Truss’ In-Tray: What Payment Firms Can Expect From New PM

September 7, 2022
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As Boris Johnson bids Downing Street farewell, VIXIO looks at what we can expect from incoming prime minister Liz Truss, and what this means for payments compliance.

As Boris Johnson bids Downing Street farewell, VIXIO looks at what we can expect from incoming prime minister Liz Truss, and what this means for payments compliance.

Liz Truss, a long-serving cabinet minister, is now Prime Minister of the UK after claiming victory in a leadership contest between her and former chancellor of the exchequer, Rishi Sunak.

During her campaign for leadership of the Conservative Party, payments and financial services regulation were discussed at membership hustings.

For example, going by what she said, the former foreign secretary looks set to follow governments across Europe in enhancing access to cash and the right to pay with cash.

Some in her campaign team also suggested merging the UK’s three financial regulators: the Financial Conduct Authority (FCA); the Prudential Regulation Authority (PRA); and the Payment Systems Regulator (PSR).

“The FCA and the PRA, as well as the Bank of England, have each been criticised in Westminster for their overly restrictive attitudes to the reform of the UK economy,” said Neil Robson, partner at Katten Muchin Rosenman.

Robson suggested that although the FCA, set up in the wake of the last financial crisis, has become “unwieldy and at times Byzantine” in its approach to market participants, merging it with the PRA and the PSR into a single body would have to be structured so as to provide enhanced consumer and retail protections, while opening up the wholesale and institutional sector.

“A switch back to a single mega regulator akin to the Financial Services Authority of old would only be worthwhile if the new regulator actually achieves things and is an ally of business, rather than thwarting businesses that want to operate in the UK or UK financial markets,” he said.

Gary Prince, chief strategy officer at SimplyPayMe, was unenthusiastic about the possibility of a regulatory merger.

"Having the degree of separation has worked much better than the old regime, so I’m not sure what the rationale is,” he said. “We don't need anymore upheaval, and if we start joining the regulators together, that will cause problems between the different departments and who is doing what.”

A new structure will need embedding, he said. “Other things need to be focused on before that. The government should be pouring more money into staffing so that there are a number of people to deal with changes like open banking, open finance, and what is replacing the Open Banking Implementation Entity.”

Prince did say, however, that there is optimism to be had about a Liz Truss-led government. "People have said that she understands the sector and the role that it plays,” he said. “Boris is a great orator, but not a details man, whereas Truss does seem to understand how important the industry is. Hopefully, she will look at it.”

With Johnson having said in his resignation speech that like Cincinnatus, he is returning to his plough, Truss comes into the role as the cost of living crisis bites and Russia’s invasion of Ukraine rages on.

It is for this reason that some are sceptical about whether the financial reforms that the ruling Conservative Party have proposed are unlikely to be passed into law anytime soon.

“It remains to be seen how high financial crime and fraud will be on the new Prime Minister’s agenda,” said Kathryn Westmore, a senior fellow at the Centre for Financial Crime and Security Studies. “There has been, and remains, a lot of work going on behind the scenes and so the new ministers, when they are appointed, will have a pretty full inbox.”

“Clearly, the need to provide support to individuals in the current crisis and Truss’ proposed tax cuts will mean that there is a much smaller pot of money to fund areas like law enforcement or some of the structural changes that might be needed,” she acknowledged.

There is also the risk that some of the impetus for change seen earlier this year after the invasion of Ukraine may wane, she warned. “To delay or neglect these reforms would be a huge mistake in the long-term both in terms of the UK’s reputation but also the ultimate cost to the UK’s economy.”

“Other pressures will likely require more immediate redress in her first few months in office, and the Financial Services and Markets Bill is still in its infancy,” agreed Neil Williams, deputy head of complex crime at Reeds Solicitors.

The pressures on the economy require urgent attention, whether through the proposed bill or otherwise, but there are other headlines to be grabbed through tax cuts and policy reversals, he continued. “Longer-term policies may well be just that for now.”

The Financial Services and Markets Bill was introduced by Boris Johnson’s government as the UK’s bold foray out of the EU’s sphere.

It includes commitments to access to cash, a crypto regulatory framework and tightened fraud legislation to better support consumers.

“Given the vast ambition of the Financial Services and Markets Bill, and the need to get all the details right, a proper level of scrutiny is essential,” said Nathaniel Lalone, partner at Katten Muchin Rosenman. “However, the broad outlines of much of the bill’s substance have been widely consulted on already, so the notion that major changes are afoot under the cover of darkness seems wide of the mark."

Despite uncertainty about how high up the agenda these issues will be for Truss, Westmore cautioned that financial crime and fraud have not gone away. “If anything, they will likely be exacerbated by the cost of living crisis so it’s imperative that these issues remain a priority.”

As a priority, she suggested that the new government should accelerate the introduction of the second Economic Crime Bill, which contains much-needed reforms for Companies’ House, the UK’s registrar of companies.

“That will go a long way to addressing one of the key weaknesses in the UK’s defences against financial crime and fraud.

“I would also like to see bold and ambitious plans for reform in the upcoming Fraud Strategy and second Economic Crime Plan, particularly around areas like information sharing and AML supervision,” she continued, adding that also absolutely key to the UK’s ability to deal with financial crime and fraud is a long-term plan for increased funding of enforcement agencies, including the National Crime Agency and the Serious Fraud Office.

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