MP Kitty Ussher Uses GCMT to Announce FSA to Regulate Payment Services Directive
“In the UK, according to our best estimates, around GBP 2.3bn worth of remittances are made each year. The money transfer sector is growing rapidly. Already we have almost 4000 money transfer business operating out of almost 30,000 premises. A transparent and robust system for overseas money transfers is crucial and we need the market to work as effectively as possible.”
With this statement, Economic Secretary and City Minister Kitty Ussher opened the third Global Consumer Money Transfer conference in London.
She went on to announce to the industry that the Financial Services Authority will regulate the Payment Services Directive (PSD) in the UK, clearing the uncertainty that has surrounded this issue. “We think that the FSA is the best choice; they are the best people to do it.”
“It's a whole new system of regulation under the Payment Services Directive that we think will make our sector stronger while preventing abuse. Everything to do with the Directive, with the exception of the money laundering issue will be done by the FSA.”
While the FSA will be the UK regulator for the PSD, the HM Revenue and Customs will retain its supervisory role over businesses. Ms Ussher said, "HMRC are experienced anti-money laundering and counter terrorist financing supervisors. By retaining supervision of money service businesses HMRC will provide continuity for the sector and be able to utilise their supervisory powers under the Money Laundering Regulations 2007. I believe this will provide the most effective approach.”
The PSD is to come into effect in November 2007, as agreed in April this year. Ms Ussher said that the Directive is intended to ensure money transfer and other money service providers gain more compliance through a tiered approach – less regulation if you're smaller, appropriate regulation if you're a larger player. It will also allow passporting of money transfer operations across the EU, which in Ms Ussher's view translates to less regulation.
Thriving Sector
Says Ms Ussher, “We are glad the money transfer sector is thriving. We want to create the economic conditions that help you grow and expand; we want to make it easy for companies to trade throughout the EU, and eliminate the single market barriers. More attention is required in order to give consumers the confidence to use this sector. We will provide guidelines and light touch regulation to help that happen, as we are currently doing. We intend to get the regulatory requirement right and we want you to succeed.”
She affirmed that it is an extremely important sector, socially and financially, for the services it provides to people within and outside the UK.
Payments Council and Regulation
Ms Ussher went on to outline the important role and activities of the Department for International Department and the UK Payment Services Task Force.
“Despite its importance, the remittances industry is a part of the wider payments services sector and we believe there needs to be consumer choice competition, efficiency and innovation throughout the whole sector.”
“The Payment Services Task Force announced last year a number of significant reforms to bring greater certainty and transparency to those using checks. These changes will come into effect next month. The Task Force also agreed on proposals to speed up electronic payments made by phone, internet, standing order, from the current three days to just a few hours; and they will make a real difference when they are introduced. They will be introduced next May.”
Ms Ussher revealed the Task Force's agreement on the self regulating body, the Payments Council. She said the Council is expected to develop the payments systems so that they meet the needs of consumers, businesses, payment service providers, and the wider economy. The performance of the Council will be reviewed by the Office of Fair Trading, before March 2009.
Ms Ussher condoled with the victims of the First Solution situation with reference to the need for more targeted regulation and requirements.
"We now need to consider how best to implement the Payment Services Directive in the UK law and ensure the regime we create is proportionate and risk-based. In consulting on our approach to implementation this autumn we will be looking to support further competition, choice, efficiency and innovation in the payments market, and balance this with ensuring appropriate consumer protection, true to the aims of the Directive."
Fighting Financial Crime
Says Ms Ussher, “We have achieved some important results. A four-fold increase in prosecutions for money laundering since 2002, and an even bigger increase in the levels of criminal assets recovered. In the FATF's recent assessment of the UK government's action against money laundering and terrorist finance, we have received more fully compliant ratings than any other country in the world.
“In the UK, we consulted last year on the supervisory regime on money service businesses and proposed a package of changes in February 2007. These changes will include methods to monitor levels of abuse and non-compliance more systematically, tackle them more aggressively and replace the current registration system with licensing, helping HMRC to root out those who are persistently non-compliant.”
We also published new money laundering regulations earlier this year, which come into effect December 15 this year and which implement the Third Money Laundering Directive.”
She stressed the new, more detailed requirements for know your customer, particularly for high risk transactions, and higher penalties for non-compliance. She called for flexible, intelligent measures by businesses in response to different situations.
Finally, Ms Ussher called for private sector support for a private sector consultative forum that will enhance the business world's engagement with the FATF saying, “Without the joint efforts of governments, international institutions, and the private sector each playing their part, we won't be able to tackle financial crime effectively. That will have to be a priority for us.”
