UK payment services businesses and other fintechs need to be prepared for site visits from Luxembourg’s financial services regulator, warns fscom, the financial services regulatory consultancy.
fscom 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.
fscom 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 in order to retain their EU passporting rights post-Brexit.
The CSSF’s proactive approach to visits is radically different from the FCA in the UK, 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 has previously publicly warned that it would be paying site visits to UK asset managers that establish a presence in Luxembourg in order to retain their EU passporting rights post-Brexit.
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
- Having board members present in Luxembourg
- Hitting agreed targets in establishing a full presence in Luxembourg
fscom says that 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.
fscom says that while the CSSF is likely to take a relatively pragmatic approach, it has the power to levy significant fines.
James Borley, Director at fscom, comments: “UK payments businesses and fintechs need to be aware that they will not escape scrutiny from the Luxembourg regulator. The CSSF has already started visiting the firms that have established offices in the country since the EU referendum.”
“Asset managers have been warned about living up to their commitments to the regulator, but other financial services businesses need to make sure they are hitting the targets – customer base, staffing levels, revenue etc. – they agreed with the CSSF, or have plausible explanations for why not.”
“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.”
In this month’s print edition, TFT had a catch up with Nasir Zubairi, the CEO of the LHoFT – Luxembourg House of Financial Technology, on fintech innovation, Luxembourg’s central role in Europes
“We’re looking after traditional institutions, helping them in their digitalisation. When we go around the world, we find fintech firms that look interesting and could solve current problems financial companies we know are facing. We then help them connect and move towards collaboration..”
