The UK Financial Conduct Authority (FCA) has fined Barclays Bank £783,800 for oversight failings in its relationship with collapsed FCA-regulated payments firm Premier FX Limited (Premier FX or PFX). Barclays was Premier FX‘s sole bank in the UK. In February 2021, the FCA publicly censured Premier FX (in liquidation) for breaching Payment Services Regulations (PSR). The FCA found that Premier FX had seriously misled customers by misrepresenting the services it was authorized to provide and how it held customers’ money. Moreover, it allegedly facilitated fraud and scam ventures.
The Premier FX case
The FCA regulated PremierFX, aka PFX, as an authorized payment institution with the reference number 530712. One report found that Premier FX directors allegedly engaged in fraud and embezzlement over many years. The sole shareholder and, from 2009 until his death in June 2018, the sole director was Peter Rexstrew. Six weeks after Rexstrew’s death, Premier FX ceased trading and reported the matter to the FCA on 1 August 2018.
Customer funds were not held in secure, segregated client accounts. Rexstrew used funds to settle payments from other customers. Customers’ losses were not covered by the FSCS, which does not apply to authorized payment institutions providing money remittance services under the PSRs.
Premier FX, which handled money on behalf of other people, presented particularly high risks of financial crime and fraud. Barclays was aware of these high risks in providing banking services to Premier FX but failed to take reasonably appropriate steps to mitigate those risks.
Mark Steward, FCA Executive Director of Enforcement and Market Oversight
Barclays responsibility
According to the UK regulator, Barclays failed to do proper due diligence to ensure that Premier FX‘s actual business activity aligned with regulatory standards and Barclays‘ expectations. Thus, it did not identify that Premier FX‘s internal controls were deficient. This constituted a failure by Barclays to conduct its business with due skill, care, and diligence.
The FCA penalty takes into account that Barclays has agreed voluntarily to cover the losses of Premier FX customers whose claims have been accepted by Premier FX‘s liquidators. All 167 customers of Premier FX with accepted claims will have 100% of their money returned. The voluntary payment will be distributed to these customers by the liquidators by the end of March 2022.
Preliminary conclusion
Sure, the UK is no longer in the EU and has its own rules. However, the regulations for payment institutions are similar across all European jurisdictions. The FCA‘s approach shows that a financial institution must apply proper KYC/AML processes even to regulated clients like Premier FX. The fact that its client has a license from a recognized regulator does not entitle the financial institution to lower the audit standards.
In Europe, we see a similar situation with the ING subsidiary of Payvision. Currently, a victim is suing Payvision for losses incurred in a scam operated by a client of the Dutch fintech. Payvision processed the victim’s deposits to the fraud.
We will bring you a more detailed analysis of Payvision and the FCA’s decision shortly.
