CSSF warns UK fintechs about onsite visits
UK payment services businesses and other fintechs, not just asset managers, need to be prepared for onsite visits from Luxembourg’s financial services regulator.
Fscom, a financial services regulatory consultancy, says that it recently met with the Commission de Surveillance du Secteur Financier (CSSF) to discuss its regulatory approach to UK fintechs that propose to establish in Luxembourg as part of their Brexit preparations.
In this meeting, the CSSF confirmed that UK payments services businesses and other fintechs will be subject to its regime of site visits and warns that these visits have already begun.
The CSSF has previously publicly warned that it would be paying site visits to UK asset managers that establish a presence in Luxembourg to retain their EU passporting rights post-Brexit.
“The CSSF is in no way a ‘soft touch’ regulator. It is open to having conversations with prospective applicants and will be pragmatic and work with firms to give them the best opportunity to comply and be successful, but it will come down hard on any business that thinks it can get away with having a ‘brass plate’ presence,” says James Borley, Director at fscom.
The regulator’s proactive approach to visits is radically different from the UK’s Financial Conduct Authority (FCA), which undertakes site visits extremely infrequently.
Fscom says that, as a result, many UK-based financial services businesses are now unused to dealing with visits from the regulator, and risk being unprepared.
The CSSF will visit all newly-regulated firms in Luxembourg six months after their initial authorisation, to make sure that they are keeping the commitments they made as part of their authorisation, including: having staff working at the firm’s designated address, board members present in Luxembourg and hitting agreed targets in establishing a full presence in Luxembourg.
While the CSSF is likely to take a relatively pragmatic approach, it has the power to levy significant fines. Fines are especially likely in cases where the regulator believes a business has misled it deliberately.