Payment compliance is the process of meeting the legal, regulatory and operational requirements that apply to payment services. Harper James advises businesses on the laws of England and Wales, including financial services regulation relevant to payment institutions, e-money institutions and other businesses handling customer funds.
The first step is to identify the services provided and the entity responsible for them. The Payment Services Regulations 2017 apply to many payment services, while the Electronic Money Regulations 2011 govern the issuing of electronic money. An organisation must establish whether it requires Financial Conduct Authority (FCA) authorisation or registration, or whether it operates through an authorised agent or another permitted structure. Its permissions, customer terms, marketing and business model must remain aligned.
The compliance framework should cover customer due diligence under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, sanctions screening, fraud controls and transaction monitoring. It should also address safeguarding, which requires relevant customer funds to be protected from the institution’s own money and handled in accordance with the applicable rules.
A payment institution should document controls from onboarding through payment execution, complaints and account closure. Customer communications must be clear, accurate and consistent with applicable FCA rules, including the Consumer Duty where relevant. Procedures should explain how the institution handles unauthorised payments, vulnerable customers, complaints, failed transactions and requests for information.
Fraud and operational resilience require separate testing. The institution should maintain incident response procedures, access controls, service continuity plans and records of material disruptions. Firms within the scope of the authorised push payment fraud reimbursement rules must also maintain processes for assessing and handling eligible claims. Outsourced technology providers do not remove the regulated firm’s responsibility for oversight, due diligence and ongoing monitoring.
Compliance depends on evidence as well as written policies. The board or governing body should receive reports on safeguarding reconciliations, suspicious activity, fraud losses, complaints, regulatory breaches, incidents and outstanding remediation. Policies require named owners, review dates, training records and escalation routes. Periodic compliance testing should compare the documented process with actual transactions and staff practice.
A practical review usually begins with a regulatory-perimeter assessment, followed by a gap analysis, risk-ranked remediation plan and approval of revised policies. The institution then tests the controls, records the results and reports material issues through its governance structure. This sequence gives management a clear record of how payment risks are identified, controlled and reviewed.