The following posts provide a snapshot of selected UK, EU and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
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FSB forum on cross-border payments data
27 March 2025
The Financial Stability Board (FSB) has announced the establishment of a forum on cross-border payments data, a key outcome from the FSB's recommendations for data frameworks related to cross-border payments published in December 2024. The forum seeks to bring together experts in payments, anti-money laundering and countering terrorist financing, sanctions and data privacy and protection, to strengthen cooperation on data-related issues in cross-border payments. Working with international organisations, including with the Financial Action Task Force (FATF) and the Organisation for Economic Cooperation and Development (OECD), the forum will serve as a platform for dialogue, information exchange and research, helping to identify and address inconsistencies in global data frameworks. An advisory body comprised of private sector representatives will also be created to provide industry perspectives and expertise to the forum. Its first meeting will be held in May. -
Bank of England discusses opportunities in innovating wholesale payments
25 March 2025
Victoria Cleland, Executive Director of Payments, Bank of England (BoE) has given a speech on innovating wholesale payments: building a resilient and innovative future. In the speech, Ms Cleland discusses the BoE's innovation work, including on tokenisation, synchronisation of foreign exchange between sterling and euro and developing a wholesale central bank digital currency. Ms Cleland highlights the BoE's work on enhancing access to the RTGS service. Before Easter, the FCA will publish a summary of the key feedback received on its February 2024 discussion paper, an update on work so far and its forward-looking policy work in this area. Market participants can expect in April the publication of an updated guide for non-bank payment service provider (NBPSP) access to UK payment systems. The Bank will also be considering offering safeguarding facilities directly to NBPSPs, so that NBPSPs could securely hold funds overnight and manage their liquidity and payment obligations. It is also working with HM Treasury and the Financial Conduct Authority on reforming the regulatory regime for NBPSPs to support their RTGS access. The BoE will also soon be publishing updated information on access to RTGS to give more details on benefits, costs and processes, including for foreign banks. The Bank intends to continue engaging with industry on assessing the appropriateness of the CHAPS direct participation threshold. Additionally, given the value of a consistent adoption of the ISO 20022 global messaging standard, the BoE will mandate the use of ISO 20022 enhanced data for certain CHAPS payments from 1 May, including the use of Legal Entity Identifiers for payments between financial institutions. -
UK FCA engagement paper on contactless payments limits
14 March 2025
The UK Financial Conduct Authority (FCA) has published an engagement paper which seeks views on increasing or removing the current £100 contactless limit, giving payment service providers (PSPs), consumers and businesses greater flexibility to decide limits that work for them. The FCA is engaging stakeholders before consulting on any revised standards, rules or guidance. Given the regulatory and market trends happening around contactless payments, the FCA is considering several options for amending its existing standards for contactless limits: (i) Introducing a new risk-based exemption for in-person transactions which would give PSPs greater flexibility to set their own contactless limits for in-person transactions as long as they are able to achieve low rates of fraud; (ii) Amending the limits in the existing contactless payments exemption, including removing the limits altogether; and (iii) Relying on the consumer duty following legislative change.
The FCA notes that any changes would need to support good consumer outcomes as required by the consumer duty. The FCA is considering prioritising reforms to the contactless payments exemption under its existing regulatory framework before considering wider strong consumer authentication (SCA) requirements. It aims to replace SCA more widely, as and when legislation allows it to do so. With legislative change, other options for reform to contactless payments may be possible and the FCA is also interested to hear if there are alternative approaches which it might implement in the longer term when legislation allows. The paper poses eight specific questions for feedback, which is requested by 9 May. -
PSR publishes policy statement on 2024 APP scams data
11 March 2025
The UK Payment Systems Regulator (PSR) has published a policy statement outlining its approach to publishing authorised push payment (APP) scams data for 2024.
In 2025, the PSR will take a different approach to publishing the data, following the introduction of the reimbursement requirement on 7 October 2024, which ensures victims of APP scams are reimbursed in all but exceptional cases. As a result, the PSR is planning to publish two separate data updates for 2024, as data before and after the policy took effect cannot be directly compared. The first report will cover APP scams where the fraudulent transaction took place over Faster Payments before 7 October 2024 and the case was closed between 1 January and 31 December 2024. The second report will cover APP scams where the fraudulent transaction took place after 7 October 2024 and the case was closed between 7 October and 31 December 2024.
The PSR also confirms that it intends to publish a call for views in Spring 2025 to ensure that its future reporting aligns with consumer needs, regulatory requirements and its commitment to transparency. Considerations will include whether the PSR reports at the firm or industry level, the frequency of future reporting and the potential inclusion of additional metrics. -
ECB flags reliance of EU card payments on international schemes
28 February 2025
The European Central Bank (ECB) has published a report on card schemes and processors. The report provides an updated analysis of the development of card schemes and processing entities in EU member states. In the report, the ECB considers whether changing market conditions allow national card schemes to remain sustainable and considers the distribution of processors across EU countries, including the extent to which non-EU ownership may lead to EU dependence. The ECB concludes that the EU is highly reliant on non-EU solutions to operate card payments. This includes both card schemes and processors. According to the ECB, it is important for an EU solution to be developed at the point of interaction to secure operational resilience and autonomy of EU payment systems. -
FATF second consultation on payment transparency
24 February 2025
The Financial Action Task Force (FATF) has published a second consultation on payment transparency, and in particular proposed revisions to recommendation 16 (R.16). The revisions adapt the FATF Standards to the changes in payment business models and messaging standards, as well as to the evolving risks and vulnerabilities. This consultation picks up the main issues raised in the first consultation during February to May 2024, and how these have now been addressed. It also provides more information on the questions of policy intent and proportionality which were raised as overarching issues during that consultation. The revised proposal is attached as an annex to the consultation.
The deadline for responses is 18 April. The FATF will finalise the revisions in June, following which it will develop a guidance paper on payment transparency to facilitate consistent implementation of the updated standards. -
FSB letter to G20 finance ministers and central bank governors ahead of meeting
24 February 2025
The Financial Stability Board (FSB) has published a letter (dated 21 February) to the G20 finance ministers and central bank governors ahead of their meeting on 26 and 27 February. The letter addresses areas of focus for the FSB, including:- Implementation monitoring, providing a strategic review of the FSB's monitoring of 15 years of implementation of reforms. The review is intended to provide valuable insights into the effectiveness of the monitoring of post-global financial crisis regulatory reforms and identify areas where improvements can be made in the tools used to ensure consistent, global implementation of agreed reforms. The FSB will publish a progress report in October.
- Completing the G20 roadmap to enhance cross-border payments. The FSB note that as the work has advanced, many structural issues have become apparent that require concerted efforts to resolve. Addressing these issues calls for significant additional work up to and beyond 2027. The FSB will report in October on progress towards the G20's goal of making cross-border payments faster, cheaper, more transparent, and accessible. The FSB's focus this year is on improving the end-user experience, coordinating closely the work of the Bank for International Settlements Committee on Payments and Market Infrastructures and other partner organisations.
Read more. -
Wolfsberg Group FAQs to help assess risks generated by the emergence of digital assets for AML and CTF purposes
21 February 2025
The Wolfsberg Group has published FAQs on defining digital assets. The FAQs propose definitions to be used by financial institutions, policymakers, supervisors and regulators to understand the characteristics of digital assets, money laundering, terrorist financing and operational risks they generate, as well as serve as an input to financial institutions developing policies and appropriate controls. The Wolfsberg Group intends to supplement these FAQs in future with guidance on the risks and associated controls for digital assets in line with the concepts developed in the FAQs.
The Wolfsberg Group has also published guidance on payment transparency roles and responsibilities to supplement the Wolfsberg Group Payment Transparency Standards. -
Wolfsberg Group guidance supplementing payment transparency standards
21 February 2025
The Wolfsberg Group has published guidance on payment transparency roles and responsibilities to supplement the Wolfsberg Group Payment Transparency Standards. The guidance discusses roles played by key actors in a payment chain and their respective responsibilities to adhere to payment transparency standards across a sample of commonly observed payment flows. It includes an example of cross-border payment between two countries, two parties and with no intermediaries, as well as an example of three different ways in which an intermediary agent payment service provider (PSP) can be involved in a payment to draw attention to what information is available to each actor from the payment message and what responsibilities they have in relation to payment transparency requirements. The guidance serves as a reference guide that can be used by all PSPs, regulators and standard setters.
The Wolfsberg Group has also published FAQs on defining digital assets. -
EU MiCAR technical standards published
20 February 2025
Two delegated acts were published in the Official Journal of the European Union (OJ) in respect of the EU MiCAR.- Commission Delegated Regulation (EU) 2025/303, which comprises regulatory technical standards specifying the information to be included by certain financial entities in the notification of their intent to provide crypto-asset services.
- Commission Implementing Regulation (EU) 2025/304, which comprises implementing technical standards for the standard forms, templates and procedures for the notification by certain financial entities of their intention to provide crypto-asset services.
Both sets of technical standards concern the notification requirements applied to certain firms seeking to provide crypto-asset services, where article 60 of MiCAR imposes a requirement to supply specified information to the competent authority of the applicant's home member state at least 40 working days before providing those services. The Delegated and Implementing Regulations will enter into force on the twentieth day following their publication in the OJ. -
UK regulators publish feedback statement on big tech and digital wallets
19 February 2025
The UK Financial Conduct Authority (FCA) and the UK Payment Systems Regulator (PSR) have issued a joint feedback statement on the usage and impact of big tech and digital wallets (FS25/1). The feedback statement was accompanied by a press release and joint letter to the UK Competition and Markets Authority (CMA) regarding the CMA's invitation to comment on investigations in relation to certain mobile ecosystems. The feedback statement highlights four potential issues around big tech and digital wallets:- First, there are competition concerns as between different digital wallets (and mobile ecosystems).
- In addition, there are competition concerns as between payment systems within digital wallets, particularly where digital wallets do not provide a choice of payment methods except for cards.
- Operational resilience and consumer rights and protection are an issue, given that reliance on digital wallets could impact the financial system's resilience if consumers do not have other means of payment.
- Finally, there are regulatory perimeter questions around whether the regulatory framework should include digital wallets in order to be more effective (although some responses raised concerns that this approach may hinder innovation).
Read more. -
ESMA consultation on MiCAR guidelines on assessment of knowledge and competence
17 February 2025
The European Securities and Markets Authority (ESMA) has published a consultation paper on the guidelines for the criteria on the assessment of knowledge and competence under Markets in Crypto-Assets Regulation (MiCAR). The guidelines relate to natural persons giving advice or information about crypto-assets or a crypto-asset service. In terms of approach, ESMA has taken as a reference the Markets in Financial Instruments Directive guidelines on the assessment of knowledge and competence.
ESMA proposes four guidelines. The first guideline is a general guideline to ensure that crypto-asset service providers (CASPs) take sufficient steps to ensure that their staff providing information or advice on crypto-assets or crypto-asset services possess the necessary knowledge and competence to fulfil their obligations. This includes an understanding of how to apply the CASPs internal policies and procedures designed to comply with MiCAR. Guideline two concerns criteria for staff giving information about the relevant crypto-assets or crypto-asset services. Guideline three concerns criteria for staff giving advice about crypto-assets or crypto-asset services, and addresses the minimum requirements for professional qualification and professional experience, as well as the minimum number of hours of continuous professional development or training per year. Finally, guideline four on organisational requirements states that CASPs' organisational requirements should ensure that the knowledge and competence of the staff giving information and advice on crypto-assets or crypto-asset services is assessed, maintained and updated appropriately.
The deadline for comments is 22 April. ESMA will publish a final report and guidelines in Q3 this year. -
European Central Bank decision on non-bank payment service providers' access
6 February 2025
The European Central Bank (ECB) has published Decision (EU) 2025/222 relating to access by non-bank payment service providers (NB-PSPs) to Eurosystem central bank operated payment systems and central bank accounts. The EU Instant Payments Regulation (Regulation (EU) 2024/886) introduced certain changes to the EU Settlement Finality Directive (SFD) and Payment Services Directive (PSD 2), including adding NB-PSPs to the list of institutions eligible to become participants in payment systems designated under the SFD and permitting NB-PSPs to deposit their clients' funds for safeguarding in a separate account in a bank or central bank, at the central bank's discretion.
The ECB's decision: (i) sets out the circumstances in which a Eurosystem central bank should provide access to central bank operated payment systems, (ii) prohibits Eurosystem central banks from offering or providing safeguarding accounts to NB-PSPs or crypto-asset services providers, (iii) determines the maximum amounts that may be held by an NB-PSP across its accounts at any given central bank operated payment system, and (iv) provides for penalties in the event that an NB-PSP fails to comply with the maximum holding amount limit or requirements for access to central bank operated payment systems.
The Decision will enter into force on 26 February 2025 and will apply from 9 April 2025.
For more information on the issues and developments relating to fintech, see our blog A&O Shearman on fintech and digital assets. -
UK Payment Systems Regulator publishes compliance monitoring framework
4 February 2025
The Payment Systems Regulator (PSR) has published a policy statement (PS25/2) on its new compliance monitoring framework, setting out the scope of its monitoring work, its approach to compliance monitoring and how, in practice, it will monitor the parties that it regulates. Its approach is informed by three monitoring principles, namely that it should: (i) act in a way which is proportionate and risk-based, (ii) act quickly, and (iii) provide clear, reciprocal engagement. In practice, it monitors firms in three stages, firstly identifying and assessing whether firms are complying with regulatory requirements, then taking action where it identifies non-compliance and finally escalating cases to the Enforcement team where there are concerns that a firm is still non-compliant or investigation in relation to past conduct is warranted. The PSR also engages with and educates firms as part of its supervisory engagement and coordinates with other regulatory bodies.
Alongside the PS25/2, the PSR has published a thought piece which explains why the framework is necessary and how the PSR will work with firms in ensuring compliance. The PSR provides that its next steps include planning changes to its Process and Procedures Guide. -
UK Financial Conduct Authority Dear CEO letter on priorities for payments portfolio firms
3 February 2025
The Financial Conduct Authority has published a Dear CEO letter to firms in the payments portfolio sector (including payment institutions, e-money institutions and registered account information service providers). Although the FCA has observed improvements following its letter of 16 March 2023 which set out priorities for payments firms, it remains concerned that there are risks of harm to consumers and financial system integrity. The letter sets out key outcomes for firms.
Read more. -
Financial Stability Board publishes work program for 2025
January 23, 2025
The Financial Stability Board has published its work program for 2025. Priority areas of work for 2025 include:- supporting global cooperation on financial stability: the FSB will continue monitoring global financial stability developments and the implications of emerging financial innovation, and conduct in-depth analysis on vulnerabilities in non-bank financial intermediation and climate change;
- enhancing the resilience of NBFI: while preserving its benefits, the FSB workstream includes finalizing policy recommendations on NBFI leverage, developing and beginning implementation of a medium-term workplan to address issues relating to non-bank data availability, use and quality and analyzing the resilience and functioning of the repo market;
- harnessing the benefits of digital innovation while containing its risks: the FSB will produce a thematic peer review on implementation of its crypto-asset recommendations, a report on how financial authorities can monitor AI adoption and assess related vulnerabilities, and finalize the format for incident reporting exchange;
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UK payments regulators discuss next steps for open banking
January 23, 2025
The Financial Conduct Authority and Payment Systems Regulator have set out the next steps for open banking, focusing on variable recurring payments. In the statement the regulators explain the benefits of variable recurring payments, which includes helping consumers take more control of their regular payments, reducing the risk of unexpected expenditure. It will also offer businesses greater competition to current payment methods and could help reduce processing fees. As part of the next steps to deliver variable recurring payments, Open Banking Limited will establish an independent central operator to coordinate how variable recurring payments are made. The FCA and PSR will support this endeavor by working with industry and trade associations and are looking forward to significant progress being made in 2025. The regulators are also working with industry and trade associations to progress development of the commercial arrangements underpinning both variable recurring payments and use of open banking for e-commerce. -
UK Financial Conduct Authority responds to Government call for regulators to support growth
January 17, 2025
The Financial Conduct Authority has published a letter (dated January 16, 2025) from Nikhil Rathi, FCA Chief Executive, sent to the Government, setting out its work to ensure that it is supporting the Government's U.K. growth mission. The letter responds to Government's December call for regulators to support growth. In the letter, the FCA explains that to achieve the vast reforms, the FCA will need to take greater risks and prioritize resources. The Government's support and acceptance of this approach is required, including an acceptance that there will be failures because it will not be possible to prevent all harm under an approach based on risk-based choices. The FCA emphasizes that this acceptance needs to be shared across all accountability mechanisms, including in Parliament, and states that metrics for "tolerable failures" within the overall system would assist.
The areas addressed in the letter include:- unlocking capital investment and liquidity: in addition to the planned reforms for the wholesale markets, the FCA will fast-track a review of capital requirements for specialized trading firms to improve liquidity;
- accelerating digital innovation to enhance productivity: the FCA makes a number of suggestions on how to do this including introducing a new open banking payment method and developing open finance, the removal of the £100 contactless payment limit to enhance consumer flexibility and level the playing field with digital wallets. The FCA also suggests that government action could help by introducing digital identity authentication, enhancing the quality of the Companies House database to reduce costs for business, and digitalizing court systems to reduce delays;
Read more. -
EBA repeals guidelines on major incident reporting under the revised Payment Services Directive
January 17, 2025
The European Banking Authority has announced that it has repealed its guidelines on major incident reporting under the revised Payment Services Directive due to the application of harmonized incident reporting under the Digital Operational Resilience Act. DORA introduced harmonized incident reporting requirements that apply to financial entities across the banking, securities/markets, insurance, and pensions sectors, including most payment service providers. DORA also disapplies the incident reporting requirements under PSD2 for those PSPs. As such, the EBA has repealed the guidelines to simplify the reporting of major incidents by PSPs and provide legal certainty to the market. The EBA reminds firms that incident reporting requirements under PSD2 still apply for other types of PSPs, such as post office giro institutions and credit unions, that are not covered by DORA. The EBA notes that those PSPs that are still subject to PSD2 incident reporting requirements may be subject to national incident reporting requirements, regardless of the existence of the EBA guidelines. Competent national authorities willing to retain the incident reporting approach included in the EBA guidelines for those PSPs can continue to do so under their national legal framework or supervisory measures. -
The Banking Act 2009 (Wholesale Cash Oversight Fees) Regulations 2024
December 17, 2024
The Banking Act 2009 (Wholesale Cash Oversight Fees) Regulations 2024 have been published, together with an explanatory memorandum. The Financial Services and Markets Act 2023 enabled the Bank of England to oversee certain firms recognized by HM Treasury in the wholesale cash distribution market. These Regulations set the scale of fees that the BoE may charge to these firms. The payment of these fees will reimburse the BoE for its costs incurred in connection with overseeing these firms. The BoE may charge: (i) an annual oversight fee which may not exceed GBP400,000 in any one calendar year; and (ii) a special projects fee if it considers that events require further supervision of a recognized firm up to a maximum of GBP150,000 in any one calendar year. The Regulations do not apply to persons that are recognized by HMT as having systemic significance for the wholesale cash distribution market. HMT does not expect in the near term to recognize any such firms and would make further regulations to provide a separate scale of fees if that should change.
The Regulations come into force on January 24, 2025. -
UK authorities consult on operational incident and third-party reporting
December 13, 2024
The Financial Conduct Authority, Prudential Regulation Authority, and the Bank of England have launched consultations on operational incident and third-party reporting. The regulators propose to establish a framework to enhance incident and third-party risk management, strengthen firms' operational resilience and minimize harm. To achieve this, the regulators propose a definition for an operational incident and introduce new material third-party reporting rules. The proposals introduce standardized reporting templates to allow the regulators to collect data which would be used to monitor and respond to potential risks arising from operational incidents and firms' increasing reliance on third parties.
The deadline for comments is March 13, 2025. The FCA intends to publish finalized rules in H2 2025. The PRA and the BoE propose that the implementation date for the proposals will be no earlier than H2 2026. You may like to see our client bulletin, "Operational incident reporting: UK financial regulators propose new rules", which goes into the details of these proposals. -
UK Independent Review of the Payment and Electronic Money Institution Insolvency Regulations 2021
December 12, 2024
HM Treasury has published its letter inviting Adam Plainer to lead an independent review of the Payment and Electronic Money Institution Insolvency Regulations 2021 (PESAR). HM Treasury also published the PESAR terms of reference, setting out the scope of the review. HM Treasury is required to appoint a reviewer to consider how the PESAR regime has been embedded and is working in practice. The PESAR regime was introduced to bring in new objectives to mitigate against administrators of payment and electronic money firms causing delays in customers gaining access to their funds. The reviewer will produce a report to be laid before Parliament. Submissions of evidence may be submitted until May 30, 2025. -
Financial Stability Board issues recommendations for regulating cross-border payments
December 11, 2024
The Financial Stability Board has published two final reports on recommendations to promote greater alignment and interoperability across data frameworks related to cross-border payments, and consistency in the regulation and supervision of bank and non-bank payment service providers. In addition to the two reports, the FSB also published overviews of the consultation responses, setting out the main changes made to the final report in order to address comments raised in the public consultation.
The first report sets out final recommendations for promoting alignment and interoperability across data frameworks applicable to cross-border payments. The recommendations fall into four broad categories: (i) addressing uncertainty about how to balance regulatory and supervisory obligations; (ii) promoting the alignment and interoperability of regulatory and data requirements related to cross-border payments; (iii) mitigating restrictions on the flow of data related to payments across borders; and (iv) reducing barriers to innovation.
The second report sets out recommendations for regulating and supervising bank and non-bank PSPs offering cross-border payment services to strengthen consistency in a way that is proportionate to the risks associated with such activities. The FSB explains that this approach aims to reduce the prospect of regulatory arbitrage by establishing a level playing field that takes into account differences in business models and risk profiles. -
European Commission writes to EU authorities on the interplay between crypto asset and payment services regulations
December 10, 2024
The European Banking Authority has published a letter from the European Commission (dated December 6, 2024) to the EBA and the European Securities and Markets Authority regarding the interplay between Markets in Crypto Assets Regulation and the Payment Services Directive. The Commission notes the diverging interpretations among member states about the interplay between MiCAR and PSD2 and asks the EBA, with ESMA, to explore the possibility of issuing a "no action letter" on the enforcement of PSD2 authorization requirements as regards services with electronic money tokens provided by crypto asset service providers (or by entities benefiting from the transitional period under MiCAR) that may be inadvertently caught by PSD2. Where dual authorization would nevertheless be required, the Commission invites the EBA, with ESMA, to explore whether the PSD2 authorization process could be streamlined to reduce the operational burden on institutions. The EBA has responded (in a letter dated December 10, 2024), stating that it agrees with the concerns, and is assessing the issues in co-ordination with ESMA. The EBA aims to publish a response by April 2025.
For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets. -
Speech: UK government's Approach to Tokenization and Regulation
November 25, 2024
HM Treasury has published a speech given on November 21, 2024, by Tulip Siddiq, Economic Secretary to the Treasury, on the U.K. government's approach to tokenisation and regulation. In the speech, Ms. Siddiq confirms that HM Treasury intends to implement the proposal for the financial services regulation of cryptoassets in the U.K. in full. The proposals were published in October 2023 and included proposals for the creation of various new regulated activities for cryptoassets, as well as associated regimes for both admissions to trading and market abuse. HM Treasury also intends to proceed with removing the legal uncertainty over whether cryptoasset staking services constitute a collective investment scheme under financial services law. HM Treasury is also proceeding with the proposals for new regulated activities for stablecoin. Ms. Siddiq explains that the regulated activity for stablecoin issuance will ensure that the FCA can properly manage stablecoin specific risks, most notably those associated with management of the backing assets. This proposal will be implemented to the same timetable as the rest of the regulatory regime for cryptoassets.
For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets. -
UK Financial Conduct Authority Finalized Guidance for Payment Firms that Enables a Risk-Based Approach to Processing Suspected Fraudulent Payments
November 22, 2024
The Financial Conduct Authority has published finalized guidance for payment service providers that enables a risk-based approach to processing suspected fraudulent payments. Following the publication of the Payment Services (Amendment) Regulations 2024, the amount of time that a PSP has to process an outbound payment when there are reasonable grounds to suspect fraud or dishonesty was extended to up to four business days. To support these regulations, HM Treasury asked the FCA to issue guidance to explain how it expects PSPs to apply these legislative changes, taking into account feedback from stakeholders.
Following a consultation in September, the finalized guidance sets out:- the requirements for delaying outbound payments and determining whether the threshold for "reasonable grounds to suspect" has been met;
- how PSPs should use the payment delay window;
- obligations on PSPs if they delay an outbound transaction; and
- the treatment of suspicious inbound payments.
The FCA has amended its payment services and electronic money approach document to include the new finalized guidance. The guidance came into effect on November 22, 2024. -
Financial Stability Board Publishes Letter to G20 Leaders and 2024 Annual Report
November 18, 2024
The Financial Stability Board has published a letter sent to the G20 leaders ahead of their meeting on November 18, 2024, together with the FSB 2024 annual report. The letter warns of ongoing vulnerabilities within the global financial system, illustrated by recent episodes of market turmoil and the failure of several banks and non-banks in recent years. The letter stresses the importance of effective implementation of the FSB's policies, emphasizing that authorities must not only put policies into national laws and regulations, but also build the capacity to operationalize them.
In the annual report, the FSB provides an overview of its work in its key priority areas, which include: (i) addressing lessons from the March 2023 banking turmoil; (ii) enhancing the resilience of non-bank financial intermediation; (iii) addressing financial risks from climate change; (iv) improving cross-border payments; (v) responding to technological innovation; and (vi) enhancing the resolvability of central counterparties. Looking ahead, the FSB will continue to focus on these priority areas and will also place an emphasis on: (a) implementation monitoring of its recommendations on crypto-asset activities and global stablecoin arrangements; (b) further work on resolution reforms; and (c) regular monitoring and progress reports on financial stability issues.
For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets. -
Mansion House 2024
November 14, 2024
Rachel Reeves, the U.K. Chancellor has set out a package of reforms in her Mansion House speech. The reforms aim to drive growth and competitiveness in financial services. Ms. Reeves stated that the regulatory changes post-financial crisis created a system which sought to eliminate risk-taking that 'has gone too far' and has led to unintended consequences. Ms. Reeves hopes to maintain the U.K.'s high regulatory standards while rebalancing elements of the regulatory system to drive economic growth and competitiveness.
Read more. -
Mansion House: National Payments Vision
November 14, 2024
HM Treasury has published the National Payments Vision, outlining the government's plans for bolstering the U.K. payments sector. The Vision, which is an integral part of the latest Mansion House reforms, responds to the findings of the independent Future of Payments Review 2023, led by Joe Garner, and takes action to address key issues across the landscape.
The Vision aims to "strengthen the foundations of today" by ensuring that the regulatory framework is clear, predictable and proportionate. To support this, the government has outlined its priorities for U.K. payments through a joint remit letter to the Financial Conduct Authority and the Payments Systems Regulator and welcomes the regulators' commitment to revise their existing memorandum of understanding on cooperation in relation to payments regulation. Another significant objective is ensuring infrastructure is resilient. The government has concluded that the New Payments Architecture program is not sufficiently agile. It is therefore establishing a Payments Vision Delivery Committee which will, through work led by the Bank of England and PSR, clarify the upgrades required to the existing Faster Payments System, assess longer-term requirements and the appropriate funding and governance arrangements needed to deliver this—including proposals to reform Pay.UK.
Read more. -
Mansion House: Financial Services Growth and Competitiveness Strategy
November 14, 2024
HM Treasury has launched a call for evidence on a proposed Financial Services Growth & Competitiveness Strategy, a key part of the latest Mansion House reforms. Once developed, the Strategy will serve as the central guiding framework for the next ten years through which the government aims to deliver sustainable, inclusive growth for the financial services sector and secure the U.K.'s competitiveness as an international financial center. To meet its objectives, the proposed strategy sets out five core policy pillars central to sustainable growth: innovation and technology, regulatory environment, regional growth, skills and access to talent, and international partnerships and trade. The proposed strategy also identified five priority growth areas within the financial services sector: fintech, sustainable finance, capital markets (including retail investment), insurance and reinsurance markets, and asset management and wholesale services. Responses to the call for evidence may be submitted is December 12, 2024. HM Treasury intends to publish the strategy in Spring 2025.
Read more. -
UK Treasury Committee Call for Evidence on Acceptance of Cash
November 5, 2024
The Treasury Committee has launched a call for evidence as it examines whether rules are needed to govern the acceptance of physical cash in the U.K. The Committee explains that the Bank of England has noted that the decline in cash usage is increasing the infrastructure costs of retaining physical cash as a viable payment method, which could lead to disruption for businesses and consumers. Meanwhile, there is a concern that cash is still being used by and is essential for certain vulnerable groups to make payments, and that the U.K. becoming over reliant on digital payments could have an impact on financial stability.
Questions in the call for evidence include:- Whether there are groups in society that disproportionately rely on using cash.
- What practical challenges and costs businesses may face from a requirement to accept cash.
- Whether any sectors would face problems by a decline in cash acceptance.
The deadline for responses is December 2, 2024. -
HM Treasury Consults on Regulating Buy Now Pay Later
October 17, 2024
HM Treasury has begun consulting on draft legislation regulating Buy Now Pay Later. HM Treasury is proposing to bring forward secondary legislation that would bring BNPL into Financial Conduct Authority regulation as soon as possible. The consultation sets out HM Treasury's intended policy approach to regulation along with the draft legislation. HM Treasury explains that the proposed legislation aims to ensure people using BNPL products receive clear information, avoid unaffordable borrowing, and have strong rights when issues arise.
Read more. -
UK Financial Ombudsman Service Updates Guidance on Handling Complaints Concerning APP Fraud, Scams and Fraud
October 17, 2024
The Financial Ombudsman Service has published updated versions of its guidance for businesses on: (i) handling complaints concerning Authorized Push Payment fraud and other scams involving authorized payments or withdrawals; and (ii) handling complaints concerning fraud and scams. The FOS's updated guidance reflects the new rules introduced, with effect from October 7, 2024, on Faster Payments and CHAPS APP fraud reimbursement. -
Committee on Payments and Market Infrastructures Reports on Interlinking and Interoperability of Payment Systems
October 15, 2024
The Committee on Payments and Market Infrastructures has published two reports to the G20 that offer key insights and recommendations on the interlinking and interoperability of payment systems to enhance cross-border payments. The first report, Linking fast payment systems across borders: governance and oversight, aims to support owners and operators of faster payment services when they are developing the governance and risk management of their faster payment services interlinking arrangement as well as overseers when they are defining their oversight approach. The report discusses the main decisions to be taken by operators in developing the governance approach for faster payment services interlinking arrangements. The report also sets out recommendations that overseers should consider when developing an oversight approach for the respective component faster payment services or a separate entity.
The second report, Promoting the harmonisation of application programming interfaces to enhance cross-border payments: recommendations and toolkit, presents the recommendations of the API Panel of Experts on the prioritization of harmonization. The report makes ten recommendations, divided into four categories: (i) recommendations that aim at facilitating the global API harmonization processes; (ii) recommendations that focus on API design principles and the use of existing international data standards; (iii) recommendations to enhance the developer experience; and (iv) recommendations to promote pre-validation APIs and implementation. Each recommendation is accompanied by a list of potential actions that stakeholders may consider as practical and concrete implementation measures. The recommendations are further supported by a toolkit to assist various stakeholders in assessing their current related practices. -
UK Draft Payment Services (Amendment) Regulations 2024 Published
October 2, 2024
HM Treasury has published a final draft version of the Payment Services (Amendment) Regulations 2024, enhancing efforts to address authorized push payment fraud. The draft Regulations amend regulation 86 of the Payment Services Regulations which require payment service providers to execute payment transactions within maximum time limits. The amendments give a payer's PSP the ability to delay the execution of certain payment orders where, within a specified time, provided the PSP establishes reasonable grounds to suspect the order has been made subsequent to fraud or dishonesty perpetrated by a third party (which may include the payee). The purpose of the delay is to enable the PSP to determine whether the order should be executed and must not exceed a specified time limit. Where the PSP exercises the ability to delay, the PSP will be liable for any charges or interest incurred by the payer resulting from the delay. The legislation is due to be laid before parliament shortly after the government's return from conference recess. -
UK Payment Systems Regulator Publishes Policy Statement Confirming the Maximum Level of APP Scam Reimbursement
October 2, 2024
The Payment Systems Regulator has published a policy statement confirming the maximum level of Authorized Push Payment scam reimbursement. The statement follows the PSRs recent announcement confirming its decision to reduce the maximum level that payment service providers will have to reimburse victims of Faster Payments APP scams to £85,000 per claim, in line with the Financial Services Compensation Scheme limit. The statement provides an overview of the responses the PSR received to the consultation, sets out how the PSR has considered and weighed the responses and information received through the consultation in reaching its view and explains the reasons for its decision on the maximum level. The PSR explains that it will keep this level under review and consider it as part of its 12-month evaluation of the reimbursement policy. The Bank of England, as the operator of CHAPS, has also decided to set the maximum level for CHAPS APP scams to £85,000 per claim. The start date for the reimbursement policy is October 7, 2024, and the PSR reminds PSPs to continue the work already underway to prepare and ensure they are ready to implement the requirements. -
UK Payment Systems Regulator Confirms Maximum Reimbursement Limit for Authorized Push Payment Scams Reimbursement
September 25, 2024
The U.K. Payment Systems Regulator has confirmed that the maximum reimbursement limit for victims of Faster Payments Authorized Push Payment scams will be £85,000. The PSR began consulting on reducing the reimbursement limit earlier in September. The PSR will publish a final policy statement to explain the reasoning for the decision next week. The Bank of England, as the operator of CHAPS, has also decided that the maximum reimbursement for CHAPS will be £85,000. In making this decision, the BoE has given weight to the benefits to industry and consumers of having consistency of limits across the two payment systems. The BoE is committed to reviewing this limit within 12 months. -
UK Financial Conduct Authority Consults on Changes to the Safeguarding Regime for Payments and E-Money Firms
September 25, 2024
The U.K. Financial Conduct Authority has published a consultation on proposals to address weaknesses in the safeguarding regime for payments and e-money firms. The FCA explains that there remain poor practices across the industry due to poor implementation of the regulatory framework. For firms that became insolvent between Q1 2018 and Q2 2023, there was an average shortfall of 65% in funds owed to clients (difference between funds owed and funds safeguarded). In developing the safeguarding proposals, the FCA has adapted the approaches in the existing CASS rules to reflect payment services.
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UK Payment Systems Regulator Publishes Policy Statement and Guidance on the Identification of Authorized Push Payment Scams and Civil Disputes
September 23, 2024
The U.K. Payment Systems Regulator has published a policy statement and draft guidance to support payment service providers in assessing whether an authorized push payment scam claim raised by a consumer is not reimbursable under the Faster Payments Scheme and CHAPS reimbursement rules because it is a private civil dispute. By private civil dispute the rules mean a dispute between a consumer and payee which is a private matter between them for resolution in the civil courts, rather than involving criminal fraud or dishonesty. The guidance sets out five high-level factors that PSPs should consider when determining whether a claim is a reimbursable APP scam or a civil dispute.
PSPs should consider all high-level factors and the information provided by the consumer or third party when assessing a claim. Changes to the draft guidance as consulted on include: (i) clarification that the guidance does not set any expectations on consumers; (ii) broadening the guidance where possible to include more detail on peer-to-peer disputes; and (iii) clarification on how to use information from Companies House, as an unverified source of information. The PSR consulted on the draft guidance in July this year. -
UK Payment Systems Regulator Updates Powers and Procedures Guidance
September 20, 2024
The U.K. Payment Systems Regulator updated its Powers and Procedures Guidance to reflect recent developments in its processes and structure. The guidance explains: (i) the PSR's role and its ways of working; (ii) the Financial Services (Banking Reform) Act 2013 legal and regulatory framework under which it operates; (iii) the PSR's powers to take regulatory action under the FSBRA, how the PSR will decide what, if any, action to take, what processes and procedures it will follow, and how a party can appeal against regulatory action; and (iv) the PSR's powers to take enforcement action under the FSBRA where it considers that a potential compliance failure has occurred, how it will decide what, if any, enforcement action to take, what processes and procedures it will follow, and how a party can appeal against a decision to impose a penalty or publish details of any compliance failure.
The PSR has also published a response to its October 2023 consultation on the updated guidance. Changes to the guidance include in relation to: (a) the process for opening an investigation; and (b) flexibility for staff deployed on monitoring or enforcement to work across functions. The guidance applies from September 20, 2024. -
UK Payments Regulator Consults on Reducing Maximum Level of Reimbursement for APP Scams
September 4, 2024
Following feedback from industry and other stakeholders, the Payments Systems Regulator published a consultation paper on reducing the maximum level of reimbursement for the Faster Payments APP fraud reimbursement limit from £415,000 to £85,000. The APP reimbursement requirement obliges payment services providers to reimburse consumers when a payment is executed over the Faster Payments Scheme and the payment was executed following fraud or dishonesty. The PSR proposes to implement the policy with an initial maximum level of reimbursement set at the Financial Services Compensation Scheme reimbursement limit, which is currently £85,000, per each Faster Payments APP scam claim. The previous maximum reimbursement value of £415,000 matched the Financial Ombudsman Service maximum reimbursement limit at that time (the FOS has since raised it to £430,000). The new reimbursement level would come into effect on October 7, 2024 as planned. No other changes to the reimbursement rules are proposed at this stage.
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UK Financial Conduct Authority Reports on Payment Account Access and Closures
September 4, 2024
The Financial Conduct Authority has published a report setting out the findings from its follow-up work on payment account access and closures. The report follows on from the FCA's 2023 report, UK Payment Accounts: Access and Closures, which detailed findings from an initial review of issues relating to payment account access for both individuals and organizations. The 2023 report arose from the "de-banking" of higher risk or less profitable clients by several institutions and scandals in the U.K. involving account terminations of some politicians.
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UK Payment Systems Regulator Publishes Response to Call for Views on Expanding Variable Recurring Payments
August 15, 2024
The U.K. Payment Systems Regulator has published a response to its call for views on proposals for the expansion of variable recurring payments. VRPs allow customers to safely connect authorised payment providers to their bank accounts using open banking so that they can initiate recurring payments (which may be made at flexible intervals and in varying amounts). The Competition and Markets Authority has already mandated nine U.K. banks (the 'CMA9') to implement VRPs for payments between accounts belonging to the same person. The PSR's proposals would enable payments between accounts in different names (so-called 'non-sweeping VRPs'). Phase 1 of the expansion would enable the extension of VRPs to low risk use cases, namely regulated financial services, regulated utilities sectors, and local and central government. The PSR sets out its responses to stakeholder feedback on the key changes required to expand VRPs in this way, including: (i) coordinating the expansion of VRPs through a multilateral agreement - the PSR continues to view an MLA as an efficient way of managing relationships between sending firms and payment initiation service providers, but acknowledges concerns regarding Pay.UK's capacity to deliver the MLA on time. The PSR will work closely with the VRP implementation group to assess which specific rules an MLA should include and who might be best placed to operate it; (ii) mandated participation - the PSR agrees that the 'CMA9' concept should not be used to determine participation in the expanded VRPs and will continue to assess the necessity and scope of mandated participation; and (iii) pricing principles and possible price intervention - the PSR will evaluate different approaches to pricing VRP Application Programming Interface access in Phase 1. The PSR aims to share a set of updated proposals in the autumn. -
Bank of England Discussion Paper on Approach to Innovation in Money and Payments
July 30, 2024
The Bank of England has published a discussion paper on its proposed approach to innovation in money and payments. It explains that innovations in money and payments present risks and opportunities for central banks' monetary and financial stability objective and that central banks must be quick to engage with them and prepare for their implications. The BoE's proposed approach includes developing additional functionalities for the Real-Time Gross Settlement service such as extending settlement hours and a synchronization interface that would allow RTGS to connect to external ledgers, including those based on programmable platforms, and settle assets in central bank money.
Central bank money could interact with programmable platforms through the use of so-called "wholesale central bank digital currency" (wCBDC) technologies. To inform this work, the BoE proposes a program of experiments to test the use cases, functionalities and prospective designs of both wCBDC and synchronization, and their relative merits. The BoE seeks views on its overall approach and on specific topics including, the benefits and risks of programmable platforms and the likelihood of them being taken up at scale by wholesale markets; the pace of innovation in private money, particularly commercial bank money; and the use of tokenized deposits and stablecoins for wholesale transactions.
Responses to the BoE's proposed approach may be submitted until October 31, 2024. -
Payment Systems Regulator Proposes Guidance for Supporting Identification of APP Scams and Civil Disputes
July 18, 2024
The Payment Systems Regulator has opened a consultation on draft guidance to support payment service providers in their assessment of whether an authorized push payment scam claim raised by a consumer is not reimbursable under the reimbursement requirement because it is a private civil dispute. Private civil disputes are not reimbursable under the mandatory reimbursement requirement. They most often involve situations where the consumer has not received good or services, or they are defective in some way, and there is no indication of an intent to defraud on the part of the alleged scammer. The APP reimbursement requirement, which applies from October 7, 2024, obliges PSPs to reimburse consumers when a payment is executed over the Faster Payments Scheme and the payment was executed following fraud or dishonesty.
The PSR's draft guidance sets out a proposed non-exhaustive set of factors a PSP should consider in its assessment, including: (i) the communication and relationship between the consumer and the alleged scammer; (ii) the trading status of the alleged scammer; (iii) the alleged scammer's capability to deliver the goods or services; and (iv) the extent to which the alleged scammer deceived the consumer as to the intended purpose of the payment. The guidance will apply to claims for payments made via Faster Payments and CHAPS.
The PSR expects sending PSPs to take a proportionate approach to validating claims based on the relative complexity and value of the fraud. PSPs are not expected to undertake complex or resource intensive investigations for simple APP fraud claims. Responses to the consultation may be submitted until August 8, 2024. -
King's Speech 2024
July 17, 2024
The King's speech to Parliament sets out the new government's legislative program. The government has published background briefing notes relating to the King's Speech, providing a summary of the legislation to be brought forward. The Bills announced, in relation to financial services, include:- A Bank Resolution (Recapitalisation) Bill, which would aim to enhance the U.K.'s resolution regime, providing the Bank of England with a more flexible toolkit to respond to the failure of small banks. The Bill would expand the statutory function of the Financial Services Compensation Scheme to provide funds to the BoE upon request, to be used where necessary to support the resolution of a failing bank. The FSCS would then recover the funds provided by charging levies on the banking sector, similar to the current arrangements for funding depositor pay-outs in insolvency. Credit unions will not be in scope of this levy. The BoE will also be provided with the power to require a bank in resolution to issue new shares, facilitating the use of FSCS funds to meet a failing bank's recapitalization costs.
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Financial Stability Board Consults on Recommendations to Enhance Cross-Border Payments
July 16, 2024
The Financial Stability Board has launched two consultations: the first on proposed recommendations to promote greater alignment in data frameworks related to cross-border payments, and the second on consistency in the regulation and supervision of bank and non-bank payment service providers. First, in relation to data frameworks, the FSB's recommendations aim to address identified frictions that pose significant challenges to improving the cost, speed, transparency, and accessibility of cross-border payments, while maintaining their safety and security and upholding the objective of protecting the privacy of individuals. These frictions include the misalignment of data in payments that interferes with the smooth processing of cross-border payments, restrictions on data sharing that impede the ability to safely process cross-border payments, and increased costs due to data storage and handling requirements. To take forward these recommendations in a coordinated manner and to identify emerging issues that should be addressed, the FSB proposes the establishment of a forum comprised of public-sector stakeholders covering payments, AML/CFT, sanctions, and data privacy and protection.
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UK Regulators Issue Call for Information on 'Big Tech' and Digital Wallets
July 15, 201
The Payment Systems Regulator and the Financial Conduct Authority have launched a joint call for information on "big tech" and digital wallets. With the increasing use by consumers of digital wallets provided by big tech firms, the regulators are concerned about the potential risks arising from big tech business models, but are aware also of the opportunities for enhanced payment experiences through the use of digital wallets. The regulators are looking to gather focused information and evidence on issues including:- the range of benefits that digital wallets bring for service users;
- whether there are any features in the supply of digital wallets that mean payments don't work as well as they could for consumers and/or businesses;
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UK Policy Statement on APP Scams Reimbursement Compliance and Monitoring
July 12, 2024
The Payment Systems Regulator has published its policy statement on compliance and monitoring of the authorized push payment scam reimbursement requirement. As the operator of Faster Payments, Pay.UK is responsible for monitoring all directed payment service providers' compliance with the APP reimbursement rules. Where necessary, and where it has the powers to do so, it will take action to manage compliance.
The PSR's policy statement confirms the requirement for directed PSPs to register with Pay.UK by August 20, 2024. This is one way that PSPs will identify themselves as in-scope of the policy to Pay.UK and will help facilitate a shared FPS Reimbursement Directory. This directory will enable PSPs to find one another's contact details so that they can meet the requirements in the FPS reimbursement rules and related policy, and communicate in respect of FPS APP scam claims received. The PSR sets out the data under reporting standard A that sending PSPs in-scope of the policy are required to retain and report to Pay.UK monthly in respect of transactions they have sent, to enable it to effectively monitor compliance with the FPS reimbursement rules. In addition, the PSR states the reasonable limits it is placing on Pay.UK in respect of the use and disclosure of the compliance data it receives. Finally, the PSR set out its approach to requiring PSPs to inform consumers of their rights under the policy.
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UK Payment Systems Regulator Updates List of Faster Payment Scheme Participants Potentially in Scope of Authorised Push Payment Reimbursement Requirements
June 14, 2024
The UK Payment Systems Regulator has updated its list of payment service providers that participate in the Faster Payments Scheme, and therefore may fall in scope of Specific Direction 20 and the mandatory authorised push payment fraud reimbursement requirement. The PSR does not guarantee that this is a complete list. Indirect access providers are required to provide monthly updates to the PSR on any changes to the PSPs to which they provide access to FPS.
