PRA Proposes Rules on Identity Verification of Depositor Protection
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS). It also proposes amendments to the expectations of PRA in respect of insolvency practitioners being best placed to carry out identity verification checks in the event that a firm has failed to do so by the compensation date. The proposals in CP3/21 would result in changes to the Depositor Protection Part of the PRA Rulebook (Appendix 1) and the supervisory statement SS18/15 on depositor and dormant account protection (Appendix 2). This consultation closes on February 15, 2021, with PRA proposing the implementation date to be March 24, 2021.
CP3/21 is relevant to the FSCS, all PRA-authorized deposit-takers, and insolvency practitioners. It contains no material of direct relevance to retail financial services consumers or consumer groups, upon which they might need to act. Under the existing PRA Depositor Protection rules, which implemented an EU Directive, if a depositor or ultimate beneficiary has not had their identity verified in accordance with the Relevant Anti Money Laundering (AML) Requirements at the compensation date, their deposits are automatically ineligible for FSCS protection (through no fault of the depositor or ultimate beneficiary). The proposed rule changes are intended to prevent FSCS eligibility issues in the event that a firm has failed to conduct identity verification in accordance with the relevant anti-money laundering requirements referred to in Depositor Protection Rule 2.2(4)(f) while continuing to ensure identity verification is carried out before any compensation is paid.
PRA proposes to amend existing Depositor Protection rules to allow deposits to become eligible for FSCS protection if identity verification is, in any case, carried out in the manner set out in Regulation 28 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLR). CP3/21 also outlines the proposal to set out, by way of amendment to SS18/15, that PRA considers that insolvency practitioners should undertake post-compensation date identity verification, given their obligations and responsibilities under the Banking Act 2009. PRA has engaged closely with FCA on these issues, due to the responsibility of FCA for consumer protection and role as competent authority for the anti-money laundering regime in UK, and has also engaged with the FSCS. The proposals have been designed in the context of UK having left EU and the transition period having come to an end. Unless otherwise stated, any references made to legislation, including that which is “retained EU law,” relate to the UK version. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework.
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Comment Due Date: February 15, 2021
Effective Date: March 24, 2021 (Proposed)
Keywords: Europe, UK, Banking, Depositor Protection, Consumer Protection, PRA Rulebook, AML, Identity Verification, FSCS, PRA
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