Payment Services Regulations (PSRs): Update 4
June 2010
In this update we provide further information on our experience in dealing with authorisation appplications submitted to the Financial Services Authority (FSA) and look at the process that authorised Payment Institutions (authorised PIs) must go through if they wish to provide payment services in another European Economic Area (EEA) state. We also cover the right to use the FSA logo.
Don't delay
The deadline for authorisation by the Financial Services Authority (FSA) under PSRs is 1 May 2011. The FSA has advised that, to allow applications to be processed by this date, they should be submitted by 1 February 2011 at the latest. This timescale assumes that the FSA will raise few queries on an application. This may, of course, not be the case and the possibility of queries from the FSA should be factored into your authorisation plan, especially since failure to be authorised by 1 May 2011 would mean that your remittance business would need to cease trading. In light of this, and having regard to our experience of the FSA authorisation process, we strongly advise that you submit your application for authorisation no later than 31 August 2010.
Passporting
Passporting is the right of a business to conduct activities and services regulated under EU legislation in another EEA state on the basis of authorisation in its home member state. These activities can be conducted through an establishment in the host state (known as a "branch" passport) or on a cross border services basis without using an establishment in the host state (known as a "services" passport). A branch established in another member state by a UK authorised PI is referred to as an "EEA branch."
Passporting rights are only available to authorised PIs, not small PIs.
A UK authorised PI can also provide services in another member state through an agent established in the UK (using a services passport) or through an agent established in another EEA state (using its right of establishment).
The passporting right extends to all services for which the PI is authorised.
The procedures for making an application for a "branch" or "services" passport are very similar. However, there are additional procedures that need to be followed when passporting through an agent.
Where an authorised PI intends to provide payment services, either on a cross border basis or on an establishment basis, the business is required to give notice of its intention to the FSA. The notification needs to give details of the payment services the business intends to carry on, the names of the people responsible for managing any proposed EEA branch, the details of that branch's organisational structure, as well as the EEA state where the payment services are to be carried on.
If the business intends to use an agent to provide services in another EEA state, then the FSA has to advise the host state FSA equivalent authority to take into account their opinion as to the suitability of the applicant for authorisation. In order that the host state may come to an opinion, the following further information needs to be provided; the name and address of the agent; the names of those who will be responsible for management of that agent and identification information of the management such as date of birth, National Insurance or passport number.
Where a firm has applied for a services passport that it will be using directly, the FSA will let it know once the host state has been notified and will update its register to show details of the passport.
Where a firm seeks to establish a branch, or provide services through an agent, the FSA will assess the fitness and propriety of the management of the branch or the agent before making the notification to the EEA state.
Money laundering provisions
If the competent authority of the host member state has reasonable grounds to suspect that, in connection with the intended engagement of the agent or establishment of the branch, money laundering or terrorist financing is taking place or has been attempted, or that the engagement of an agent or establishment of a branch could increase the risk of money laundering or terrorist financing, they shall inform the FSA, which may refuse to register that branch or agent, or withdraw the registration of the agent or branch if already made.
Changes to payment services
Changes affecting the payment services that a firm seeks to carry on under passporting rights should be notified to the FSA at least one month before the business wishes them to take effect. Such changes may include:
- changes to the name and address of the firm
- changes to the name and address of the agent engaged in another member state
- adding or removing an agent
- adding or removing passporting rights to particular EEA states
- changes to the payment services being conducted
- changes to the persons responsible for the management of the proposed EEA branch or agent.
Approval of changes is subject to a similar review process as for new passport applications; so in the case of changes in the use of agents or the management of a branch, registration will be subject to the fitness and propriety checks described above in relation to the use of agents or branch passports.
PIs authorised outside of the UK
PIs that are authorised in another EEA state and who wish to provide payment services in the UK should refer to the relevant authority in their home state for instructions on making a passport notification. The PIs will appear on the register of their home state, but not on the FSA register.
The FSA is responsible for supervising compliance by an FSA authorised PI of its capital requirement obligations, regardless of where it carries on its payment services in the EEA.
The FSA is also responsible for supervising compliance with the conduct of business rules for the PSRs in relation to payment services being provided from an establishment in the UK. This includes an EEA PI exercising its rights of establishment, but not in relation to those provided on a cross border basis from an establishment based outside the UK.
Use of the FSA logo
The FSA allows authorised firms for whom it is the home state regulator, to use the FSA logo in certain circumstances. Authorised PIs may use the logo as part of a statement in a letter (or electronic equivalent such as email) that it is authorised and regulated by the FSA.
Agents of authorised PIs are also permitted to use the FSA logo as part of a statement in a letter that its principal is authorised and regulated by the FSA.
Small PIs, EEA authorised PIs and businesses taking advantage of the transitional provisions of the PSRs, including their agents and branches, are not permitted to use the FSA logo.
How we can help
Littlejohn can assist you in the following areas in relation to the PSRs:
- Preparation of applications for authorisation
- Preparation of applications for registration
- Advice in relation to complaints procedures
- Advice in relation to conduct of business rules
- Compliance reviews in relation to the PSRs
- Completion of FSA annual returns
Littlejohn can also provide the following services:
- Audit of financial statements
- Preparation of financial statements
- Corporation tax services
If you would like further information, contact Azhar Rana on 020 7516 2232 or email.
