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