Is My Money Safe and Secure with FCA Authorised Money Transfer Providers?

If you are looking to find the safest international money transfers, then understanding the international money transfer regulations in the UK is critical. The UK’s financial services regulator, known as the Financial Conduct Authority (FCA), ensures that any money transfer provider it authorises, upholds certain standards to qualify as a safe and secure money transfers.

How the UK Financial Conduct Authority regulates international money transfers

What is the FCA? The FCA, which stands for Financial Conduct Authority, was previously a part of the FSA. The FSA (Financial Services Authority) was a UK self-funded authority, founded under the Financial Services and Markets Act 2000 (FSMA). It ceased to exist in 2012, and split into two authorities, one is the PRA and the second is the FCA (all detailed in our money transfer history timeline).

The FCA is the regulatory body for a wide number of financial services, including but not limited to; insurance firms, financial advisers, banks and of course i money transfer companies who both transfer money internationally and repatriate it from overseas. Every company that wishes to engage in the transfer of funds across borders (over the value of €3 million per month), needs to be authorised under the Payment Services Regulations 2017 and the electronic money regulations 2011, laws set by the UK government but implemented by the FCA. It’s also worth noting the FCA is responsible for enforcing the EU’s payment services directive (PSD2). Money Transfer Regulations the UK still complies with following its exit from the European Union. Ultimately, the FCA exists to ensure firms are  legitimate and safe international money transfer providers that are secured to a necessary degree and should be able to provide secure money transfers.

The latest payment services regulations are available on the government website here and how the FCA implements this within FCA authorised payment provider’s is available here.

The authority is governed by a board appointed by the treasury and supervises the activity of over 50,000 UK-facing financial services firms.

Official website: https://www.fca.org.uk/

Offices: The Financial Conduct Authority UK office headquarters is at: 25 The North Colonnade, London E14 5HS. Here’s a unique photograph we took of the impressive building.

Core responsibilities of the FCA to allow safe money transfers 

• Ensure firms are correctly adopting the Payment Services Regulations of 2017, the electronic money regulations of 2011 and PSD2 2019 (i.e. all international money transfer regulations in UK).
• Business conduct requirements
• Capital resources and requirements
• Segregation and safeguarding of client funds
• Reporting and notifications (firms must report to the FCA if they breach FCA guidelines)
• Setting the guidance and rules for customer disputes (investigating  customer complaints falls to the Financial Ombudsman Service to do that)
•  Regulation committees and periodical FCA checks
•  Issue warnings and remove licenses of unsafe providers
•  Escalating issues to Upper Tribunal (Tax and Chancery Chamber) and the Commissioner of Complaints
• Supervision over Financial Crime
•  Supervision over Anti Money Laundering

FCA Approved & Authorised Secure Money Transfer Firms

The following list of companies are authorised as either a Payment Institution or Electronic Money Institution; these are firms that the Financial Conduct Authority UK approves to offer safe international money transfers and adhere to the UK’s international money transfer regulations.

All authorised Electronic Money Institutions and Payment Institutions are required to appoint a chief compliance officer (CCO) and money laundering reporting officer (MLRO).

Types of FCA Approvals for Money Transfers & Costs

Payment institution application

Becoming a payment institution under the FCA is a prerequisite if you want to provide payment or remittance services in the UK. If your payment transactions result in under €3 million per month, then you can choose to be registered as a SPI — Small Payment Institution. Registration is certainly faster and cheaper than authorisation, but SPIs cannot provide such payment services to the EEA member countries.

Electronic Money Institution

Many remittance companies are purely remittance — one service company. If you’re not providing payments per se, but just transferring funds electronically, then you can just apply to become an EMI. For example, Currencies Direct are authorised under FCA as an EMI. Likewise, if you’re a bank or building society, you’re exempt from registering for an EMI because you’re already authorised under a more broad regulation.

E-money institutions have to pay a lot of different FCA fees. Here are some of the most relevant FCA e-money institution fees:

• Re-authorisation: £750
• Re-registration: £250
• New Small PI or EMI: £1000
• New Authorised PI or EMI: £5,000
• Notification of the use of the limited network exclusion (LNE): £300
• Notification of the use of the electronic communications exclusion (ECE): £200
• Change of legal status: £500 – £2500 (half of original application fee)
• PSD or EMD Variation of authorisation/registration: £750
• Annual fee: varies

As we can see, it’s not cheap getting authorised, but it’s a necessity. Most consumers will only use FCA approved firms. Money transfer companies are in the business of dealing with large amounts of personal assets. Sometimes, they may perform transactions worth 95% of the consumer’s total personal assets.

KYC Issues from the consumer side

When we look at reviews of the likes of Wise and XE money transfers, even though the majority of customer reviews are positive describing a smooth process, the disgruntled customers oftentimes focus on KYC issues. By KYC issues we mean that money transfer service providers – for the most part those entertaining large transfers but also remittances companies (geared at low-value remittances), are requesting more documents about the origins of the money, its recipient, and the reason in which the money is being transferred. The reason the aforementioned companies and any other currency broker would be asking for more documents is AML laws.

To learn more about the requirements that you will be requiring to sign up with an international money transfer service, as per UK international money transfer regulations, view this guide about KYC documents required to sign up with a money transfer service.

Why Stick To FCA-Authorised Payment Providers in the money transfer space?

In simple terms, if you want to have the same level of confidence when issuing overseas payments via a specialised payment provider, as you would with a full-scale bank, then the payment provider should be an FCA authorised firm that undergoes the scrutinization of the UK’s leading regulatory body. An independent body, with no vested interest in the firm, makes sure things are happening as they should be. A firm simply stating they offer safe money transfers or that they have a secure website is insufficient without a third party public body verifying this is the case.

Think of a money transfer company as a mediator. You send them money domestically in your own currency, they make the exchange and then move it forward. How would you feel if the money you sent them was transferred directly into their own bank account, with no designated account for client money? You absolutely wouldn’t want that to happen. You want any financial institution you work with to have segregated client accounts, as well as various safeguarding policies in place. That is truly the “safest money transfer method“.

You also don’t want to be a victim of fraud. Rip-off companies are common. More on this in our case study later.

The FCA can and will issue fines and revoke licenses if necessary, i.e. if a firm receives too many complaints, has repeated governance issues or has a major event of business misconduct, or simply fails to pass regular FCA checks.

You can easily check the status of any money transfer firm to see if it is an FCA authorised payment provider adhering to UK international money transfer regulations. 

A full list of authorized payment institutions offering secure money transfers is available on the FCA Official Website.+

Unsafe Money Transfers Case Study: Working With a Non-FCA Authorised Payment Provider 

Back in 2010, there was a well known case surrounding cornwall-based Crown Currency Exchange. 

Crown’s regulatory designation at the time with the (then FSA) was as a Small Payment Institution. This meant the firm was registered with the FSA, it was not an authorised payment institution. As a result, it did not operate segregated client accounts – this was not a legal necessity for a firm only registered with the FCA/FSA.

When the firm went bankrupt in October 2010, it left 11,000 known creditors short of cash (and some 2,000 others, according to the police) and it’s reported each customer lost somewhere between £100 and £400,000 each – this was money they had sent to Crown Currency to exchange to another currency but never received back. For many this was the downpayment on an overseas property or money they were trying to send to a loved one.

It was later discovered that Crown Currency Exchange used new customers’ cash to pay off existing clients and three of its directors were arrested.

In total, customers lost about £20m. The administrators were only able to recover £3.2m. 

Crown’s collapse caused the loss of 85% of their customers’ money. Customers only discovered later that the money was not ring fenced and that they had very little to no consumer protection rights. The Financial Services Authority (now FCA), had no real power at the time either given the firm’s status as just registered.

Even to this day (last news release Sep 2020) the Devon and Cornwall police are doing their best to recover what money they can from the jailed directors but any money that can be claimed will only be shared with the victims on a pro-rata basis.

Remember it would have been perfectly possible for this firm to advertise ‘secure money transfers’ or ‘safe money transfers’ – the onus is on the customer to do their research and ensure the claims these firms are making are legitimate. Firms can be penalised for making false claims but this generally falls as a responsibility of the advertising standards authority before the FCA gets involved. The fact Crown Currency Exchange was not an authorized payment institution left customers even more exposed. Clearly, it was not adhering to the UK international money transfer regulations of the time, though it should also be noted money transfer regulations are much tougher now than they were in 2010.+

Foreign Exchange Rigging Fines

As detailed on our bank scandals page, the FCA played a prominent role in cleaning up the UK financial system in 2014 when they issued a great deal of fines to banks for their business fx practices and rigging the LIBOR rate.

The FCA announced fines totalling £1.1 billion ($1.7 billion) for five prominent banks for ineffective controls among foreign exchange traders between January 1, 2008 and October 15, 2013.

The five banks facing fines for “failing to control business practises” in their spot FX trading operations were: Citibank (£226 million), HSBC (£216 million), JP Morgan (£222 million), Royal Bank of Scotland (RBS) £217 million) and UBS (£233 million).

One of the primary benchmarks that the FX traders attempted to manipulate was the World Markets/Reuters Closing Spot Rates (WM/R Rates). Regulators discovered that banks went to great lengths to collude in this core benchmark used to price cross-currency swaps, foreign exchange swaps, spot transactions, forwards, options, futures and other financial derivative instruments.

The FCA also collaborated with the US-based NFA and SEC to levy over $10 billion in fines back in 2014. Within days, other regulatory agencies weighed in with additional levies based on similar findings and discoveries of market abuse and collusion.

Are We FCA-Approved?

MoneyTransferComparison.com is by no means regulated, authorised by, or registered with the FCA. As we do not provide personal financial advice, nor process any payments what-so-ever from our visitors, we aren’t required to be an FCA authorised payment provider as we don’t fit the criteria of  UK currency brokers who should adhere to the international money transfer regulations UK. Nevertheless we try to follow the values of what the FCA is trying to achieve – we try to be as transparent and straightforward as we can, and always keep the information on our website up to date and truthful.

We offer a free service of investigating FX cases.

Does the Financial Ombudsman protect corporate clients?

The Financial Ombudsman Service is able to handle complaints for 99% of small businesses. However, if your annual turnover is more than £6.5 million then the answer is unfortunately no.. Many of the fx brokerages we have listed deal with corporate clients specifically through their corporate fx department and this should be your first port of call if you want to raise a complaint.  Corporate clients with an annual turnover above £6.5 million cannot file a complaint as private clients or small businesses would via the Financial Ombudsman. Large corporate clients would have to resort to a civil court to handle their complaints. Though it should be noted this would be the case no matter which financial services provider you are raising a complaint with – whether it’s a money transfer firm, bank or insurance company. 

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Bank Regulation

The FCA also plays a role in the regulation of banks alongside dedicated payment providers, enforcing regulation that goes beyond the scope of secure and safe money transfers. Banks, which were traditionally overseen by the FSA until it was split in 2012, are now inspected by 3 regulatory bodies: HMRC, PRA and the FCA.

Each one of the regulators is responsible for different things. The FCA’s specific role with banks is to make sure competitiveness is maintained, and the bank’s day-to-day activity is compliant with the UK’s legal framework, such as capital requirements, credit requirements, exposure requirements and transparency requirements.

Final Notes About Money Transfer Security

If you wish to make a safe money transfer from the UK it is an absolute necessity to check whether the company you plan to use for international money transfers is in fact an FCA authorised payment provider. International money transfer regulations in the UK are some of the most extensive controls to be implemented anywhere in the world (after all they have more payment providers registered there than anywhere else – see our guide to UK currency brokers) but the same applies if you want to make a secure money transfer from another country – be sure the firm is an authorized payment institution of another major regulatory body (such as ASIC or FINCEN). That’s the FIRST and MAIN requirement you should have as a customer who wishes for a safe and secure money transfer. Be sure to do your due diligence though – ensure the firm has a strong credit rating, is turning profit and offers segregated client accounts.

If it offers segregated client accounts, understand when your money is safeguarded (i.e. ringfenced) and when it isn’t. Making a safe money transfer is not just about delivering your funds to the correct beneficiary, you need to understand your position should extreme cases unfold, such as your money transfer provider going bust. Even though the UK international money transfer regulations are some of the most extensive in the world today, you’ll want to choose a payment provider with a strong reputation and high credibility.