Financial services matters - August 2024

FCA publishes speech on Consumer Duty: one year on and next steps 

On 31 July 2024, the FCA published a speech by Sheldon Mills, Executive Director of Consumers and Competition, which was delivered at the FCA's Consumer Duty: 1 year on event.

Highlights of the speech, titled "Taking the leap on Consumer Duty", include:

• The FCA welcomes the improvements that firms have made to deliver better consumer outcomes in the first year of the Consumer Duty.
• The outcomes-based nature of the Duty will allow the FCA to streamline its rulebook to support competitiveness and growth, while ensuring good consumer outcomes.
• Following the milestone of one year of the Consumer Duty, the FCA will focus on how firms are embedding the Duty, acting to address harm. 

On 31 July 2024, the Consumer Duty came into force for closed products and services, a year on from its application to open products and services. The FCA introduced the Consumer Duty and its outcomes-based approach as it wanted to create an environment for healthy competition and innovation based on high standards. The FCA has seen many examples of positive and impactful changes, and that the Duty is already having a tangible impact on consumer outcomes. Mills also noted that there are still areas where firms need to continue to improve.

In terms of next steps, the FCA will publish a grid of its programme of Consumer Duty work. This will include thematic work across sectors and work on specific sectors, products or services. The FCA will continue to monitor how firms are embedding the duty and, where necessary, act to address harm.

King's Speech 2024: financial services implications 

On 17 July 2024, the UK King's Speech was delivered to Parliament. The speech sets out the new Labour government's legislative programme for the forthcoming parliamentary session.

The Bills announced with a financial services interest include the following: 

• Bank Resolution (Recapitalisation) Bill.
• Pension Schemes Bill, reported on in our recent post.
• Digital Information and Smart Data Bill.
• Cyber Security and Resilience Bill.

FOS annual complaints data and insights for 2023/24

On 12 July 2024, the Financial Ombudsman Service (FOS) published its annual complaints data and insights for 2023/24.

The data shows the volume of complaints received and overall uphold rates between 1 April 2023 and 31 March 2024. The FOS has seen higher case levels, as it received 198,798 new complaints in 2023/24 compared with 165,149 in 2022/23. Notably, complaints about the banking sector are at their highest level in a decade, as consumers raised 80,137 cases about banking and payment products in 2023/24, up from 61,996 in 2022/23. The increase was caused by concerns over current accounts, credit cards, and fraud and scams (around half of which were authorised push payment (APP) scams).

The FOS upheld 37% of the complaints resolved in 2023/24, which is an increase from 35% in the previous financial year.

25% of complaints were brought by claims management companies (CMCs) and professional representatives, an increase from 18% in the previous financial year. The FOS notes that when complaints are upheld, professional representatives can take a significant proportion of the compensation which their clients are awarded, without contributing to the FOS' running costs. It has therefore proposed to introduce a case fee for professional representatives.

FCA quarterly consultation 44

On 9 July 2024, the FCA published its 44th quarterly consultation paper (CP24/11). 

The FCA invites comments on proposed changes including:

• The introduction of criminal background checks on owners and controllers at the Authorisation gateway: following the Financial Action Taskforce's (FATF) recommendations the FCA (in agreement with the PRA) proposes to require controllers and beneficial owners to obtain criminal background checks from the Disclosure and Barring Service (DBS). This requirement will apply to those making an application for authorisation or registration with the FCA and for a notice of an intended acquisition or increase in control. 
• Changes to controllers and close links rules SUP: following the FCA's consultation on proposed non-Handbook guidance for the prudential assessment of acquisitions and increases in control, the FCA proposes to amend the Supervision manual (SUP) by replacing the wording in SUP 11.3.1BG to refer readers to the Change in Control Guidelines and deleting SUP 11 Annex 6G to minimise duplication. 

The consultation closes for comments on 12 August 2024. 

FCA policy statement on regulated fees and levies for 2024/25

On 3 July 2024, the FCA published a policy statement (PS24/5) on regulated fees and levies for 2024/25. 

PS24/5 sets out:

• The 2024/25 regulatory fee and levies for FCA.
• The 2024/25 regulatory fee and levies for the Financial Ombudsman Service (Ombudsman Service).
• The feedback received to the April 2024 consultation on draft fees and levies rules in CP24/6. 

The FCA is generally proceeding with the proposals in CP24/6, with some amendments, which include:

• A difference in the final fee and levy rates for 2024/25 from the draft rates consulted on, due to a change in the fee data used to calculate fee rates.
• The FCA is no longer recovering the AGBR exceptional project costs from general insurance firms. 
• The final rates for fee-block A.24 (access to cash) will be made by a separate instrument as it enters into force at a later date. 

Complaints Commissioner final report on FCA oversight on MoneyThing Capital Ltd 

On 18 July 2024, the Financial Regulators Complaints Commissioner published a final report (dated 21 June 2024) into the FCA's oversight of MoneyThing Capital Ltd (MoneyThing). MoneyThing operated a peer-to-peer lending platform, which facilitated crowdfunded loans that were used to fund business loans secured against assets such as property, as well as pawn-broking style loans secured on items of value. It started to wind down its activities in December 2019 and went into administration in December 2020.

The Commissioner received several complaints about the FCA's regulation of MoneyThing, from a number of different complainants, and decided to issue a single report addressing the complaints, looking only at the issues raised in the complaints rather than the wider issues affecting the peer to peer (P2P) market.

The FCA's engagement with MoneyThing started in 2014, when it received interim permissions from the FCA having previously been regulated by the OFT, and ended after it went into administration in 2020. The complainants raised a large number of allegations about the FCA's failings in relation to MoneyThing, which fall into the following categories:

• The FCA should not have authorised MoneyThing.
• The FCA did not supervise MoneyThing adequately after authorisation and before it went into administration.
• The FCA did not supervise the administration of MoneyThing adequately.

After reviewing the allegations about its regulation of MoneyThing, the FCA did not uphold any of the complaints and did not accept that it had acted inappropriately in relation to the three elements above. 

The Commissioner identified some issues for consideration regarding the FCA’s oversight of MoneyThing, however, in the context of the complaints referred to her, on the whole she found the FCA's authorisation and supervision of MoneyThing and its administration was reasonable. Therefore, she did not uphold the complaints. The Commissioner noted that investors are disappointed and expressed sympathy for those who have incurred losses, but stated that they were not attributable to the FCA. 

Court of Appeal considers responsibility of principal for activities of appointed representatives

On 12 June 2024, in the case of KVB Consultants Ltd and others v Jacob Hopkins McKenzie Ltd and others [2024] EWCA Civ 765, the Court of Appeal considered whether a principal was responsible for the actions of its appointed representative under section 39 of the Financial Services and Markets Act 2000 (FSMA).

KCL, authorised to carry out investment business, entered an agreement with JHM in 2015 to market, promote, and arrange business and give advice, but not to advise retail clients or operate a collective investment scheme (CIS). KCL did not have the necessary authorisation to promote or operate CISs. Investors claimed losses of £1.7 million from property investment schemes promoted by JHM.

The investors sought summary judgment against KCL. KCL argued JHM acted outside the scope of the agreement such that it had not "accepted responsibility" for those activities and therefore should not be held liable. 

The court held that KCL was responsible for JHM's activities related to the promotion of the schemes, despite KCL's claim that JHM acted outside the agreement's scope. KCL was judged liable for liquidated damages and costs, as principals could limit their liability in respect of the "what" (the activity for which it accepts responsibility) but not the "how" (the manner in which that activity is carried out).

KCL appealed on two grounds:

• The AR Agreement prohibited JHM from conducting business relating to the Schemes and therefore KCL did not give permission or accept responsibility for the conduct of such business by JHM under section 39 of FSMA.
• The AR Agreement prohibited the promotion of the Schemes to retail clients, this being a prohibition which restricts what can be done, not how it can be done.

The appeal was dismissed as both arguments were rejected. The court rejected the argument that the Agreement prohibited the promotion and marketing of the various property investment schemes and, among other things, the judge held that it was clear that KCL did not give permission to JHM to operate a Scheme and did not accept responsibility for the operation by JHM of such a Scheme. However, this did not detract from the permission granted elsewhere in Schedule 5 to advise on and arrange deals in Schemes.

King's Speech 2024: Digital Information and Smart Data Bill 

The Digital Information and Smart Data Bill intends to harness the power of data for economic growth. Through the Bill, the government will put on a statutory basis three innovative uses of data in which people can choose to participate, including:

• Establishing digital verification services, which will support the creation and adoption of secure and trusted digital identity products and services from certified providers to help with day-to-day processes and applications.
• Setting up smart data schemes which, as well as empowering customers to make more informed choices and providing businesses with a toolkit to innovate, the government hopes that by empowering consumers to share their data with sectors the economic growth that has been seen from Open Banking across the economy.

BCBS finalises disclosure framework for banks' cryptoasset exposures and targeted amendments to cryptoasset standard

On 17 July 2024, the Basel Committee on Banking Supervision (BCBS) published its final disclosure framework for banks' cryptoasset exposures (BCBS580), and its targeted amendments to its cryptoasset standard (BBS579).

The disclosure framework sets out standardised tables and templates which cover banks' cryptoasset exposures. Banks are required to disclose qualitative information on their cryptoasset-related activities and quantitative information on the capital and liquidity requirements for their cryptoasset exposures. The common disclosure requirements aim to support market discipline and contribute to reducing information asymmetry amongst banks and market participants, whilst the targeted amendments aim to tighten the criteria for certain stablecoins to receive preferential regulatory treatment. 

Both standards must be implemented by 1 January 2025. 

Final report on ESAs' second batch of policy materials under DORA

On 17 July 2024, the Joint Committee of the European Supervisory Authorities (ESAs) (that is, the EBA, ESMA and EIOPA) published their second batch of policy materials under the Regulation on digital operational resilience for the financial sector ((EU) 2022/2554) (DORA). The batch consists of:

• Final report on draft regulatory technical standards (RTS) and implementing technical standards (ITS) on the content, format, templates and timelines for reporting major information and communication technology (ICT) related incidents and significant cyber threats under Article 20 of DORA (JC 2024 33).
• Final report on draft RTS on the harmonisation of conditions enabling the conduct of the oversight activities under Article 41(1)(c) of DORA (JC 2024 54). These RTS relate to the criteria for determining the composition of the joint examination team (JET).
• Final report on draft RTS on the harmonisation of conditions enabling the conduct of the oversight activities under Article 41(1) of DORA (JC 2024 35).
• Final report on draft RTS specifying elements related to threat-led penetration tests (TLPT) under Article 26(11) of DORA (JC 2024 29).
• Final report on joint guidelines on the estimation of aggregated annual costs and losses caused by major ICT-related incidents under Article 11(11) of DORA (JC 2024 34).
• Final report on joint guidelines on the oversight co-operation and information exchange between the ESAs and the competent authorities under Article 32(7) of DORA (JC 2024 36).

After consulting on the draft technical standards and guidelines and receiving feedback, the ESAs made some changes to the final versions. 

The guidelines have been adopted by the Boards of the Supervisors of the ESAs and the final draft technical standards have been submitted to the European Commission for adoption. It is expected the technical standards will apply from 17 January 2025. 

FSB Chair speech on how AI may shape economy and financial system

On 16 July 2024, the Bank for International Settlements (BIS) published a speech (dated 11 July 2024) given by Klaas Knot, Financial Stability Board (FSB) Chair, on how AI may shape the economy and the financial system.

Key messages include:

• Generative AI, advances in computing power and the increase in productivity it brings may contribute to economic growth in a meaningful way.
• In order to use AI to our benefit, we must implement the right policies and regulations. Regulators and policymakers should therefore maintain a healthy balance between harnessing the benefits of innovation while mitigating the risks. 
• The American regulatory environment has traditionally been more focused on opportunities, being flexible and conducive to business innovation. The European environment tends to focus on the risks and call for regulation, but there is danger in falling behind in adopting new innovations. Mr Knot calls for a slightly more American attitude and warns against stifling AI-driven innovation.
• The FSB is updating its 2017 paper on the financial stability implications of AI. The risks identified in the earlier report still exist, and whilst the potential risks of AI may seem new, beneath the surface they are very similar to traditional financial risks. The FSB is familiar with such risks and has frameworks to assess them, notably concentration risk, third party dependence and interconnectedness.  
• Potential new forms of interconnectedness in the financial system may emerge. For example, autonomous trading agents may interact to create new dynamics in financial markets. Interdependencies may be especially pronounced if the market for data and model providers is highly concentrated, which appears to be the case for generative AI (GenAI) models. 
• Currently, the FSB's work is purely analytical. It is not currently developing policy options or co-ordinating across standard setting bodies or international organisations. However, it is ready to do what is needed to monitor these risks and implement effective regulatory frameworks.

AI Act and the financial sector

Following the publication in July 2024 of the EU's Artificial Intelligence Act (AI Act), financial supervisors are thinking through how the new legislation and its extensive governance and risk management framework for those who develop and use high-risk AI systems (see our summary) will apply to the financial sector. On 15 July 2024, the European Insurance and Occupational Pensions Authority (EIOPA) published its preliminary assessment.

EBA consults on guidelines on reporting templates under MiCA

On 15 July 2024, the EBA published a consultation paper (EBA/CP/2024/15) on draft guidelines on templates to assist competent authorities in performing their supervisory duties regarding issuers' compliance under Titles III and IV of the Regulation on markets in cryptoassets ((EU) 2023/1114) (MiCA). The draft guidelines aim to ensure a common supervisory approach and enhance supervisory convergence to ensure a level playing field across the internal market. 

The EBA explains that the data points that issuers of asset-referenced tokens (ARTs) and certain e-money tokens (EMTs) are required to report under Article 22 MiCAR do not allow competent authorities and the EBA to discharge their supervisory tasks under Titles III and IV of MiCAR. The EBA has identified data gaps that, left unaddressed, would impede the supervision of issuers’ compliance with the own funds and liquidity requirements laid down in MiCAR. 

In these draft guidelines, the EBA specifies templates that issuers of ARTs and EMTs should use to provide competent authorities and the EBA with the necessary information to cover the gaps. Additionally, these guidelines include common templates and instructions that issuers should use to collect data from the relevant Crypto-Asset Service Providers (CASPs).

The consultation paper and related EBA webpage both state that comments can be made on the draft guidelines until 15 October 2024. However, a related EBA press release states that the consultation deadline is 11 October 2024.

The guidelines are expected to apply two months after the publication of the official EU language versions on the EBA website. 

ESAs consult on guidelines on explanations, opinions and standardised test for classifying cryptoassets under MiCA

On 12 July 2024, the European Supervisory Authorities (ESAs) published a consultation paper on draft guidelines on explanations and opinions, and the standardised test for cryptoassets, under Article 97(1) of the Regulation on markets in cryptoassets ((EU) 2023/1114) (MiCA).

The draft guidelines propose a standardised test for the classification of cryptoasset and templates for explanations and legal opinions providing descriptions of the regulatory classifications of cryptoassets, specifically asset-referenced tokens (ARTs) and cryptoassets that are not ARTs or electronic money tokens EMTs under MiCA. 

The aim is to support market participants and supervisors adopt a convergent approach to the classification of cryptoassets. The test acknowledges that the regulatory classification of a cryptoasset requires case by case assessment, taking account of applicable EU and national law, decisions of the Court of Justice of the European Union, decisions of the national court, and any regulatory measures or guidance applicable at the national level.

The ESAs plan to hold a public hearing on the consultation paper on 23 September 2024. Comments on the draft guidelines can be submitted until 12 October 2024.

The guidelines are expected to apply two months after the publication of the final version on the ESA's websites. 

Law Commission publishes scoping paper on Decentralised Autonomous Organisations

On 11 July 2024, the Law Commission published a scoping paper on Decentralised Autonomous Organisations (DAOs), which follows on from the Commission's November 2022 call for evidence.

The paper introduces the broad concept of a "DAO" and explains some of the practical and legal questions they raise. The Commission explores the possible legal characterisation of DAOs and examines the different legal entities a DAO might adopt. The paper considers the attractiveness of England and Wales as a jurisdiction for DAOs and areas of domestic regulation affecting DAOs, which includes money laundering, financial services regulation and taxation.

The Commission has not developed recommendations for reform. It identifies several options for future workstreams or innovations that could clarify the status and support the uptake of DAOs. This includes:

• Keeping the development of a DAO-specific entity in England and Wales under review.
• Reviewing the Companies Act 2006 to see if reform is needed to facilitate the increased use of technology at a governance level. 
• Reviewing anti-money laundering regulation in England and Wales and considering whether the same policy objectives can be achieved in a manner more compatible with the use of distributed ledger and other technology.

ESAs update Q&As on SFDR: July 2024

On 25 July 2024, the Joint Committee of the European Supervisory Authorities (ESAs) published an updated version of its consolidated Q&As (JC 2023 18) on the Sustainable Finance Disclosure Regulation ((EU) 2019/2088) (SFDR) and on Commission Delegated Regulation (EU) 2022/1288.

The ESAs have added a range of new answers. Among other things, these relate to establishing a website to comply with Article 10 of the SFDR, how to calculate the share of sustainable investment that qualifies as environmentally sustainable and its disclosure, and calculating a sustainable investment either at the economic activity or the investment level for financial products.

FRC introduces interim changes to UK Stewardship Code reporting requirements

On 22 July 2024, the FRC announced interim changes to reporting requirements for existing signatories to the Stewardship Code ahead of consultation on the implementation of a new Code in 2026. 

Following extensive engagement with stakeholders, and in response to their feedback, the FRC has taken steps to reduce the reporting burden on signatories to the Code. The changes, which will be effective for the next application deadline of 31 October 2024, include:

• Removing the requirement for existing signatories to update disclosures against "Context" reporting expectations, except where there are material changes to previous disclosures.
• Removing the requirement for existing asset owner and asset manager signatories (but not service provider signatories) to disclose against "Activity" and "Outcome" reporting expectations for Principles 1, 2, 5 and 6, except where there are material updates.
• Allowing existing signatories to cross-reference to specific disclosures made in their most recent stewardship report where there have been no material changes.

The FRC has also clarified its expectations for all applicants and signatories regarding reporting on outcomes, and the application of the Principles on collaborative engagement and escalation of stewardship activity:

• Effective stewardship takes time, and it is not always possible to report on an engagement that has concluded in a reporting period. Applicants can therefore report on an ongoing engagement, along with some reflection on progress made and next steps.
• Applicants are not expected to undertake collaborative engagement or escalation unless it is conducive to achieving their stewardship objectives.

The FRC confirms that the review of the Code is ongoing, with further engagement taking place across summer and early autumn 2024 before a formal consultation later this year.

FSB stocktake on nature-related risks

On 18 July 2024, the Financial Stability Board (FSB) published a stocktake report on nature-related risks. 

The FSB notes that a growing number of financial authorities have been considering the potential implications of nature-related risk. To inform this stocktake, the FSB has surveyed financial authorities from participating FSB member jurisdictions and international organisations on their current and planned initiatives on nature-related risks.

The report sets out authorities’ perceptions of nature-related risks, then delves into current and planned regulatory and supervisory initiatives, and presents the key challenges for authorities in identifying, assessing and managing nature-related financial risks.

Key findings include:

• Financial authorities are at different stages of evaluating the relevance of biodiversity loss and other nature-related risks as a financial risk.
• Financial authorities that are analysing the issue categorise nature-related risks into the same two types of risks typically used in climate-related financial risk analysis: physical and transition risks. However, analytical work faces major data and modelling challenges.
• Regulatory and supervisory work is at an early stage globally, with approaches differing considerably across jurisdictions and institutions. There is a general recognition of the need for more expertise in the supervisory community, and a number of capacity building initiatives are underway. 

NGFS information on improving greenhouse gas emissions data 

On 16 July 2024, the Network for Greening the Financial System (NGFS) published an information note on improving greenhouse gas (GHG) emissions data. 

The NGFS' goal is to increase awareness among central banks and supervisors about common challenges in compiling and using GHG emissions data, and to explore potential solutions for bridging data gaps. The note presents several case studies from various jurisdictions, highlighting the main challenges and potential strategies to overcome these obstacles. 

The note focusses on GHG emissions data since it is one of the most significant data gaps and in the light of its importance in monitoring progress towards the transition to a low-carbon economy.

Key messages from the note include:

• Financial institutions need to accelerate their collection of data on financed emissions, as the relevance of climate change mitigation will increase over the years together with the macroeconomic implications.
• Central banks, supervisors and regulators could provide information through their websites as a way to increase supervised entities' awareness of the importance of sustainability indicators.
• Central banks and supervisors must collaborate with relevant government agencies to achieve alignment and promote convergence on data methodologies, since the collection of official GHG emission data oftens falls outside the direct purview of such bodies.
• Ongoing efforts to harmonise international standards should be continued, complemented by active information exchange among peers on workable solutions.
• The implementation of taxonomies around the world supports the development of definitions, metrics and uses.

FCA and PSR call for information on BigTech and digital wallets 

On 15 July 2024, the FCA and the Payment Systems Regulator (PSR) published a call for information (CP24/9) on big technology firms (BigTech) and digital wallets.

The regulators recognise that the use of digital wallets has grown rapidly as Bigtech has expanded into the payments space. The regulators explain that the customer experience overseas provides an indication of the opportunities that digital wallets represent for the UK, eg making in-store retail transactions using digital wallets that are integrated with account-to-account payment systems, whilst showing that digital wallets have attracted the attention of various regulators across Europe and the United States. 

The regulators' aim is to understand the opportunities and risks that this technology's increasing popularity creates. The call for information focuses on a range of issues, including the following:

• The range of benefits digital wallets bring for service users.
• Whether there are any features that mean payments do not work as well as they could for consumers or businesses, or both.
• The role of digital wallets in unlocking the potential of account-to-account payments and how they could impact competition between payment systems.
• Whether digital wallets could raise any significant competition, consumer protection or market integrity issues, either now or in the future.
• Whether the current regulatory framework is effective.

The call for information is open for submissions until 17:00 on 13 September 2024. The regulators intend to publish an update by Q1 2025. 

PSR regulatory fees figures for 2024/26

On 9 July 2024, the Payment Systems Regulator (PSR) published a document setting out its 2024/25 regulatory fees figures.

The document sets out the figures the PSR will use to calculate the regulatory fees for each PSR feepayer in 2024/25. The PSR received fees from fee payers each year, which it levies to fund its operations to perform its functions under relevant legislation. 

The annual funding requirement (AFR) for 2024/25, published in the PSR's annual plan and budget for 2024/25, is set at £25 million which was subsequently increased to £25,255,270 due to an under recovery of previous years' fees. Taking effect in 2023/24, the PSR introduced a minimum yearly threshold of £100 for issuing fees. The PSR can also now charge special project fees. These fees are payable by operators of payment systems that have a for-profit business model, for work in relation to, or consequential upon, the designation of a new regulated payment system. A new card payment system under the PCIFRs or a new payment system under the PSRs 2017. 

The document sets out the formula the PSR uses to calculate each fee payer's fees. The PSR's regulatory fees regime, including the collection and allocation methodology that it uses, is set out in its June 2018 policy statement (PS18/12). 

Bank of England Speech on power of LEIs 

On 9 July 2024, the Bank of England (BoE) published a speech by Victoria Cleland, BoE Executive Director for Payments, on the power of legal entity identifiers (LEIs).

In the speech, titled "A multi-tool for cross-border payments: the power of Legal Entity Identifiers", Cleland discusses the potential benefits of Legal Entity Identifiers (LEIs) for payments, the role that they can play in enhancing cross-border payments, and steps that could be taken to drive their uptake and use.

As of early July 2024, there are 2.7 million active LEIs worldwide. Much of the uptake has been driven by regulatory mandates, but as LEIs have become more common, a wider range of beneficial use cases have emerged. In particular, widespread use of LEIs could enhance all stages of the cross-border payment journey:

• At payment initiation, inclusion of an LEI could enable account to account owner validation, providing greater assurance that the end user is sending money to the correct recipient.
• Payment processing at payment system operators (PSOs) could be simplified with consistent unambiguous identification and PSOs could benefit from richer data on activity and system usage patterns.
• Financial crime checks could be simplified by using LEIs as a reference to access due diligence information.
• For the recipient, an LEI carried in a payment message could enable fast and automated reconciliation with information on debtors.

Cleland noted the global use of LEIs is still relatively low, and currently too low to make a real difference to cross-border payments. Increasing the use of LEIs is one of the FSB’s priority actions for enhancing cross-border payments. The FSB's 2022 report on ways to improve adoption of LEIs highlighted the important role that they could play in strengthening data standardisation, assisting and supporting straight-through processing of payments, KYC processes and sanctions screening. 

Cleland encourages both the public and private sector to consider, advocate for and think about how to take advantage of LEIs within an organisation. 

PSR publishes guidance for PSPs on information on consumer communications on APP scams reimbursement

On 1 August 2024, the Payment Systems Regulator (PSR) published a document containing guidance for payment service providers (PSPs) on information to be provided in communications to consumers on reimbursement for authorised push payment (APP) scams.

The purpose of the document is to facilitate compliance with the PSR's Specific Direction 20 (SD 20) on the Faster Payments Service (FPS) APP scam reimbursement requirement. SD20 applies to all PSPs participating in the Faster Payments Scheme that provide relevant accounts. Under section 5 of SD20, PSPs which are capable of being sending PSPs (directed PSPs) must inform their customers about their rights under the reimbursement requirement and reimbursement rules, and any changes that will be made to their contractual terms and conditions. 

The document sets out suggested content which aims to support consumers in understanding how the reimbursement requirements will apply to any claim, as well as other helpful information PSPs may consider providing to their customers, under three categories:

• The scope of the policy.
• The exclusions.
• What consumers can expect when making a claim. 

PSR consults on APP scams reimbursement requirement guidance

On 18 July 2024, the Payment Systems Regulator (PSR) launched a consultation on draft guidance (CP24/10) to help payment service providers (PSPs) in their assessment of whether an authorised push payment (APP) claim made by a consumer is not reimbursable under the reimbursement requirement because it is a private civil dispute.

The document applies to claims for payments made via Faster Payments and CHAPS. The guidance, which is indicative only, sets out factors that PSPs should consider when assessing whether a claim solely relates to a civil dispute and does not fall within the requirement to reimburse. The factors are:

• All PSPs should consider each claim and payment on its own merits.
• All PSPs should consider the circumstances leading up to the disputed payment(s).
• The sending PSP should consider all available relevant information when assessing a claim.
• The sending PSP should make best efforts to gather relevant information in a timely manner.
• The receiving PSP(s) should provide accurate and complete information where requested or material about the receiving account and the account holder.

In PS23/3 the FCA confirmed that claims relating to civil disputes would not be reimbursable under the reimbursement requirement. Since civil disputes and scams might look very similar, the FCA highlights that each case must be considered in accordance with the facts available. 

The guidance does not specify evidentiary requirements, and the FCA stresses that PSPs should continue to have regard to the best practice guide to support their assessment of a reimbursable APP scam.

The deadline for comments on the draft guidance was 8 August 2024. The PSR aims to publish the final guidance in mid-September 2024.

PSR policy statement on compliance and monitoring under FPS APP scams reimbursement requirement

On 12 July 2024, the Payment Systems Regulator (PSR) published a policy statement (PS24/3) on compliance and monitoring under the Faster Payments System (FPS) reimbursement requirement to fight authorised push payment (APP) scams.

PS24/3 confirms: 

• The requirements for directed PSPs to register with Pay.UK by 20 August 2024, which is one way that PSPs will identify themselves as in-scope of the policy to Pay.UK and will help facilitate a shared directory – the FPS Reimbursement Directory.
• The data under reporting standard ‘A’ that sending PSPs in-scope of the policy are required to retain and report to Pay.UK monthly in respect of transactions they have sent.
• The reasonable limits the PSR is placing on Pay.UK in respect of the use and disclosure of the compliance data it receives.
• The PSR’s approach to requiring PSPs to inform consumers of their rights under the policy.

The changes will be delivered through amendments to the PSR's Faster Payments APP scams legal instruments. The start date for the reimbursement policy is 7 October 2024.

Chartered Banker's podcast series on Modern Payment Services: new episode on push payments

On 16 July 2024, Chartered Banker released the third episode of their podcast series called "Banking Transformations: A Deep Dive into Modern Payment Services", hosted by Institute Trustee Andrew Shiels. The series is designed to bring listeners up to speed with the evolving landscape of payment services, delving into the role of Pay.UK and how it helps shape the UK's banking sector.

The third episode, titled "Push Payments: what you need to know about the new regulations" discusses the new regulations that will come into force later this year, highlights the specifics of the new policy, and examines how it differs from what is in place today. The PSR's intention is that the new regulations will provide more consistency for victims of fraud, and will ensure liability is shared between the sending and receiving bank.  

FCA consultation on extending temporary changes to handling rules to motor finance complaints 

On 30 July 2024, the FCA published a consultation paper (CP24/15) on extending the temporary changes to handling rules for motor finance complaints. 

The FCA is reviewing the historical use of motor finance discretionary commission arrangements (DCAs), as noted in our June 2024 update. The FCA proposes to extend the current pause to the time firms have to respond to consumers about motor finance complaints involving a d DCA. The FCA explains that it has not completed the work it intended to complete before the end of the initial pause, as it has taken firms longer to provide the data than it had hoped, and the data has been more complex than anticipated.  

The FCA proposes to extend the pause until 4 December 2025, and intends to set out the next steps in its review in May 2025, rather than by 24 September 2024. It expects to have analysed the data collected from firms by then, assessed the outcome of the Barclays Partner Finance judicial review of the Financial Ombudsman’s decision to uphold a DCA complaint, and consulted on the cost benefit analysis underpinning its proposals. 

The FCA's next steps could involve consulting on a redress scheme. Alternatively, it could involve asking firms to start dealing with complaints again as usual, in which case the FCA would consult on ending the pause earlier.

The consultation is open to comments until 28 August 2024. The FCA will publish its feedback in a policy statement by 24 September 2024. 

EBA publishes final report on guidelines for amending ESA guidelines on complaints handling

On 24 July 2024, the EBA published its final report (EBA/GL/2024/12) on EBA Guidelines amending Joint Committee Guidelines (JC guidelines) on complaints handling for the securities (ESMA) and banking (EBA) sectors.

The EBA summarises the feedback received to its November 2023 consultation on amending the guidelines. Following the assessment of the responses, the EBA has not introduced any additional requirements, although it has introduced some non-substantive changes to keep complaints handling up to date. 

The new guidelines amend the JC guidelines to specify the requirement in relation to credit servicers to establish and maintain effective and transparent procedures for the handling of complaints from borrowers in accordance with Article 24(1) of Directive (EU) 2021/2167 (the Credit Servicers Directive) keeping the content identical to the aforementioned JC Guidelines. 

The EBA cannot translate and issue new guidelines as it cannot address them to NCAs under the Credit Services Directive. It expects this to change after the new Payment Services Regulation (PSR) enters into force and Article 4(2) of the EBA Regulation is amended. The Guidelines will be translated into the official EU languages and published on the EBA website, but the guidelines will apply three months after the entry into force of the proposed Payment Services Regulation (PSR), which is expected in 2025.

FCA publishes product sales data for 2023

On 27 June 2024, the FCA published aggregated product sales data (PSD) for 2023:

• Retail Investments Product Sales Data.
• Mortgages Product Sales Data.
• Pure Protection Contracts Product Sales Data.

The data includes a breakdown of mortgage and remortgage PSD from 1 January 2019 to 31 December 2023. The PSD data allows consumers and market participants to identify trends in the sale of products and also includes data covering retail investments and pure protection contracts. The FCA also published guidance on how to interpret the data.

APPG on Fair Banking update on IRHP further redress judicial review claim

On 25 July 2024, the All-Party Parliamentary Group (APPG) on Fair Banking published the summer edition of its newsletter. 

Points of interest include:

• The APPG held their inaugural meeting on 24 July 2024. New officers were elected, and attendees agreed to change the name of the APPG from Fair Business Banking to Fair Banking to reflect a change in focus to creating a better financial services sector for individual consumers and business. 
• The King's Speech presented numerous opportunities for the APPG to capitalise on in the upcoming Parliament.
• The APPG are looking to explore the issue of Authorised Push Payment (APP) fraud in the next Parliament. 
• The APPG confirms new hearing dates on 10 and 11 December 2024 for its judicial review claim against the FCA, regarding the FCA's decision not to seek to use its powers to require any further redress to be paid to interest rate hedging product (IRHP) customers. 

FCA policy statement on new rules for access to cash

On 24 July 2024, the FCA published a policy statement on new rules to maintain reasonable access to cash for personal and business customers in the UK (PS24/8). It has also published a research note on an empirical analysis of characteristics associated with cash reliance in the UK.

The FCA summarises responses received to its December 2023 consultation paper (CP23/29) on the proposed new rules - most responses supported the need for a new regulatory regime to protect access to cash, there were diverging views between consumer groups and industry representatives on certain issues, and the FCA received some challenge on specific rules.

PS24/8 sets out the final rules and guidance for the new regulatory regime to support access to cash for consumers and business that rely on it. In response to the feedback, the FCA has made some changes, including extending the period for designated banks and building societies to carry out cash access assessments. The final rules and guidance make changes to the Glossary, FEES and SUP, and creates a new Access to Cash sourcebook (ATCS).

The FCA is providing an eight-week implementation period between publishing PS24/8 and the new regime coming into force on 18 September 2024. This is to give designated entities time to familiarise themselves with our rules and establish the necessary processes to comply with them.

Bank Resolution (Recapitalisation) Bill 2024-25: publication and first reading in House of Lords

On 19 July 2024, the Bank Resolution (Recapitalisation) Bill 2024-25 (the Bill) was published on the UK Parliament website following its first reading in the House of Lords on 18 July 2024. 

The explanatory notes explains that the Bill intends to enhance the UK’s resolution regime for managing the failure of financial institutions. The Bill will introduce a new mechanism to allow the Bank of England (BoE) to use funds provided by the banking sector to cover certain costs associated with resolution under the special resolution regime (SRR). It is designed to respond more effectively to small bank failures where resolution is considered to be in the public interest.

Key changes include:

• The expansion the role of the FSCS: the FSCS will be required to provide funds to the Bank of England upon request to cover certain costs associated with resolving a failing bank, building society, or PRA-authorised investment firm.
• The Introduction of a new levy-raising powers: the FSCS will be able to recover funds provided to the Bank of England by imposing levies on the banking sector after a failure event.
• The enhancement of the BoE's authority: the BoE will have explicit power to require the issuance of shares during a resolution, allowing it to use FSCS funds for recapitalising a failing bank.
• Further minor and consequential amendments to legislation to support the measures outlined above and ensure FSCS funds can be used effectively in a resolution.

HM Treasury has published its formal response to its January 2024 consultation on enhancing the SRR. The response confirms it has largely proceeded with the proposals consulted on, with the exception of the removal of credit unions from contributing to the costs of recapitalisation.

FOS received highest level of complaints about travel insurance since COVID-19

On 16 July 2024, the Financial Ombudsman Service (FOS) published a press release highlighting that throughout 2023/24, travel insurance complaints were at their highest levels since the pandemic.  

• The number of travel insurance cases brought to the FOS has increased by 19% in the past year. 4,466 complaints were received in 2023/24, up from 3,745 the previous year. 
• Apart from the year impacted by COVID, complaints are now at their highest level within the last decade.
• 2,510 complaints were received in 2019/20.
• The FOS has seen a rising trend of policyholders being told medical conditions had not been properly disclosed to the insurers, people being dissatisfied with the levels of emergency assistance after falling ill abroad, and complaints about delayed or missed flights, as well as lost and stolen luggage.

The press release includes a series of "top tips" for consumers when choosing travel insurance.

FCA published consultations and policy statement aimed at capital markets reform 

On 26 July 2024, the FCA published a webpage which sets out a package of measures designed to help strengthen the UK’s capital markets and position as a global and vibrant financial centre.

The webpage includes information on the proposals for new Public Offers and Admissions to Trading Regime (POATRs), which will replace the existing UK Prospectus Regulation and aim to ensure investors get the information they need while reducing the costs associated with further capital raises for companies. The FCA is also consulting on proposals for a new activity of operating a public offer platform, which will offer an alternative route for companies to raise capital outside public markets including from retail investors.

The webpage also confirms the FCA's new rules giving asset managers greater freedom in how they pay for investment research, by allowing the ‘bundling’ of payments for research and trade execution. The rules aim to improve competition in the market to benefit investors. 

FCA overhauls listing rules to increase opportunities within UK stock markets 

On 11 July 2025, the FCA published new UK Listing Rules (UKLR) in a policy statement (PS24/6), which significantly reforms the UK listing regime, creating a single category and streamlined eligibility for those companies seeking to list their shares in the UK. 

The new rules came into effect on 29 July 2024. 

In a press release, the FCA highlights that the overhaul of the UKLR aligns the UK's regime with international market standards. The new rules remove the need for votes on significant or related party transactions and offer flexibility around enhanced voting rights, whilst shareholder approval for key events such as reverse takeovers is still required. Whilst the new rules involve greater risk, the FCA believes the changes reflect the risk appetite the economy needs to achieve growth. The changes follow extensive market engagement. 

BoE and FCA finalise second set of Q&As for derivatives reporting under UK EMIR

On 12 July 2024, the Bank of England (BoE) published a webpage setting out Q&As on the revised reporting requirements under Article 9 of UK EMIR (648/2012), that have been jointly developed with the FCA. 

The Q&As cover 11 topics and relate to the arrangements for transitioning to the updated derivative reporting framework under UK EMIR from 30 September 2024 to 31 March 2025.

The BoE consulted on topics 6 to 11 of the Q&As in May 2024, and in response to the feedback, the regulators are consulting on one further draft Q&A on reporting spread bets. 

FCA update on operational impact of TMPR funds applying for recognition under overseas funds regime

On 19 July 2024, the FCA updated its webpage on the overseas funds regime (OFR).

The FCA has added a section on operational impacts for operators of funds in the temporary marketing permissions regime (TMPR). The FCA states that, for TMPR fund operators that make an application to be recognised in the UK under the OFR, it is important for the fund population data at the beginning of the landing slot window to be accurate and stable. Operators are requested not to make any changes to the fund population data during the allotted landing slot and are encouraged to plan accordingly.

The FCA further mentions:

• Once a landing slot direction has been issued and until the application for recognition has been determined, the FCA cannot take account of any change of operator for the EEA UCITS within the TMPR. If the operator needs to be changed, this must be done after the scheme is recognised in the UK under the OFR.
• Operators of umbrella EEA UCITS in the TMPR can currently add a sub-fund of that umbrella to the TMPR if the sub-fund has been authorised since the UK withdrew from the EU. Sub-funds may be added in this way is two weeks before the opening of the umbrella landing slot at the latest. If new sub-funds are to be added after that point, it needs to wait until the umbrella has been recognised in the UK under OFR.
• Operators of umbrella EEA UCITS in the TMPR cannot currently add a sub-fund of that umbrella to the TMPR if the sub-fund was authorised before the UK withdrew from the EU. The operator must apply within its landing slot for recognition under the OFR of the umbrella and the sub-funds within the TMPR. Once that recognition has been granted, recognition of additional non-TMPR sub-funds can then be applied for.

FCA policy statement on implementing overseas funds regime 

On 17 July 2024, the FCA published a policy statement on implementing the overseas funds regime (OFR) (PS24/7).

The OFR will be a new gateway through which certain collective investment schemes, domiciled in jurisdictions deemed to be equivalent by the government, will be able to market to UK retail investors. The new rules set out the information the FCA requires to determine an application for recognition. To continue marketing in the UK, TMPR funds will need to apply for recognition under the OFR when directed by the FCA. 

The policy statement sets out the FCA's response to feedback received to its December 2023 consultation and details the final rules and guidance the FCA is introducing. Following feedback received to the consultation, the FCA adjusted the proposals, including supplying further explanation and clarification as to which categories of changes should be notified, and clarifying which UK fund prospectus requirements only apply to OFR funds. 

FCA quarterly consultation 44

On 9 July 2024, the FCA published its 44th quarterly consultation paper (CP24/11).

The FCA invites comments on proposed changes to matters which include:

• Changing the application of UCITS concentration rules in COLL: the FCA is consulting on proposals to apply the UCITS concentration rules to umbrella UCITS schemes at the sub-fund level rather than the umbrella level, and to clarify the level of a Collective Investment Scheme (CIS) to which COLL 5.2.29R(3) applies.
• Removing references to LTIFs and the LTIF: the FCA proposes to remove all references to LTIFs and the LTIF Regulation from the Handbook, and to delete references to 'EEA LTIFs', relating to EEA alternative investment funds (AIFs) marketing in the UK under Part 9A of the Alternative Investment Fund Managers (AIFM) Regulations 2013. No LTIF was ever established in the UK and the LTIF regulation was repealed in the UK on 1 January 2024. 

The deadline for comments is 12 August 2024.

FCA takes enforcement action under EMRs against firms enabling cryptoasset trading

On 25 July 2024, the FCA published the final notice (dated 23 July 2024) it issued to CB Payments Ltd (CBPL), where it imposed a fine of £3.5 million under regulation 51(1)(a) of the Electronic Money Regulations 2011 (EMRs).

CBPL is an authorised electronic money institution with permission to issue electronic money (e-money) and to provide payment services. It is part of the Coinbase Group, which operates a prominent cryptoasset trading platform that is accessible globally. Whilst it does not undertake cryptoasset transactions for customers, it enables them to deposit fiat currency into e-money wallets which can then be used to purchase and exchange cryptoassets via other entities within the Coinbase Group.

Following engagement with the FCA relating to concerns about CBPL's financial crime control framework, CBPL entered into a voluntary requirement (VREQ) under regulation 8 of the EMRs. This prevented CBPL from onboarding new high-risk customers or providing them with payment or e-money services while it addressed issues with its framework.

Between 31 October 2020 and 1 October 2023 CBPL repeatedly breached the requirements imposed on it by the CBPL VREQ by onboarding and/or providing payment or e-money services to 13,416 separate high-risk customers, and by permitting approximately 31% of these customers to make 12,912 prohibited deposits with a total value of approximately USD24.9 million.

The notice reports that the breaches were caused by a failure on the part of CBPL, in breach of Principle 2 of the Principles for Businesses, to exercise due skill, care and diligence in relation to the design, testing, implementation and monitoring of the controls established to ensure compliance with the VREQ.

This is the first time the FCA has taken enforcement action using powering under the EMRs.

FCA publishes first supervisory notice imposing requirements on principal firm and its appointed representatives

On 18 July 2024, the FCA published the first supervisory notice (dated 14 June 2024) it has issues to the City & Merchant Ltd (CML). 

Under section 55L(3)(a) and 55L(3)(b) of the Financial Services and Markets Act 2000 (FSMA), the FCA has imposed the following restrictions with immediate effect:

• CML (and its Appointed Representatives) must immediately cease carrying on all regulated activities for which it has a Part 4A permission, other than where it has the express written consent of the FCA.
• CML must notify in writing all its clients and investors of the terms and effect of the requirements and secure and preserve all relevant records and other information.

The requires will remain in force unless and until varied or cancelled by the FCA, on its own volition or following an application from CML. 

The FCA concluded that CML is failing, or it likely to fail, to satisfy the threshold conditions, and it has serious concerns that CML is not capable of being effectively supervised.  

FCA publishes final notice imposing prohibition order on individual knowingly concerned in breach of FSMA and FS Act 2021

On 12 July 2024, the FCA published the final notice issued to Clive Harris Mongelard, aka Clive Harris aka Clive Lindsey (Mr Mongelard).

The final notice implements a prohibition order against Mr Mongelard, after the High Court (the Court) ruled that he was knowingly concerned in multiple breaches of sections 19 and 21 of the Financial Services and Markets Act 2000 (FSMA) and section 89 of the Financial Services Act 2012 (FS Act 2012). These breaches were committed through two companies operated as a joint business, trading as Gemini, which Mr Mongelard was deemed to be the director of between January 2015 and November 2015. 

Mr Mongelard was ordered by the Court to pay the FCA over £1.3 million, to represent the losses suffered those who invested into Gemini. However, he failed to satisfy the Order and a bankruptcy order was later made against him. 

The FCA has deemed that Mr Mongelard is not a fit and proper person to perform any function in relation to any regulated activity carried on by any authorised person, exempt person or exempt professional firm.

FCA update on court date for 'finfluencer' trials

On 11 July 2024, the FCA updated its webpage on the "finfluencers" who were charged with promoting an unauthorised investments scheme, as reported on in our July update.  

Trials dates have been scheduled for 1 February 2027 and 15 March 2027 after the nine individuals were charged in relation to an unauthorised foreign exchange trading scheme promoted on social media. These dates were the earliest the court could accommodate this case. 

Among them, the individuals face counts of breaching the General Prohibition under Section 19 of the Financial Services and Markets Act 2000 (FSMA) and unauthorised communications of financial promotions under Section 21 of FSMA. These are offences under FSMA and are punishable upon conviction by a fine and/or up to two years’ imprisonment.

The webpage highlights its finalised guidance on financial promotions and social media, which clarifies its expectations for firms and influencers using social media to communicate financial promotions and addresses emerging consumer harm the FCA has seen arising from use of social media.

ECB concludes cyber resilience stress tests on banks

On 26 July 2024, the ECB published a press release announcing it has concluded its cyber resilience stress test.

One of ECB's SSM supervisory priorities for 2024/26 is detecting and addressing deficiencies in supervised banks' operational resilience framework, including those stemming from cyber risks. The stress test was launched in January 2024 with the purpose of gauging how banks would respond to and recover from a severe but plausible cybersecurity incident. The stress test focusses on how banks would response to and recover from a cyber-attack – it featured a fictitious stress test scenario under which all preventive measures failed and a cyberattack severely affected the databases of each bank’s core systems. 109 banks were involved, and 28 were chosen to undergo extensive testing.

Results show that banks have response and recovery frameworks in place, but areas for improvement remain. The ECB encourages banks to keep working on meeting supervisory expectations by, among other things, ensuring they have in place adequate business continuity, communication and recovery plans, which should consider a wide enough range of cyber risk scenarios. Also, banks should be able to:

• meet their own recovery objectives
• properly assess dependencies on critical third-party ICT service providers; and
• adequately estimate direct and indirect losses from a cyberattack.

The outcome of the exercise will feed into the 2024 Supervisory Review, which assesses banks’ individual risk profiles.

FCA publishes findings from review of firms' treatment of domestic PEPs and consultation on amending PEP guidance

On 18 July 2024, the FCA published the findings from its multi-purpose review of firms' treatment of domestic politically exposed persons (PEPs), which was launched in September 2023. 

The FCA found that most firms had systems and controls designed to implement FCA guidance, and all firms were clear that they would not decline products or services to UK PEPs or their RCAs simply because of PEP status. However, there was room for improvement in all firms that were assessed.

• The FCA expects firms to apply definitions for PEPs, family members and close associates that are consistent with the regulations and FCA guidance. 
• Firms should have appropriate systems and controls in place that enable them to identify when a PEP ceases to hold the prominent public function.
• Firms should review their current arrangements (policies, controls, procedures etc) to ensure they apply an effective risk-based and proportionate approach to enhanced due diligence (EDD) measures, as well as ongoing monitoring and ongoing due diligence for PEPs and RCAs. 

Comments can be made on the proposals until 18 October 2024.

FMLC publishes letter to HM Treasury highlighting legal uncertainties relating to MLRs 2017 

On 17 July 2024, the Financial Markets Law Committee (FMLC) published a letter it sent to HM Treasury highlighting areas of legal uncertainty relating to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (MLRs 2017).

The FMLC, whose role is to identify issues of legal uncertainty or misunderstanding and consider how such issues should be addressed, set out areas of the MLRs which give rise to legal uncertainty. These are:

• Referencing the EU Capital Requirements Directive (CRD) Annex I activities to determine the scope of the MLRs: continued references to these listed activities creates uncertainty, particularly as the activities do not tie closely to the regulatory perimeter in the UK. This results in uncertainty about exactly what activities fall within the listed activities.
• Key concepts in the MLRs are not defined in legislation: the key example of this is the concept of "customer", on which many of the obligations under the MLRs rely. Advisors are reliant on industry guidance, the legal status of which may be unclear or may impose a more onerous or restrictive interpretation than the government intended.
• Scope of MLRs in respect of investment vehicles managed by in scope entities: there are some uncertainties around the treatment of investment vehicles in the MLRs 2017. Only collective investment undertakings are specifically included as financial institutions in regulation 10(2)(e) of the MLRs 2017, although in many cases, a CIU will only act through a third-party manager rather than in its own right. Consideration should be given to whether an entity should be caught by the MLRs where it is managed by another person already subject to obligations under the MLRs. 

King's Speech 2024: Cyber Security and Resilience Bill 

On 17 July 2024, the King's Speech was delivered to Parliament, setting out the government's legislative programme for the forthcoming parliamentary session.

The government intends to bring a Cyber Security and Resilience Bill before Parliament. 

The UK's only cross-sector cybersecurity legislation is the Network and Information Systems Regulations 2018 (SI 2018/506) (NIS Regulations). The EU legislation from which it will be derived will be superseded with effect from 18 October 2024, and the NIS Regulations require urgent updates. The Cyber Security and Resilience Bill will make the necessary updates to the legacy regulatory frameworks.

Court considers bank's liability for customer's losses where accounts are frozen following money laundering review (High Court)

On 3 May 2024, the High Court handed down the judgment in AF Kopp Ltd v HSBC UK Bank plc [2024] EWHC 1004 (Ch) where it considered a bank's liability for customer's losses where the customer's accounts were frozen following a money laundering review. 

The claimant, AF Kopp Ltd (Kopp), was a commercial customer of HSBC UK Bank plc (HSBC). The parties' relationship and Kopp's bank accounts were governed by HSBC's standard business banking terms and conditions. Clause 32 set out that HSBC is not liable for "indirect or consequential loss (including lost business, data, profits or losses resulting from third party claims) even if it was foreseeable".

To comply with its obligations under the UK anti-money laundering (AML) regime, HSBC carried out a "safeguard review", which led to two of Kopp's accounts being suspended in December 2018, which prevented Kopp from making payments. 

Kopp claimed damages of US$1,680,406.42 for breach of contract or breach or duty of care, or both, relating to HSBC's provision of financial services. 

HSBC sought summary judgment or strike out, relying on clause 32 of its standard business banking terms and conditions which excluded liability for "indirect or consequential loss". 

Kopp contended that clause 32 is unreasonable and unenforceable under section 3 of the Unfair Contract Terms Act 1977 (UCTA) and/or rule 1.1.6 of the FCA's Banking Conduct of Business sourcebook (BCOBS).

The judge dismissed the strike out limb of HSBC's application and the application for summary judgment in favour of Kopp. The judge concluded that there is a triable issue with a real prospect of success: that clause 32 fails to satisfy the reasonableness requirement in section 3 of UCTA.

The case will proceed to trial to determine the issue of the reasonableness of clause 32. 

The answer to last month's question: InvestSmart is the name of the FCA's campaign to help consumers make better-informed investment decisions and become more astute investors.

This month's question: What is the official title of the minister responsible for financial services policy and regulation?

• Chief Secretary to the Treasury.
• Financial Secretary to the Treasury.
• Exchequer Secretary to the Treasury.
• Economic Secretary to the Treasury.