The FCA is consulting on updating its guidance in its “approach” document for payment services and e-money firms to support proposed amendments to the PSRs that will allow PSPs to delay making payment transactions where they have reasonable grounds to suspect fraud or dishonesty.
So far, the Treasury has merely published its proposals in a draft statutory instrument (we reported on this in March) but the FCA expects the final regulations to be laid in due course.
It is clear that the new regulations will not oblige PSPs to delay payments but will allow them to adopt a risk-based approach so they can decide the best course of action. The FCA wants to support this by amending the guidance to make sure PSPs have clear information about how to implement and apply the law and take a proportionate approach. The FCA wants to help PSPs understand:
- when and how they should consider whether to delay an outbound payment transaction, and when to tell customers about these;
- how PSPs should treat potentially suspicious inbound transactions (which is not covered by the amendments to the PSRs but on which PSPs have asked for clarity); and
- how the FCA will monitor compliance with the changed law.
It wants to be clear that the new law should not result in a negative impact for customers, so there should be minimal effect on legitimate payment transactions which should still be processed quickly.
In principle, the FCA has taken a similar approach to defining “reasonable grounds to suspect fraud or dishonesty” as the JMLSG guidance takes in relation to money laundering and terrorist financing suspicions. It is proposing examples in the guidance to help PSPs to decide whether reasonable grounds exist in any given circumstance. The FCA is also clear that delays must be as short as possible, with the 4 days the legislation allows being used only where it is necessary to take that long to decide whether the payment is fraudulent. Other areas the guidance will address include:
- a suggestion both that the PSP should notify their customer when they have decided whether or not to execute the payment order but also that payer PSPs should tell the payee PSP which will enable both PSPs to investigate and should minimise delays and duplication;
- confirmation (assuming the Treasury confirms this) that the amount the PSP must reimburse the payer as a result of a payment delay is to be narrowly construed as applying only to interest and charges and not to any wider loss a customer may experience as a result of the delay;
- guidance that the effect of the force majeure provisions in regulation 96(2) of the PSRs is that a payee PSP would not be liable for contravening the requirement under Regulation 89(3) to make incoming funds available immediately after they have been credit to the PSP’s account if the delay is because of POCA or TA suspicions or where, for reasons outside the PSP’s control, it has not been possible for their MLRO to determine whether making the funds available would breach those laws – for instance if the MLRO needs and is actively seeking, further information.
Consultation closes on 4 October and the FCA plans to publish the finalised guidance by the end of the year.