FCA Enforcement has taken a “use it or lose it” stance on payment firms to visibly use their licences, or risk the chances of it being revoked:
Last week the regulator published its Final Notice on its decision to cancel Fidelity Payment Services’ Small Payment Institution licence, on the grounds that it failed to provide payment services since its registration on 23 August 2016.
The Fidelity Final Notice hinted at the FCA’s monitoring of regulatory reporting (namely annual form FSA057 for small payment firms) from which timely submissions and metrics provide crucial indications of ‘live’ activity at firms. A strong suggestion that regulatory reporting will be used with more rigour by FCA Supervision to vet for the more stagnant firms.
This action resurrects the FCA’s multi-sector communication in 2021 warning the financial services industry of its (then) new power under the Financial Services Act 2021 in removing dormant firms at a faster pace. It aimed to prevent consumers from being misled about the level of protection offered by a firm or to give undue credibility to a firm’s unregulated activities. Additionally, the regulator imparted the relevance of removing licence permissions efficiently to aid its quest in scam prevention; We have all seen in the regulatory news that opportunistic fraudsters veil their criminalities under firm names that they’ve found on the public FS register and Companies House database.
Retrospectively, the matter of archaic data, ‘sleepy’ firms and misinforming customers has not been identified as a fresh issue. If you think back to the 90’s, there was certainly a fair few firms offering payment facilities and credit offerings who hid their sudden ‘dissolved’ status under the glove of their parent companies unbeknown to payers until a cheque was deposited at the bank.
And so, if anything, the Decision Notice should trigger firms to look at their Group entities with a strong governance ‘eye’ and review its functionalities within its arrangements. What could you do about the less active entities? When was the last time due diligence was performed on them? Does the firm need to revamp its Compliance Monitoring Programme to regain its “life”? Is the licence’ viable for potential acquisition?
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