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Financial Institutions FSDR e-briefing: FCA censures money transfer company

    • Financial institutions - Briefings and articles

    12-07-2013

    FCA censures money transfer company

    Summary

    On 30 April 2013, the FCA published the Final Notice issued to Horn Express Limited (formerly known as Quaran Express Money Transfer Limited) (“Horn”), a money transfer company authorised by the FCA under the Payment Services Regulations 2009 (“PSRs”).

    The FCA imposed a public censure on Horn for failing to safeguard and segregate customer funds in breach of Regulation 19 of the PSRs (safeguarding requirements).  The FCA would have fined the firm £136,687 had the firm not produced verifiable evidence that imposing a fine would have caused it serious financial hardship.

    Failings

    Horn’s customers commonly used its services to transmit money overseas from the UK.  At times during the period between 1 December 2009 and 26 August 2011, Horn mixed customer funds with its own monies in the same bank account and failed to record accurately how much of the money in that account was customers’ funds. 

    Horn also failed to properly reconcile the customer funds held in its bank account and to set up the bank account properly (for instance, it was not labelled as a customer funds account, which meant that customers might have lost their money if Horn had become insolvent). 

    Horn had also failed to sufficiently supervise its branches and agents, and the records of compliance visits that it carried out failed to show an adequate assessment of the safeguarding and segregation requirements for customers’ funds.

    Bill Sillett, FCA Head of Retail Enforcement, said: “This case highlights the wide remit of the FCA; we are not just the regulator of firms authorised under the Financial Services and Markets Act.  We will use our enforcement powers to the full extent and this case, the first of its kind, demonstrates that we will take action where breaches are identified.  It is not acceptable that customers’ monies are put at risk by firms, whether in the financial services or payment services sector, and we will take action to tackle this.

    Comment

    This is an important case as it is the first time that a public sanction has been imposed on a payment institution authorised under the PSRs for misconduct under the PSRs(other than for failures to comply with minimum conditions for registration or authorisation).  It shows that the FCA is taking pro-active steps to use the full range of the enforcement powers available to it.

    The case also serves as a reminder to firms that they must comply with their obligations under the PSRs, in particular under Regulation 19, to keep customer funds segregated from other funds; designate a separate account with appropriate safeguards for customer funds; ensure that no other person maintains an interest over those customer funds; and maintain appropriate organisational arrangements to minimise the risk of loss or diminution of customer funds through fraud, misuse, negligence or poor administration.

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