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Dear CEO | Release Date: 16th March 2023

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

To access the original FCA document, click here.

Short Summary

The Financial Conduct Authority (FCA) has issued a letter to CEOs of firms within the payments sector, emphasising the urgent need for enhanced controls due to significant risks that may harm customers and the financial system. This letter specifically targets firms regulated under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011, including Payment Institutions, Electronic Money Institutions, and Registered Account Information Service Providers.

The FCA expresses concerns about the adequacy of current controls within these firms, particularly in light of the economic downturn and cost-of-living crisis which may increase risks. The letter outlines three critical outcomes that payments firms must strive to achieve:

Ensuring the Safety of Customers’ Money: The FCA stresses the importance of safeguarding customers’ funds, highlighting common failings such as improper fund segregation and inadequate reconciliation processes. The letter insists on comprehensive audits and immediate reporting of any discrepancies or failures in safeguarding protocols.

Maintaining Financial System Integrity: The letter calls for robust financial crime controls, with a focus on anti-money laundering and fraud prevention measures. It emphasises the need for proper due diligence and risk assessments to prevent the misuse of financial platforms for criminal activities.

Meeting Customer Needs: Firms are urged to deliver high-quality products and services that meet customer needs, driven by innovation and adherence to the FCA’s Consumer Duty guidelines.

The FCA also outlines specific actions that firms should take to address these risks, including enhancing liquidity risk management, implementing effective wind-down plans, and ensuring all regulatory compliance, especially in safeguarding customer funds and managing prudential risks.

To foster compliance, the FCA expects firms to integrate these priorities into their governance structures and operational strategies. The letter serves as a reminder that the FCA will take assertive actions to protect consumers and maintain market integrity, highlighting the agency’s commitment to early and rigorous intervention when firms fail to meet regulatory standards. CEOs are urged to prioritise these issues and be prepared to demonstrate their compliance efforts upon request.

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