What is PSD Agent UK (payment sub-license)?
Under the Payment Services Directive 2 (PSD2), a PSD Agent UK is a legal or natural person acting on behalf of a UK Payment Institution (PI) or Electronic Money Institution UK (an entity with EMI license UK), Small Payment Institution UK (Small PI), Small Electronic Money Institution (Small EMI) or Registered Account Information Service Provider (RAISP) in providing payment services. All agents must be registered with the FCA.
Often a PSD Agent UK is a registered or authorised institution that provides services under its own license and some service of behalf of a principal, which is an entity that made it its agent. It is not necessarily the case that all of the services that a PI or EMI offer as part of their authorisation will be mandated to the agent. That all depends on the terms of the agreement between the agent and the principal (e.g. the PI or EMI). The most popular services used for agent model are account information, payment initiation and money-remittance services. Furthermore, agents can act for more than one principal provided that each of these principals registers the agent with the competent authorities.
While an agent can provide its principal’s payment services, the agent cannot provide or intend to provide such services in its own right. Moreover, the PSD Agent should not mislead its customers. Regulation 139 of the Payment Services Regulations 2017 deems a person that behaves or hold themselves out in a way that indicates they are a payment service provider, to be guilty of an offence. As such, it must be made clear to customers that the agent is acting on behalf of the institution and that the agreement for the provision of payment services must be entered into by the principal and the customer.
Note that PSD Agent UK should not be confused with E-money Distributors UK, which are entities redeeming and distributing e-money on behalf of its e-money issuing principal.
Registering Payment Agents
Under Article 19 of the Payment Services Directive II on the use of agents, branches or entities to which activities are outsourced, in case a PI intends to provide payment services through an agent, it needs to provide the competent authorities in its home Member State with the following details:
- The name and address of the agent;
- Elaboration on the internal control mechanisms used by the agent to comply with AML/CTF obligations under EU Directive 2015/849;
- The identity of directors and management of the agent used in the provision of payment services;
- Payment services of the principal for which the agent is mandated;
- The unique identification code or a number of the agent.
These requirements have been transposed identically in the UK Payment Services Regulations 2017, regulation 34. PIs and EMIs must complete the Agent Application form via Connect to register an agent.
Usually, upon providing this information, the competent authorities will communicate to the principal whether the registration of the agent has been successful within 2 months. Once the confirmation has been received, the agent can start providing payment services.
In the case of the UK, PERG 15.4 of the FCA Handbook clarifies that it is the responsibility of the PI to register the agent with the authorities. Similarly, EMIs that want to assign Agents for the provision of certain payment services, need to themselves register the agent under the Electronic Money Regulations 2011.
Requirements applicable to PSD Agents UK
Agents must be subject to the internal control mechanisms guaranteeing that they shall not be exploited for the furtherance of financial crime. Moreover, if these agents are employed in another EEA State, the PI/EMI must ensure that the agents are still subject to the same level of requirements regarding Anti-Money Laundering/ Counter Terrorist-Financing as provided in the national legislation of the home member state regardless of the local legislation.
Moreover, Agent’s beneficial owners, directors, senior management and key principals must be fit and proper, as well as must possess an impeccable reputation, presenting a high level of integrity, honesty, competence and capability to carry out payment services. PSD Agent UK must maintain business offices and physical presence in the country where payment services for the provision of which it is being registered with the principal will be provided. It is a prerequisite that agents must possess all the necessary human, information technology and financial resources to carry out envisaged services.
How can PSP Lab help you?
If you need help in setting up a payment agent and getting the agent registered and approved with the FCA, PSP Lab can be of great assistance. Our extensive experience in Fintech Consulting means our advice extends from getting you authorised as an EMI or PI to supporting all the operations of an authorised firm. Should you have any queries with regard to PSD Agents UK or want to set up a consultation, do not hesitate to get in touch with us.