On 18 May 2020 the FCA published its latest Dear CEO letter which was subsequently sent to all e-money authorised in the United Kingdom. The letter follows the finalised Guidance Regarding Coronavirus, the Safeguarding of Customers’ Funds consultation and the portfolio strategy letter published by the FCA on 9 July 2020.
The letter highlights the concerns the FCA have in relation to financial promotions. Many financial firms compare their services to traditional banks – or present themselves as an alternative – yet fail to disclose the differences in protection afforded to the consumer. In particular, the FCA believes that e-money do not make it clear that Financial Services Compensation Scheme (FSCS) rules do not be apply when using their services.
The guidance regarding Coronavirus and the Safeguarding of Customers’ Funds also warned FCA regulated firms against providing consumers with misleading information about the level of industry safeguarding and the protection provided to keep their money safe.
The Dear CEO letter further refers to the portfolio strategy letter which highlights regulatory obligations in six key areas, non-compliance with which may harm consumers:
Relevant functions of the e-money firms should consider the Dear CEO letter as well as the portfolio letter and the Guidance Regarding Coronavirus and the Safeguarding of Customers’ Funds and report to the management bodies whether the firms are compliant with the issues raised, and propose the further actions, if any, that the firm needs to take in response. All promotional materials need to be endorsed by compliance and legal functions before they are published; and the firms should issue a letter to customers to inform them how their money is protected.
It is believed that in the long-term the above steps will rebuild consumer and business confidence in working with e-money firms.