FCA Payment Firm Review: What the Compliance Findings Mean for Cross-Border Operations
The FCA’s payment firm review findings were not a surprise to anyone close to the market. The regulator identified material weaknesses across safeguarding, financial crime controls, and governance. These are not new issues. They are recurring themes that have persisted for years.
For CFOs and treasurers managing cross-border payment operations, the findings warrant careful attention. Not because the FCA has changed its expectations. But because enforcement posture has shifted. The regulator is now moving from observation to action.
What the FCA Payment Firm Review Actually Found
The review examined authorised payment institutions and electronic money institutions. The findings centred on three areas: safeguarding of customer funds, anti-money laundering controls, and prudential risk management.
Safeguarding failures were the most common. Firms struggled to demonstrate accurate, real-time reconciliation of customer funds against their safeguarding accounts. In several cases, the records simply did not match the balances held.
Financial crime controls showed similar gaps. Customer due diligence was incomplete. Transaction monitoring lacked calibration to actual risk profiles. Suspicious activity reports were filed late or not at all.
Governance structures often existed on paper but not in practice. Boards lacked visibility into operational risk. Senior management could not articulate how compliance obligations were being met day to day.
The Root Causes Behind Payment Compliance Failures
The FCA’s observations point to systemic issues, not isolated mistakes. Firms did not fail because they lacked policies. They failed because their infrastructure could not support those policies in practice.
Three root causes appear repeatedly across the firms that struggled.
Fragmented Banking Relationships
Cross-border payment firms often maintain multiple banking relationship arrangements across jurisdictions. This is operationally necessary. But without centralised visibility, reconciliation becomes manual and error-prone.
When funds flow through multiple accounts across different banks, tracking becomes fragmented. Safeguarding requirements demand that customer funds are identifiable at all times. Fragmentation makes this difficult to prove.
Manual Reconciliation Processes
Reconciliation is where many firms expose themselves to regulatory risk. Spreadsheets, manual uploads, and end-of-day batch processes create gaps. Those gaps become findings in an FCA review.
Real-time reconciliation is not a luxury. It is a regulatory expectation. Firms that cannot demonstrate accurate, timely matching of transactions to safeguarded funds will face scrutiny.
Undocumented Counterparty Due Diligence
Many firms rely on third-party providers for FX execution, correspondent banking, and settlement. The FCA expects firms to understand who they are working with and to document that understanding.
This means more than collecting certificates of incorporation. It means ongoing monitoring, periodic reviews, and clear audit trails. Firms that cannot produce this documentation on request have a problem.
Why Clean Infrastructure Led to Clean Audits
The firms that navigated the FCA payment firm review without material findings shared common characteristics. They had invested in infrastructure that made compliance demonstrable.
Their treasury operations were integrated. Reconciliation was automated. Counterparty records were centralised and current. When the regulator asked questions, they could answer them quickly and with evidence.
This is the core insight for any CFO or treasurer responsible for cross-border payment operations. Compliance is not achieved through policy documents. It is achieved through infrastructure that makes policy enforceable.
A cross-border compliance consultant can help identify where infrastructure gaps create regulatory exposure. But the work is operational, not theoretical. It requires understanding how money actually moves through the business.
The Role of a Cross-Border Compliance Consultant
External advisors can provide perspective that internal teams often lack. Not because internal teams are incapable. But because they are too close to daily operations to see structural weaknesses.
A cross-border compliance consultant brings experience across multiple firms, jurisdictions, and regulatory regimes. They have seen what works and what does not. They can benchmark your operations against peers and against regulatory expectations.
The value is practical. Which counterparties present concentration risk. Where reconciliation processes are vulnerable. How banking arrangements should be restructured to support safeguarding obligations.
At KWP Holdings, we have worked across £3.4 billion in annualised payment flow, with more than 120 counterparties across 38 currencies. Over fourteen years, we have seen how regulatory expectations evolve and how firms adapt. That perspective informs our approach. We focus on what actually reduces risk, not what looks good in a presentation.
Treasury Compliance in a Tightening Regulatory Environment
The FCA’s posture has shifted. Supervisory engagement is more frequent. Skilled persons reviews are being deployed more readily. Enforcement actions are following findings more quickly than in previous years.
For CFOs and treasurers, this means treasury compliance cannot be delegated entirely to compliance teams. It must be embedded in operational decision-making.
Consider how banking relationships are structured. Are funds segregated appropriately. Can you produce a reconciliation report within hours, not days. Do you know which counterparties your payments flow through before they reach the beneficiary.
These are operational questions with compliance implications. A cross-border compliance consultant can help you answer them. But the answers must come from your infrastructure.
Practical Steps for CFOs and Treasurers
The FCA’s findings suggest a clear set of priorities for firms that want to avoid similar outcomes.
First, audit your reconciliation processes. Identify where manual intervention is required. Assess how quickly you can produce accurate safeguarding reports. If the answer is days, you have work to do.
Second, review your counterparty documentation. Ensure that due diligence records are complete, current, and accessible. Build a schedule for periodic review.
Third, assess your banking arrangements. Understand where customer funds are held, how they move, and whether your current structure supports regulatory expectations. Fragmentation may be necessary, but it must be managed.
Fourth, engage external expertise where appropriate. A cross-border compliance consultant can provide an independent assessment of your infrastructure and identify gaps before the regulator does.
Frequently asked questions
What did the FCA payment firm review identify as the main compliance issues?
The review found weaknesses in safeguarding of customer funds, anti-money laundering controls, and governance structures. Many firms could not demonstrate accurate reconciliation of customer funds or complete counterparty due diligence documentation.
How can a cross-border compliance consultant help payment firms?
A cross-border compliance consultant provides independent assessment of payment infrastructure, identifies gaps in reconciliation processes and counterparty documentation, and helps firms align operations with regulatory expectations across multiple jurisdictions.
What causes payment compliance failures in cross-border operations?
Payment compliance failures typically trace to fragmented banking relationships that complicate reconciliation, manual processes that create gaps in record-keeping, and insufficient documentation of counterparty due diligence.
How should treasury teams prepare for increased FCA scrutiny?
Treasury teams should audit reconciliation processes for speed and accuracy, ensure counterparty documentation is complete and current, review banking arrangements for safeguarding compliance, and consider engaging external advisors for independent assessment.
A Final Observation
The firms that emerged cleanly from the FCA payment firm review did not have better policies. They had better infrastructure. They could demonstrate compliance because their systems were built to support it.
For CFOs and treasurers responsible for cross-border payment operations, the lesson is clear. Compliance is an operational discipline, not a documentation exercise.
If your infrastructure has gaps, now is the time to address them. Worth a conversation.
Photo by Roman Warren on Unsplash