The United Kingdom’s Financial Conduct Authority (FCA) proposed requiring payments and eMoney firms to participate in a client assets (CASS) system in which funds and assets are held on trust for consumers.
Currently, these firms must safeguard funds, which means their customers can lose money or face delays in accessing their funds if the firm fails, the FCA said in a Wednesday (Sept. 25) press release.
Firms can respond to the proposal until Dec. 17, according to the release.
“We’re consulting on proposals to make safeguarding rules stronger and clearer for payment and eMoney firms so customers get as much of their money back as quickly as possible if the firm goes out of business,” Matthew Long, director of payments and digital assets at the FCA, said in the release.
In addition to the proposal, the FCA will publish stronger interim safeguarding rules for firms by the middle of next year, according to the release.
The current proposal aims to minimize shortfalls in safeguarded relevant funds, ensure these funds are returned as cost-effectively and quickly as possible, and strengthen the FCA’s ability to identify and intervene in firms that do not meet its safeguarding expectations, according to the consultation paper.
The proposed rules would apply to authorized payment institutions, eMoney institutions, small eMoney institutions, and credit unions that issue eMoney in the U.K. under the Payment Services Regulations (PSRs) and Electronic Money Regulations (EMRs), per the consultation paper.
The proposal comes at a time when the use of payments firms has been growing and the FCA has seen poor safeguarding practices from firms, according to the press release.
The regulator wrote to CEOs of payments and eMoney firms in March 2023, asking about their safeguarding and wind-down arrangements, per the release.
In the letter, the FCA said payments firms should ensure their customers’ money is safe, that their firm does not compromise the integrity of the financial system and that they meet their customers’ needs.
“We welcome the competition and innovation we have seen in the payments sector and the improved choice, convenience and value this can provide for customers,” the FCA said in the letter. “However, 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.”
