legal compliance for the fintech sector

Legal Compliance For The FinTech Sector

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Legal Compliance For The Fintech Sector

FinTech Week is all the rage in London this week and so, being all serious and proper like … we thought it was a good time to sketch out some thoughts on legal compliance for the fintech sector.

Launched in 2014, Fintech Week was created in response to the growing number of UK FinTech investments (estimated by UK Trade and Investment at £342 million in 2014 ) and to encourage the big corporate players to collaborate with ambitious, innovative and forward-thinking businesses.

As a global hub for technology and financial services, there is a wealth of innovation and talent in London and so it’s crucial that the City develops its FinTech industry so that it can compete with its international counterparts.

Financial services regulation probably may slip down the list of priorities but the rapid market growth of the FinTech sector has inevitably led to several important FCA developments, that entrepreneurs should be aware of.

You should first check whether, and to what extent, the FCA’s authorisation requirements apply to your business. Certain activities are regulated in relation to payment, investment and lending propositions. So FinTech businesses should think about whether regulatory approval is needed in order to conduct business in the UK (and this may apply to you even if you are not based in the UK).

FCA authorisation usually comprises of a 6 week pre-submission preparation period and then a statutory post-submission period of up to 6 months.

Compliance culture is at the forefront of the regulatory regime. The rules are arguably vague but, as they as they are outcomes-based, there is plenty of room to create a business model which takes a fresh and resourceful approach to compliance.

Consumer protection is paramount and follows the FCA’s fairness mantra of doing the right thing. Compliance policies and procedures for your business may include things like:

  • A shown structured intention to comply with the regulations with appropriate training, management systems and controls in place
  • Understanding how your services may cause unfair outcomes for consumers even if you do not have direct consumer interaction
  • Designing an approach to sales and marketing activities which includes review processes to evaluate the compliance of client communications ( such as financial promotions requirements and to reduce mis-selling risks)
  • Clear and fair terms and conditions
  • Ensuring an FCA compliant complaints process
  • Establishing a reward and incentives structure controls risk
  • Regularly reviewing your systems and controls processes to ensure compliance with anti-money laundering rules and bribery risks

So if you haven’t got your house in order then why the hell not?

It’s serious stuff as failure to comply can lead to legal and regulatory sanctions, including personal prohibitions, criminal penalties, fines, restrictions on activities and possible business closure.

The knock-on effect of adverse publicity and reputational damage could also impact on a future business expansion. It may, for example, be more difficult to secure investment or leverage and it could reduce the overall value of your business.

Technology companies have a key role to play in the future of the financial services sector but they need to constantly evaluate operational and compliance measures to mitigate risk.

Article written by Rachel Furniss.

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