Financial Conduct Authority  

FCA grilled on firm's fake authorisation

FCA grilled on firm's fake authorisation

MPs have asked the Financial Conduct Authority to justify how a firm was able to fake its authorisation, despite the regulator being made aware of its illegal activity elsewhere in Europe.

At an oral evidence session at the Treasury select committee today (January 29) Charlie Elphicke, Conservative MP for Dover questioned Andrew Bailey, chief executive of the FCA, on behalf of a constituent who lost £500,000 in the collapse of Premier FX.

Mr Elphicke asked how the firm was able to act beyond its authorisation in presenting itself as being authorised to accept deposits, when in fact its authorisation was solely for money remittance.  

Premier FX, now in liquidation, is authorised by the FCA to perform the regulated payment service activity of money remittance, but it does not have permission for accepting deposits. 

This means it can only hold funds for a payment transaction, which distinguishes it from a deposit taker.

In a statement on its website last December, the FCA said it was investigating potential criminal activity at Premier FX in relation to the missing funds of customers.

It also stated Premier FX had moved into creditor’s voluntary liquidation.

Mr Bailey said: "If that is indeed what they did [presenting themselves as being authorised to accept deposits] and there is a strong suspicion that is what they did, then it is illegal.

"We are carrying out an investigation and I am very concerned that the money of individuals has been lost in this activity.

"My team so far have looked at 250,000 transaction records to try and trace the money and we will not stop doing that."

Mr Bailey said the principal involved in Premier FX’s activity was "said to be dead", calling upon relatives and business partners to tell the FCA as to the missing money’s whereabouts.

Mr Elphicke asked why, when the Bank of Portugal had alerted the FCA to Premier FX acting outside of its licence in Portugal in 2017, the regulator had failed to act on the information.

He said: "There was no follow up by the FCA under safeguarding regulations, why was the breach not detected?"

Mr Bailey said the FCA was "thoroughly" looking at the record of the Premier FX case, but stressed his first priority was to find the money owed to the victims.

He added: "If we missed clues in this case, particularly in the reauthorisation process under the European Payment Services Directive, we will look at that.

"I don’t know which jurisdiction some of this activity went on in yet, because it went on between the UK and Portugal, but we will look at that."

Under the Payment Services Regulations 2017, protection under the Financial Services Compensation Scheme does not apply to firms authorised by the FCA to provide money remittance services.

But the FCA has advised that any client who paid money to Premier FX but the money was not sent to the recipient in accordance with the client’s instruction, will have a claim against the firm and should contact the liquidators.