UNITED KINGDOM Law and Practice Contributed by: James Burnie, Kathryn Dodds, Olga Antonova and Nicky Androsov, gunnercooke llp
2.7 No-Action Letters Regulators in the UK do not issue “no-action” letters. However, there may be cases where they issue guid - ance as to the approach they will take in relation to certain business models. 2.8 Outsourcing of Regulated Functions Regulated firms are not able to outsource responsi - bility for their regulated activities. As a result, there are specific requirements for such firms to have a business continuity policy and planning in place. Fur - ther, institutions such as banks which pose a market integrity risk must ensure that they have provisions to keep key operations functioning in the event of, for Generally, for any product there will be a person con - sidered to be “doing” the relevant activity. This person will have to therefore take responsibility for the activity, regardless of whether a fintech provider is leveraged in order to provide the product. As a result, they will subject the fintech provider to appropriate due dili - gence. example, a solvency risk. 2.9 Gatekeeper Liability Furthermore, for certain activities (for example in rela - tion to payments and certain activities in connection with securities), it may be possible for a fintech to lev - erage the licence of an existing FCA-authorised firm. Where this is the case, the FCA-authorised firm will be responsible for, and have oversight of, the fintech provider. 2.10 Significant Enforcement Actions The FCA has taken a variety of enforcement actions in relation to firms that have breached its expectations. Whilst the FCA has taken steps to enforce all aspects of its rules, a particular focus has been on financial crime as a high priority. 2.11 Implications of Additional, Non- Financial Services Regulations Generally, the biggest area of focus is the protection of personal data, particularly with regard to how it should be regulated post-Brexit. There is a belief that the existing requirements are relatively onerous in a way that may not be achieving the intended outcome.
However, this needs to be balanced with the require - ment to continue equivalence with the EU. 2.12 Review of Industry Participants by Parties Other Than Regulators Banks have been taking an increasingly intervention - ist approach towards regulating firms, in particular in terms of not providing banking support to those firms that the bank deems high risk. This has been contro - versial, as it is open to accusations that banks may act in a way that is anti-competitive – particularly where a fintech concept may be considered a potential alter - native to traditional banking. 2.13 Conjunction of Unregulated and Regulated Products and Services Generally, firms offering unregulated products and services in conjunction with regulated products and services are required to be very clear with consum - ers as to which products are/are not regulated. Fur - thermore, the FCA may seek to exercise oversight in respect of the unregulated aspects of the business, both in terms of: • any risk the unregulated activities could pose to regulated activities; and • the FCA’s expectation that regulated firms uphold a certain standard of conduct, even in respect of unregulated business. 2.14 Impact of AML and Sanctions Rules Generally, AML and Sanctions Rules are well settled for most fintechs. However, there are two areas worthy of particular consideration. Firstly, the AML and Sanctions Rules that apply to crypto-asset firms are considered some of the most onerous internationally, and historically this has meant that such firms have tended to locate outside of the United Kingdom and thereby fall outside the regime. On the other hand, further regulation of the financial promotion of certain crypto-assets may impact this trend as they make it harder to operate with the UK market generally without obtaining an FCA registration and complying with the full AML and Sanctions Rules. Also, whilst the AML and Sanctions Rules for payment services firms are well established, it is suggested that
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