Updated on 20 May 2015.
The Payment Services Regulations (PSRs) came into effect on November 1 2009.
These require that any firm providing payment services (including money remittance) be registered or authorised by the Financial Conduct Authority (FCA).
A firm can be registered as a Small Payment Institution (SPI) or an Authorised Payment Institution (API).
As an example, any foreign exchange broker who is an API is authorised and regulated by the FCA for the provision of payment services.
From the 1st April 2013, the FSA became two separate regulatory authorities: the FCA and the Prudential Regulation Authority (PRA). T
he FCA is responsible for business and market conduct, whilst the PRA (part of the Bank of England), focuses on prudential issues.
The FCA is moving away from 'light touch' regulation adopted by the FSA, focussing on making markets work well for the benefit and protection of the consumer.
With new product intervention powers, the FCA will be equipped to tackle key issues at an early stage. As in the acronym, the FCA will place greater emphasis on the 'conduct' of firms.
Any UK payment services firm that is not regulated by the FCA (or is not subject to a statutory exemption from regulation) is committing a criminal offence.
The regulations provide a consumer with certain protections and rights, which will not be extended to them in the event they conduct business with an unregulated firm.
Any API is legally required to safeguard client funds in respect of a payment. The most common method is by segregating clients' funds from their own funds in specifically designated safeguarding accounts.
Written by Sarah at money.co.uk
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