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Regulatory Q&A for US and Other Non-UK Businesses Doing Fintech in the UK | JD Supra

Doing Fintech Business in the UK: Regulatory Q&A for US and Other Non-UK Businesses

As fintech continues to expand globally, businesses are constantly looking for new markets to enter, one such market is the United Kingdom (UK). However, expanding into a new country requires careful consideration of the regulatory requirements and risks associated with doing business in that country. Here are some of the most frequently asked regulatory questions that US and non-UK fintech service providers have about doing business in the UK.

Regulatory Regimes in the UK

The UK has no single regulatory regime for fintech providers. Instead, a fintech firm will be subject to regulation if it carries on certain activities that are identified as regulated activities under the Financial Services and Markets Act 2000 (FSMA) and other laws, regulations, and rules.

There are long-established activities, such as accepting deposits, offering accounts, providing payment and card services, providing consumer credit, offering residential mortgages, providing insurance, and providing and managing investments. There are also more recent activities like crowdfunding, peer-to-peer lending, and those related to cryptoassets.

It is a criminal offence for a person to carry on a regulated activity without being either authorised by the Financial Conduct Authority (FCA) or exempt from authorisation.

Carrying on Business in the UK

A firm will carry on business only where it has an establishment in the UK. However, a person based outside the UK may be carrying on activities in the UK even if they do not have a place of business in the UK, for example, by means of the internet or other telecommunications system or by occasional visits. In that case, it will be relevant to consider whether the firm satisfies the by-way-of-business test. This test looks to factors such as time spent in the UK, use of offices, and other similar factors.

Regardless of location, the Financial Promotion Restriction applies to any financial promotion that is “capable of having an effect in the UK”. Currently, the promotion of payment services and e-money services is not subject to the Financial Promotion Restriction.

Getting Authorised

As an initial requirement, a firm will have to apply to become FCA authorised and satisfy certain conditions for authorisation depending on the regulatory regime they fall under.

For payment and electronic money (e-money) services, FCA authorisation or Payment Services Regulation registration is not required by non-UK payment institutions seeking to provide payment services and e-money services to UK customers from a location outside the UK.

Related Facts

– In the case of regulated mortgage contracts, even if the contract provider is outside the UK, when the residential property on which the mortgage is secured is in the UK, the provider will be subject to UK regulation.
– The overseas persons exclusions for carrying on regulated activities in the UK are narrow and currently under review.

Key Takeaway

Expanding into the UK market requires compliance with UK regulatory requirements like getting authorised and satisfying certain conditions. While the regulatory environment may seem daunting, carrying out business responsibly and transparently can lead to long-term success.

In Conclusion

For US and other non-UK fintech service providers, the UK market presents a lucrative opportunity. However, accessing this market requires an understanding of the UK’s regulatory environment. Through careful consideration of the various regulatory regimes and requirements, fintech businesses can enter the UK market with confidence and certainty.

Denk Liu
Denk Liu
Denk Liu is an honest person who always tells it like it is. He's also very objective, seeing the situation for what it is and not getting wrapped up in emotion. He's a regular guy - witty and smart but not pretentious. He loves playing video games and watching action movies in his free time.

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