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Early this year, the FCA has forwarded a letter highlighting several cases of non-compliance with PSR & EMR acts to authorized e-money organizations & payment institutions. Attached to the letter was an additional interim guide outlining FCA's expectations regarding corrective action. 

So, let’s have a closer look at the key points of the guide & see how they may be relevant for individuals considering registering a company in Great Britain.

What Does It Mean?

According to the FCA’s guide, the coronavirus pandemic could call in question customer protection measures provided by UK-based companies.

The main areas of concern identified by the FCA are:

Ensuring security in the following areas:

  • proper establishment & maintenance of safeguarding accounts & their regular audits;
  • mixing customer funds with companies’ own funds. The FCA insists that: reconciliations be carried out on a regular basis to prevent such situations from happening; safeguarding accounts be quickly returned to customers in the event of companies’ insolvency.

Managing prudential risks in Great Britain

The following problems were highlighted:

  • lack of sufficient regulatory capital;
  • lack of sufficient liquidity to ensure that UK-registered companies can always fulfill their obligations;
  • inadequate systems & controls for managing prudential risks; 
  • the need for better testing of vulnerability to financial risks & the development of crisis management plans.

Financial crimes 

If you intend to start a financial business in the UK, you should keep in mind that FCA's analysis of AML processes has revealed several critical vulnerabilities in companies' systems & controls. The regulator emphasized the need to be prepared for risks associated with financial crimes & be able to properly deal with them.

Communication with consumers & advertising 

The FCA highlighted several issues with advertisements & corporate website design:

  • unverifiable statements about services & prices;
  • misusing the "free" word when describing costs associated with currency conversion;
  • making inaccurate statements about protection provided to clients in the event of a company's insolvency.

Management & regulation of financial activities in Great Britain 

According to the FCA, companies, including at the management level, have failed to duly address issues with regulatory non-compliance.

Reporting 

Those who want to register a company in Great Britain or already have a going concern in this country should painstakingly document PSR and EMR compliance & timely respond to FCA’s ad hoc requests.

Conclusion

The FCA requires that UK-based financial companies be compliant with regulations & warns of the possibility of punitive actions being taken if violations are detected. The regulator also calls on companies to consider the impact Brexit may have on any ongoing relationships with their clients.

If you have any questions about the regulation of financial activities in Great Britain or want to open a company in the UK, do not hesitate to contact IQ Decision UK. Our legal experts will be delighted to land you a helping hand with any legal issues you’re facing in this regard.