The FCA has wasted no time. On the day the new reimbursement requirement for APP frauds using FPS or CHAPS took effect (7 October), it has written two Dear CEO letters, one to banks and building societies and one to EMIs and PIs setting out its expectations on them.
The letters set out:
- FCA’s expectations in relation to the reimbursement requirement;
- the role of the Consumer Duty; and
- what firms can expect from the FCA in terms of monitoring and supervision.
Key expectations include:
- firms should be working broadly to improve their anti-fraud systems and controls including having in place strong governance, review mechanism for fraud prevention systems and controls and appropriate initial and ongoing CDD measures;
- the need to recognise and manage potential liabilities and adjust business models and transactions to mitigate against risk of prudential impact from potential reimbursement liabilities;
- that an example of a foreseeable harm that would fall foul of the Consumer Duty would include a customer becoming the victim of a scam relating to a firm’s products where the firm’s systems and customer communications were inadequate;
- the need to take prompt action to remedy any harm caused;
- also using the Consumer Duty as a reason to make sure consumers understand the difference between “on us” transfers not covered by the requirement and FPS/CHAPS payments and to act to deliver good outcomes to them in all cases – and the FCA may ask firms that opt to provide a lower level of protection for these payments to explain how they nevertheless comply with the Duty;
- that the FCA and PSR will use data they receive to monitor for prudential issues, conduct breaches and inadequate systems and controls; and
- reminding firms to notify the FCA promptly in the case of any material changes in circumstances, including significant systems and controls or prudential issues.