Laura WilesUK Finance has responded to two consultations from the FSB, relating to the regulation and supervision of cross-border payment services providers (PSPs) and aligning cross-border payments and data frameworks.
In the first consultation, FSB considered how to strengthen consistency in the regulation and supervision of banks and non-bank PSPs proportionately to the risks associated with cross-border payment services. UK Finance noted the following issues in particular:
- Activity-based vs entity-based regulation – UK Finance agreed with the FSB’s distinction, but stressed the need for flexibility to avoid unintended consequences and a proportionate, overarching approach of “same activity, same risk, and same regulation”.
- Definition of payments – FSB’s proposed definition for payments aims to “cover all types of electronic funds transfers and instruments (e.g. cheques, credit transfers, direct debits, card payments, e-money)”. UK Finance recommended including instant / fast payments, as this payment type is gaining popularity in the market and tends to be distinguished from ‘standard’ credit transfers. It also recommended addressing the regulatory treatment of paper-based instruments like cheques. Again, it suggested a flexible approach to reviewing the definition as the sector evolves.
- Payment systems – UK Finance highlighted a number of issues with FSB’s definition of payments system, which is a “set of instruments, procedures and rules for the transfer of funds between or among participants”. In particular, UK Finance is concerned that this drafting may not sufficiently address scenarios where there is a clear distinction between scheme and infrastructure, which in turn results in different roles and responsibilities.
In the second consultation, FSB sets out recommendations for promoting alignment and interoperability across data frameworks applicable to cross-border payments. The report aims to mitigate unintended frictions in cross-border payments while avoiding compromising on the underlying objectives of data frameworks, like security of transactions, AML and sanctions requirements, and protecting the privacy of individuals.
UK Finance agreed with the Forum’s proposed role in coordinating the implementation of recommendations, and suggested that it:
- Outline industry practices and end-to-end data quality;
- Engage in public-private consultations for measurable outcomes;
- Provide horizon scanning for upcoming regulations that may affect cross-border payments; and
- Provide specific guidance on balancing AML / CFT requirements with data privacy concerns.