On 22nd November 2024, the FCA published the latest version of its Payment Services and Electronic Money – Our Approach Document, Version 6.
An essential guide for Payment Service Providers (PSPs) and Electronic Money Institutions (EMIs), this update integrates the finalised guidance FG24/6, which provides firms with a framework for adopting a risk-based approach to payments.
This guidance is particularly important in the light of discussions around Authorised Push Payment (APP) fraud, addressing both regulatory expectations and the operational challenges faced by firms.
In this article, we’ll summarise the key points from the updates to the FCA’s guidance, and offer next steps for firms.
Context and Background
Let’s remind ourselves of the background to the FCA’s guidance.
The release of FG24/6 follows the Payment Services (Amendment) Regulations 2024, which came into effect on 30th October 2024. These amendments introduced provisions for delaying payments to help mitigate fraud, dovetailing with the Payment Systems Regulator’s APP fraud reimbursement requirements, implemented earlier in October.
By setting these clearer expectations, the FCA aims to improve consumer protections against APP fraud without disrupting the flow of legitimate payments, supporting firms as they protect their customers.
Key Updates in FG24/6
1. Extended Payment Delay Window
The FCA’s guidance permits PSPs to delay outbound payments by up to 4 business days where there are reasonable grounds to suspect fraud or dishonesty.
This extended window is designed to give firms the time needed to investigate suspicious transactions thoroughly, to create a balanced approach between fraud prevention and operational efficiency.
2. Establishing ‘Reasonable Grounds to Suspect’
While the guidance gives PSPs the grounds to delay a payment, payment delays must be grounded on an objective, factual foundation.
The FCA has provided clarity on the criteria firms must use to determine whether suspicions of fraud or dishonesty are reasonable, and this involves relying on evolving fraud typologies and making use of industry intelligence-sharing platforms to remain agile in detecting new threats. Importantly, the guidance is clear that subjective judgement alone is insufficient and that any delay must be grounded in demonstrable evidence.
3. Obligations During Delays
When delaying a payment, PSPs are required to notify relevant parties promptly and clearly, providing transparency about the delay while complying with Consumer Duty obligations.
These obligations ensure that payers are treated fairly, with clear and accessible communication about the reasons for the delay and the steps being taken to resolve the issue.
Firms should also be aware of potential liability for compensating customers for costs incurred due to delays.
4. Inbound Payment Delays
FG24/6 also addresses inbound payment delays, specifically clarifying the application of force majeure provisions where applicable.
These provisions may justify delays where compliance with other financial crime legislation conflicts with the PSRs’ execution timescales.
The guidance provides a framework for firms to ensure that their anti-fraud measures are aligned with legal and regulatory requirements, minimising potential liability while protecting consumers.
5. Industry Feedback and FCA Adjustments
The FCA has incorporated feedback from industry stakeholders into the finalised guidance.
This approach enables firms to respond effectively to the ever-changing nature of fraud, while avoiding undue disruption to legitimate payment transactions.
Next Steps for Firms
The updated guidance will require firms to carefully evaluate their existing systems, policies, and governance frameworks.
Firms must ensure that their operational processes align with FG24/6’s expectations, particularly in relation to decision-making protocols for payment delays. It’s important to implement adequate training programmes to support staff in understanding the criteria for establishing reasonable grounds to suspect fraud and the correct procedures for handling delays.
As expected, the guidance places emphasis on customer transparency and fairness under the Consumer Duty, requiring firms to develop effective communication strategies to maintain trust and minimise confusion during payment delays. Collaborative efforts, such as participating in intelligence-sharing initiatives, will also be key to staying ahead of evolving fraud patterns.
Final Thoughts
The FCA’s updated guidance is significant, as it provides critical guidance for payments and e-money firms as they navigate increasingly complex regulatory expectations.
The update offers firms an opportunity to review existing practices, identify gaps, and align operations with the new, finalised framework. Remember, firms must be prepared to demonstrate compliance through comprehensive evidence and governance frameworks. Taking steps now will ensure ongoing compliance.
If your firm needs support in understanding or implementing these requirements, API Compliance Ltd. is here to help. Contact us through the form below to speak to a consultant.
