FCA issues guidance on handling paper during coronavirus crisis

Out-Law News | 18 May 2020 | 4:51 pm | 2 min. read

The UK’s Financial Conduct Authority (FCA) has issued guidance for firms on how to deal with the requirements for processes involving post and paper during the Covid-19 pandemic.

The FCA said it expected firms to continue to comply with requirements for incoming and outgoing post and paper, but recognised that given the current circumstances firms may not be able to fully comply. It said firms which found they were unable to meet requirements should notify the FCA as soon as possible.

The regulator said firms should try to make sure that customers are not disadvantaged because of delays, and make particular efforts to contact customers who do not use online services, with a special emphasis on protecting vulnerable customers. It added that firms should send communications in a timely manner.

Firms which are unable to comply with the normal requirements need to show the FCA steps they have taken to mitigate the impact of non-compliance with postal and paper processes, and return to full compliance as soon as practical.

The FCA said firms should provide general updates on how they were treating incoming and outgoing post, and other processes such as handling cheques, through their websites or social media. Firms should also ask customers who have sent instructions or cheques that had not been processed to contact them urgently by telephone or electronic means.

They should also consider the rules under the Client Assets Sourcebook (CASS) regime to avoid the risk of breaching the Client Money Rules or putting clients at risk of a client money shortfall.

Suitability assessments should be carried out over the phone, video call or online, and firms should send assessments out without delay, either online or by post.

Financial services regulation expert Elizabeth Budd of Pinsent Masons, the law firm behind Out-Law, said the guidance followed earlier statements from the FCA on how firms should approach aspects of their paper-based business.

“The fact that the FCA is putting out further guidance highlights that although it is easy to forget when so much has moved online, many people still rely paper. Those who do are more likely to be vulnerable customers,” Budd said.

“Firms need to ensure that they are communicating with customers in an appropriate fashion, whether that be social media, or a more traditional communication by way of letter or phone, to publicise how paper-based communications will be dealt with. Firms need to ensure that post is being collected regularly and that cheques are being paid in. This is especially so where those cheques represent client money under CASS,” Budd said.

“Failure to do so increases the risk of regulatory breach. Whilst the FCA is taking a pragmatic approach, it expects firms to have in place processes that seek to minimise the risk of regulatory breach and that will adapt as lockdown eases and branch banking business moves towards an end of lockdown phase. Firms do of course have the option of covering client money shortfalls from their own resources, but as financial resources come under pressure this becomes less attractive as a default option,” Budd said.