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Dear CEO | Release Date: 16th March 2023

To read a shorter summary of this Dear CEO letter, click here.

To access the original FCA document, click here.

Long Summary

As the Chief Executive of a firm within the FCA’s payments portfolio, it is imperative to understand the latest regulatory priorities and expectations set forth by the Financial Conduct Authority (FCA). This guidance outlines the critical areas of focus for firms authorised or registered under the Payment Services Regulations 2017 (PSRs) and the Electronic Money Regulations 2011 (EMRs), including Payment Institutions (PIs), Electronic Money Institutions (EMIs), and Registered Account Information Service Providers (RAISPs).

FCA’s Concerns and Priorities

The FCA acknowledges the innovations and competitive advancements in the payments sector, which have enhanced consumer choice and convenience. However, there are significant concerns regarding the robustness of controls within the payments industry, which pose risks to customer protection and the integrity of the financial system, especially under the current economic strain and cost-of-living crisis.

Three Key Outcomes for Payments Firms

Ensuring Customer Money Safety

The FCA stresses the importance of safeguarding customer funds, particularly highlighting the need for effective insolvency arrangements to ensure swift and complete return of customer funds. Common failings include inadequate processes for identifying relevant funds for safeguarding and poor reconciliation procedures.

Maintaining Financial System Integrity

Payments firms must manage financial risks diligently, given the economic challenges and dependency on external funding. The FCA has noted deficiencies in liquidity risk management, inadequate capital to mitigate risks, and poor scenario planning among firms.

Meeting Customer Needs

With the implementation of the FCA Consumer Duty, firms are expected to offer high-quality products and services that genuinely meet customer needs, driving forward both competition and innovation.

Detailed Priorities and Actions

Priority 1: Safeguarding

Audit Requirements: Firms must engage auditors annually to assess safeguarding arrangements, promptly addressing any identified issues.

Reconciliation Practices: Daily internal and external reconciliations are mandatory to ensure the accuracy of safeguarded funds.

Priority 2: Prudential Risk Management

Financial Resilience: Regular reviews of financial performance under various scenarios are crucial to assess the adequacy of capital and liquidity.

Capital Requirements: Firms should maintain capital above regulatory minimums when prudent.

Priority 3: Wind-Down Planning

Plan Robustness: Wind-down plans should be realistic and detailed, including clear triggers and a thorough analysis of the costs associated with winding down operations.

Ensuring Compliance with Financial Crime Regulations

AML and Sanctions: Robust systems must be in place to manage money laundering risks and comply with economic and financial sanctions.

Fraud Prevention: Firms need to enhance systems to prevent and address fraud, especially given the heightened risks during the cost-of-living crisis.

Governance and Leadership

Effective governance and oversight are crucial. The FCA expects firms to have competent and knowledgeable personnel, particularly in compliance and risk management roles. Firms must also ensure thorough due diligence and ongoing monitoring of agents and distributors.

Operational Resilience

Firms are required to identify important business services, set impact tolerances, and ensure they can operate within these tolerances by March 2025. This includes managing dependencies on critical service providers.

Regulatory Reporting

Accurate and timely reporting to the FCA is essential. The FCA emphasises its intention to become a data-led regulator, underscoring the importance of compliance with reporting requirements.

Next Steps

Firms are urged to take immediate action to address the outlined risks and comply with the regulatory expectations. The FCA expects firms to report back on actions taken in response to this guidance and is prepared to take assertive action against non-compliance to protect consumers and maintain market integrity.


This letter serves as a crucial reminder of the responsibilities held by payments firms under the current regulatory framework. It is essential for CEOs and senior management to integrate these priorities into their strategic planning and operational practices to ensure compliance, safeguard consumer interests, and maintain the integrity of the financial system. The FCA remains committed to supervising the sector closely and will not hesitate to intervene if firms fail to meet the expected standards.

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