for example,  in future people may  choose to use interbank payments (when a payment moves from one bank account to another, like an online transfer) to buy their groceries. Most people currently  use  card payment systems to do this.  
• Continuing to protect access to cash for those that rely on it.  
• Making  sure that,  as interbank payments develop (like in the example above), so do the  consumer  protections  associated with them.  
• Supporting  developments to  Pay.UK’s  governance of the interbank rules so it has greater ability to enforce compliance with its rules and  make  changes that improve outcomes.  
• Understanding and taking account of the perspective of vulnerable consumer groups towards new ways of paying and the choices available to them.  

 
What happens next  
This document is a proposed  strategy .  The PSR is now seeking feedback  from everyone with an interest in payment systems and how they work.  The deadline for responding is  10 September 2021.  
 
This will  help the PSR finalise its approach and ensure  it is focused on the right outcomes,  and - ultimately - have a strategy that is balanced and credible in the eyes of those its regulates and protects.   
 
As well as gathering written feedback  the PSR is  arranging a series of engagement events to listen and understand  the views of its stakeholders.  More information about these events can be found on its website.   
 
If you have any questions, please get in touch via [email protected] 

Links: 

1. Proposed 5 year strategy 
2. ​Linkedin Post 

In my previous post on EML Payments (EML) (see here) we noted that EML had advised that its Irish regulated subsidiary, PFS Card Services (Ireland) Limited ('PCSIL'), had received correspondence from the Central Bank of Ireland ('CBI'), including a letter received on Friday 14 May 2021 (Australian time) raising significant regulatory concerns ('Correspondence'). The CBI's concerns relate to PCSIL's Anti-Money Laundering / Counter Terrorism Financing ('AML/CTF'), risk and control frameworks and governance. The Correspondence states that the CBI is minded to issue directions to PCSIL pursuant to section 45 of the Central Bank (Supervision and Enforcement) Act 2013.

A few days ago, EML provided the Australian Stock Exchange with a trading update.  The trading update also included its Quarter 3 FY2021 update in which EML confirmed:

"Current Status:
 

• EML advised the market on 19 May 2021 that it had received correspondence from the CBI raising significant regulatory concerns (‘Section 45 Letter). EMI responded to the CBI's Section 45 letter within the deadline on 27 Moy 2021. 
• EMA remains in an ongoing dialogue with the CBI in relation to their concerns through substantial responses, data and access to our teams.  
• There ie no statutory timeframe for the CBI to finale its consideration of the matters.
• A project governance structure has been established to assist our local team in Ireland, including subcommittee of the EML Board, members of the EML executive team, external regulatory consultants and legal resources.

Communication:

• We are working co-operatively with the CBI and it authorised officers.
• Communications with the CBI are confidential and we will provide updates when appropriote, . 
• EML is proactively communicating with, and providing information if and when requested, with other regulatory in the regions where EML operates.

Business Impact:  

• We continue to focus on EMI's strong pipeline of new customers and support out existing customers, yet we are aware that ongoing uncertainty is a risk and a challenge.
• Immediate one-off costs incurred for legal (Arthur Cox) and professional advisory (PriceWaterhouseCoopers) fees are expected to be less than $2 millon in FY21. In addition, we may see an impact of delayed program launches on establishment income and transaction fees which we cannot quantify at this time.
• Financial impact for FY22 can not be fully determined at this time." 

 
Some observations:

• This statement, and in particular the fees, relates to the current financial year for EML which ends on 30 June 2021 and a new financial year starts in Australia for the company on 1 July 2021, i.e. FY22. Thus, as we all know, CBI enquiries and investigations last for many years, so one could expect the 'less than $2 million' figure to go northwards. 
• There will be costs in terms of management time and that of Board involvement, as EML points out.
• Furthermore, there is a potential loss of revenue from "an impact of delayed program launches on establishment income and transaction fees which we cannot quantify at this time.

Further reading - EML Payments Q3 FY21 Trading Update June 2021 (dated 7 June 2021)

Received a letter from the Central Bank of Ireland's Anti-Money Laundering Division headed "AML Risk Evaluation Questionnaire (‘REQ’) Notification to [Name of Regulated Firm] (or ‘the firm’) to submit an REQ on an Annual Basis." last month with a return date this month? If so you are not alone.
The letter reminds that credit and financial institutions are required to have anti-money laundering (AML) and countering financing of terrorism (CFT) preventive measures to ensure compliance with the Criminal Justice (Money and Terrorist Financing) Acts 2010 to 2021, a well as reminding of the obligation to comply with EU Council Regulations setting out financial sanctions (‘FS’) measures.

The CBI has established the REQ to seek information regarding individual firms’ exposure to Money Laundering / Terrorist Financing risks and also the AML/CFT compliance framework.

Firms are being informed to submit the REQ in the specified format via the CBI's Online Reporting System on an ANNUAL BASIS within the time period specified on ONR.

The CBI has informed firms that "for 2021, this deadline for the submission of the REQ return is 18 June 2021".

Not only is the form detailed, and there are a few potential ways of interpreting some of the questions, or at least their interaction with other questions, but importantly for Boards of Directors note:

i) Statement of Compliance: "... the REQ includes a statement to be signed by the firm confirming compliance with the firm’s AML/CFT/FS obligations. This statement if [sic] compliance should be signed and dated by a person who is duly authorised to do so by the Board (or equivalent). Ideally this person will have responsibility for AML/CFT/FS within the firm." NB this person doesn't need to be in a PCF role, but the CBI expect them to be of sufficient seniority within the firm to provide the confirmation sought.

ii) Record Retention: "A record of the person who signed the statement of compliance must be formally noted in the Board minutes (or equivalent) when it is brought forward for consideration. The original signed and dated hard copy of the statement of compliance and the accompanying REQ is required to be kept on file and made available for review by the Central Bank on request."

Need assistance with your risk assessment?  Get in contact with us at the details here.

Further reading: Risk Evaluation Questionnaire ('REQ') Return

Building upon the obligations of credit and financial institutions under the CJA 2010, the Central Bank has developed a REQ in order to seek information regarding individual firms' exposure to ML / TF risks and also their AML / CFT compliance framework.

Firms selected by the Central Bank to submit an REQ are required to submit the REQ in the specified format, through the Central Bank's Online Reporting System ('ONR'), within the time period specified on ONR.

The minimum frequency that a firm will be required to submit an REQ is predicated on the level of ML/TF risk presented by the firm, either by virtue of its business model and/or the sector into which it falls (for further information on the frequency of submission please see the Table: AML/CFT Minimum Supervisory Engagement Model on the Central Bank AML / CFT Supervision Tab).

• CBI's website - Risk-based approach to AML Supervision 
• Risk-Evaluation-Questionnaire | xls 101 KB
• REQ Guidance Materials | pdf 1126 KB

Linkedin Post:  https://www.linkedin.com/posts/peteroakes_antimoney-aml-cft-activity-6808437129467756546-vRba

A few short interesting extracts from a speech by Minister of Finance Paschal Donohoe to Blockchain Ireland audience yesterday (24 May 2021), covering fintech, payments, blockchain and crypto.

Download the speech in PDF here 

• "We have a track record in this country for building globally recognised #payment companies and innovative financial services businesses.
• ​The necessity to transact a payment online forced many to implicitly “trust” in the process, without considering who the company offering such services is or what consumer protection safeguards are in place if something goes wrong.
• #Blockchain is also enabling innovative approaches to educational credentialing in the Irish banking sector.
• Equally, I recognise that the blockchain technology that underpins these [#crypto] currencies is being a catalyst for innovation in the financial services sector, particularly payments and capital markets.
• As Minister for Finance, I’m conscious that investing in #cryptocurrencies continues to involve risks and that there must be adequate regulation to protect consumers in this regard.

• ... there are 12 educational institutions across Ireland that are supporting and researching blockchain, whether that is in the form of ongoing research, study programmes or partnerships with other companies."

Published on 24 May 2021
Last updated on 24 May 2021

 From Department of Finance 
Published on 24 May 2021
Last updated on 24 May 2021
 
Check Against Delivery

Good morning everyone.
I am delighted to be speaking to you today, albeit virtually, as part of Blockchain Ireland Week.

First of all, I would like to acknowledge the commitment of Dave Feenan to blockchain; accepting the role as the new Chair of Blockchain Ireland, a challenge that few could have met.

I would also like to acknowledge the tenacity and perseverance of Lory Kehoe, being one of the original founders of Blockchain Ireland, over 5 years ago.

Thank you also Toomas Ilves for sharing your experience in the digitalisation of your country, and your expert understanding of blockchain technology.

An inspiration for us all here, as this week we explore how we can create our present, and our future, working with this technology.

It is hard to believe it is two years ago since I had the opportunity to meet many of you personally at the Iveagh Garden hotel.

A lot has changed since, even the price of Bitcoin. Or should I say Dogecoin?

Advances in the sector
Blockchain Ireland Week is taking place at a crucial moment. The last year has been extremely difficult for everyone and the impact of Covid19 on our economy and society has been immense.
Now, as our country begins to re-open and we continue to accelerate the vaccination programme, there is a sense of collective relief; we can allow ourselves to look forward more positively.

Necessity is the mother of invention. You could say, necessity is the mother if innovation.

And this is the moment to dare conceive new business models, engage with disruptive technologies and challenge ourselves to change and adapt.

Because we need to change: as citizens, as customers, as businesses. We have all felt the need to adapt to the extreme circumstances of the pandemic.

And we must continue to adjust; not to survive, but to thrive.

The series of events that you, Blockchain Ireland, have scheduled for this week, offer an ample opportunity to learn more and explore how blockchain technology can improve our business, and our lives.

Not only in Ireland, but within the EU, and globally.

I wished I had the time to attend most of the events lined up for this week: the breadth and depth of topics being discussed is a testament to the leadership of Blockchain Ireland.

International speakers from Africa, Asia, Australia, Europe and the United States will share their respective views and experiences. An extended thanks to all those speakers for bringing their expertise to our shores.

From within Ireland, it’s fantastic to see how this technology is being used in initiatives such as:
– Provenance in craft-beer, food and agricultural products
– Making investing in bloodstock more affordable and transparent;
– Providing integrity and trust to health data;
– Exploring education and training choices.

Right now, I would like to share with you two thoughts that struck me as I read about Blockchain Ireland week.

The Benefits of Blockchain
First, the discussion is no longer about “What is Blockchain?”, “Blockchain vs Crypto” or “Risks and benefits of Blockchain”. To me, this is a very encouraging sign.

It demonstrates that the technology is maturing.

We are increasingly seeing more instances of how the technology can benefit the economy and society; more enterprises are funding pilots; more private sector consortia are being created; we also see mainstream adoption starting to take off.

The technology’s broad market applicability and the relevance to specific sectors is becoming clearer.
It also demonstrates that in Ireland we are keeping abreast with changes in the technology.

We have moved from 50 companies in Ireland working with blockchain back in May 2019 (when I last spoke to you), to almost 100 today: a sure sign that the Blockchain sector in Ireland is becoming more embedded in our ecosystem.

My question for you all is: is that enough though? Could we do more? Could we do better? If so, what do we need to do?

One of Ireland’s strengths is our ability to innovate and adapt to emerging trends across finance and technology and I have spoken before about the importance of nurturing Ireland’s knowledge economy.
As a Government, we have tried to ensure that Ireland is prepared to take the advantages of technological opportunities though a number of interconnected initiatives. These objectives underpinned the Government’s Future Jobs Ireland strategy.

Our vision, as set out in the Ireland for Finance Strategy to 2025, is for Ireland to remain internationally competitive and a top-tier location of choice for specialist IFS.

We have a track record in this country for building globally recognised payment companies and innovative financial services businesses.

As you will discuss this week, blockchain can transform the way in which many financial services sectors currently operate and deliver services to customers.

The digital asset sector is becoming an increasingly competitive environment, while creating challenges for existing legal and supervisory frameworks, trying to match market and client requirements.

We are actively monitoring developments in the technology and regulations globally, so that any potential policy changes will be crafted from a balanced, measured and carefully laid out review of risks and opportunities, both to consumers and to the economy.

However, the pace of development is fast and the consequences of change might be difficult to comprehend early on.

Thus, whether it is through the provision of digital assets or innovative ways of providing micro-insurance, I encourage you all to raise any concerns that would impede Ireland’s ability to remain competitive and a destination of choice for financial services.

It is also encouraging to see how applications of the technology are being explored across the spectrum of our society.

FutureNeuro, the Science Foundation Ireland Research Centre for Chronic and Rarer Neurological Diseases, is using blockchain to match sick patients to clinical trials based on their clinical and genomic data.

It received €3.9 million in funding from the recent Disruptive Technology Innovation Fund award under Project Ireland 2040.

Blockchain is also enabling innovative approaches to educational credentialing in the Irish banking sector.

Earlier this year I was delighted to mark the launch of the EdQ Platform, a collaboration of the Institute of Banking alongside Bank of Ireland, AIB, Ulster Bank and Deloitte.

This unique blockchain-based education credentialing platform for financial services is the first of its kind Ireland – and perhaps the world.

Finally, there are 12 educational institutions across Ireland that are supporting and researching blockchain, whether that is in the form of ongoing research, study programmes or partnerships with other companies. Another heartening sign that Ireland is collectively working towards strengthening its knowledge economy credentials, anchoring on blockchain technology.

To summarise, it is very inspiring to see evidence in the Irish blockchain sector that we are moving at pace with the maturity stages of the technology.

As Minister for Finance, I would add that I am very reassured to see my Department has closely followed the pace and continues to be an integral participant of the Irish Blockchain Ecosystem.

Trust in a Global Pandemic
My second thought, is inspired by the central theme of this week’s event, “Blockchain: Foundation of Trust”. The pandemic has certainly accelerated the move to transacting and living in a digital world: what might have taken 10 years has been achieved in 10 months.

We have all adapted to a large part of our lives being carried out online. However, necessity to do so may have trumped “trust”.

Perhaps the most visible example of this was people being forced to drop the use of cash and become proficient in digital payments.

The necessity to transact a payment online forced many to implicitly “trust” in the process, without considering who the company offering such services is or what consumer protection safeguards are in place if something goes wrong.

And this was the case for everyone, irrespective of age or digital proficiency. As people became more comfortable with making financial transactions online, the 24/7 availability and convenient access made the purchasing of cryptocurrencies more accessible to the public than ever.

As Minister for Finance, I’m conscious that investing in cryptocurrencies continues to involve risks and that there must be adequate regulation to protect consumers in this regard.

Equally, I recognise that the blockchain technology that underpins these currencies is being a catalyst for innovation in the financial services sector, particularly payments and capital markets.

Not only has the pandemic upended many of our constructs of a “normal” society, it has also challenged our trust in everything around us. Fake news should not be the new normal. Online scams should not be the new normal. Unverifiable scientific data should not be the new normal.

As Finance Minister, and as President of the Eurogroup, I take the issue of trust in our banking and payment system very seriously.

This is why we are closely monitoring developments into the review of a potential Digital Euro and follow the ECB’s ongoing research into Central Bank Digital Currencies.

At the same time, my Department is working with the EU Commission and the Presidency to bring forth a general agreement on the draft proposal for regulation for a Market in Crypto Assets.

Discussions are progressing at pace, particularly considering the technicality and complexity of the proposal. Why is this important?

Because I believe that clarity of the legal and regulatory perimeter applicable to cryptoassets will bring trust for consumers and companies to deliver and use such products and services, which in turn will generate trust in our governing institutions.

Conclusion
As Minister for Finance, I welcome you all to Blockchain Ireland Week and I really look forward to exploring the key outcomes of this week’s discussions. I am sure it is going to be a terrific week of events.
​
ENDS

Source: https://www.gov.ie/en/speech/50cac-speech-to-blockchain-ireland-week-2021/​

The ASX Market Announcement says:

"EML PAYMENTS LIMITED (ASX: EML) ("EMU') refers to its request for a trading halt dated 17 May 2021.

EML advises that its Irish regulated subsidiary, PFS Card Services (Ireland) Limited ('PCSIL'), has received correspondence from the Central Bank of Ireland ('CBI'), including a letter received on Friday 14 May 2021 (Australian time) raising significant regulatory concerns ('Correspondence'). The CBI is the relevant regulator in Ireland.

The CBI's concerns relate to PCSIL's Anti-Money Laundering / Counter Terrorism Financing ('AML/CTF'), risk and control frameworks and governance. The Correspondence states that the CBI is minded to issue directions to PCSIL pursuant to section 45 of the Central Bank (Supervision and Enforcement) Act 2013.

The Correspondence does not concern EML's Australian or North American operations, or the operations of PFS' UK subsidiary ('Prepaid Financial Services Limited' which is incorporated in England and regulated by the FCA), or EML's other Irish regulated subsidiary ('EML Money DAC')."

ASX Announcement in PDF and at source. 

The Financial Times reported that "EU policymakers round on Lithuania for lax fintech oversight​" (18 May 2021).

In response Lithuania’s central bank insisted it was not “asleep at the wheel” over its regulation of a local fintech, that prosecutors suspect was used to steal more than €100m from Wirecard before it collapsed, and called for greater global sharing of information on financial crime among supervisors.

On 19 May, the Financial Times wrote "Lithuanian central bank rebuffs Wirecard criticism" (19 May 2021).

​Read more at FintechLithuania.com 

On Tuesday 18th May 2021, the UK Financial Conduct Authority issued a Dear CEO Letter to Electronic Money Institutions headed "Please act: ensure your customers understand how their money is protected."

You can read a copy of the letter here.

Some interesting excerpts from the letter below:

What is the UK FCA concerned about?:

• "We are concerned that many e-money firms compare their services to traditional bank accounts or hold themselves out as an alternative in their financial promotions, but do not adequately disclose the differences in protections between e-money accounts and bank accounts. In particular, they do not make it clear that Financial Services Compensation Scheme (FSCS) protection does not apply." 

 

• "We are still concerned that many e-money firms are not adequately disclosing the differences in protections between their services and traditional banking, in particular, that FSCS protection does not apply."

 

• "We are also concerned that firms are giving a potentially misleading impression to customers about the extent to which products or services are regulated by the FCA."

Action expected of emoney firms by the FCA:

1. "you write to your customers within six weeks of the date of this letter [Ed - i.e. 18 May 2021] to remind them of how their money is protected through safeguarding and that FSCS protection does not apply."
2. "draw this letter to the attention of your Board."
3. "expect the Board to have considered the issues we have raised here and to have approved the action taken in response." 

Note the FCA point that the communication to customer be separate from any other messaging or promotional activity. And that the FCA expects emoney firms to consider the appropriate method(s) of communication based on their business model and customer base, including any vulnerable customers. 

Why should emoney action the letter?:

Because the FCA intend to follow up, with a sample of firms, to assess the actions taken. 

Contact the team at CompliReg if you require assistance. 

You can read a copy of the letter here.