In a recent report by the UK Financial Conduct Authority (FCA), it has been revealed that many UK payment firms lack controls and pose an unacceptable risk to their customers. The report states that these firms, known as Electronic Money Institutions (EMIs), are failing to adequately manage the risks associated with cross-border payments, particularly for medium to high-risk businesses.
EMIs are companies that are authorised by the FCA to issue electronic money and provide payment services. They are often used by businesses to make cross-border payments to suppliers or employees. However, the FCA has identified that many of these firms are not doing enough to identify and manage the risks associated with these transactions.
According to the report, many EMIs are failing to carry out adequate due diligence on their customers, particularly those in medium to high-risk industries. This lack of due diligence means that these businesses may be unwittingly facilitating money laundering or other financial crimes.
The report also highlights that many EMIs do not have effective systems and controls in place to detect and prevent financial crime. This lack of controls means that EMIs may be at risk of being used to launder money or fund terrorism.
The FCA has warned that these risks are unacceptable and that EMIs must take action to improve their controls. The regulator has stated that it will take enforcement action against any firms that fail to do so.
The report serves as a timely reminder that businesses must take their responsibilities to manage financial crime risks seriously. In particular, those operating in medium to high-risk industries must ensure that they are carrying out adequate due diligence and have effective systems and controls in place to detect and prevent financial crime.
The FCA's report highlights the need for greater vigilance and control in the EMI industry. The risks associated with cross-border payments are significant, particularly for businesses operating in medium to high-risk industries. It is vital that EMIs take action to improve their controls and ensure that they are not unwittingly facilitating financial crime.
