Consumer credit and payments | Regulatory Outlook July 2022

Outcome of HM Treasury consultation on changes to anti-money laundering rules

On 15 June 2022, HM Treasury published the response to its consultation on amendments to the UK Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).

Key changes to be made to the rules include the following:

• The government has decided to remove account information service providers from the regulated sector, as the likely risk of money laundering and terrorist financing has been assessed as low. Payment initiation service providers will remain within scope at this time, as they are involved in payment chains so may represent a higher risk of being used as a tool for economic crime.

• The "Travel Rule", regarding information sharing requirements for wire transfers, will be expanded to cover cryptoassets.
• Intermediaries in cryptoasset transfers will be brought within scope of the MLRs.
• The de minimis threshold for cryptoasset transfers will be EUR 1,000, aligning with the FATF recommended threshold.
• Regarding unhosted cryptoasset wallets, collection of beneficiary and originator information will be required only for those transactions identified as posing an elevated risk of illicit finance.
• There is a concern that firms could bypass the MLRs registration gateway by acquiring already-registered cryptoasset firms, potentially enabling the acquiring firm to undertake illicit activities before the Financial Conduct Authority (FCA) could take action. To address this, FCA supervision will be expanded by requiring proposed acquirers of cryptoasset firms to notify the FCA beforehand, allowing the FCA to carry out a "fit and proper" assessment of the acquirer, and possibly object to the acquisition, before it happens.

On 16 June 2022, a draft statutory instrument, the Money Laundering and Terrorist Financing (Amendment) (No 2) Regulations was published, which incorporates most of the changes indicated in the response. The draft statutory instrument is accompanied by a draft explanatory memorandum.

PSR sets out the details for its work on card fees

On 21 June 2022, the Payment Systems Regulator (PSR) set out its plans showing how it proposes to carry out two market reviews focusing on card fees.

One looks at scheme and processing fees (MR22/1.1), and the other at cross-border interchange fees (MR22/2.1). The reviews focus on Mastercard and Visa as these two card payment system operators account for 99% of debit and credit card payments in the UK.

The draft terms of reference for the market reviews are open for consultation until Tuesday 2 August 2022. During the consultation period, the PSR will also be running series of engagement events and will be encouraging stakeholders to take part to help shape the scope of the reviews.

FCA consults on winding down synthetic sterling LIBOR and USD LIBOR

On 30 June 2022, the FCA published a consultation paper on winding down synthetic sterling LIBOR and USD LIBOR (CP22/11), with responses due by 24 August 2022. The FCA seeks views and input on the following:

• Progress towards completing the transition away from one-, three- and six-month sterling LIBOR settings; and
• Market participants' exposure to USD LIBOR.

Later this year, the FCA will review its decisions to compel continued publication of the one-, three- and six-month sterling LIBOR settings and notify the market of the outcome. The responses received to CP22/11 will help inform the FCA's review plus its assessment in relation to any requirement to publish synthetic USD LIBOR settings after end-June 2023.

PSR provisional decision on remedies for card-acquiring market review

On 29 June 2022, the PSR published a consultation paper setting out its provisional decision on remedies for the card-acquiring market review (CP22/3). The deadline for responses is 3 August 2022.

The PSR consulted on initial remedies in January 2022. Of the four potential remedies suggested, the PSR is proposing the following:

• Introducing summary boxes containing bespoke key price and non-price information for every merchant, to be used alongside new online quotation tools to help merchants compare prices and other service features more efficiently.

• Providers to send merchants trigger messages to prompt them to shop around, renegotiate their contract or switch to get a better deal.

• Contractual limits will be placed on point of sale (POS) terminal contracts, so merchants are not discouraged from searching for and switching providers. POS terminal leases and rental contracts will have a maximum duration of 18 months, and maximum one month notice period after any renewal.

The PSR intends to implement these remedies through specific directions given to the most significant providers of card-acquiring services to relevant merchants. Drafts of the three specific directions are included in CP22/3. The PSR will issue a final remedies notice later in 2022, if its findings support this.