April 20, 2021

Volume XI, Number 110

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April 20, 2021

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April 19, 2021

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Post-Brexit: Significant Changes to UK Cross-Border Payments Regulation

The EU Cross-Border Payments Regulation 924/2009 (as amended by Regulation 2019/518) (EU CBPR) has been “onshored” with significant changes into UK law following the end of the Brexit transition period (i.e., since 1 January 2021). The EU CBPR applied directly in the UK until 31 December 2020. Essentially, the onshored UK CBPR regime only retains the transparency requirements on currency conversion charges under the EU CBPR. This means that UK payment service providers (PSPs) no longer have to comply with other requirements under the EU CBPR.

With respect to the transparency requirements on currency conversion, PSPs must disclose, before initiation of a payment, currency conversion charges in the form of a percentage markup over the euro foreign exchange reference rates issued by the European Central Bank (ECB). While the requirements may appear to be straightforward, there are issues with interpreting some of the specific points.

For example, the lack of definition for “card-based transaction” results in some uncertainty on the scope of the relevant requirements. Further, all the requirements are drafted in a manner that suggests that they may only apply to transactions initiated by the payer themselves. This thus calls into questions whether these requirements should apply to transactions initiated by using a third-party payment initiation service (PIS), although the policy rationale would seem to point toward PIS-initiated payments also being included.

In addition, the ECB published an opinion on 25 January 2021 suggesting that the euro reference rates referred to in the EU CBPR should not be those issued by the ECB but instead should be appropriate rates under the relevant benchmark regulation. It remains to be seen whether or not the UK would consider a similar approach in this respect for the UK CBPR regime.

For further detail on this topic, please see our full alert at https://www.klgates.com/New-UK-Requirements-on-Cross-Border-Payments-Onshoring-and-Practical-Issues-1-20-2021.

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Copyright 2021 K & L GatesNational Law Review, Volume XI, Number 61
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About this Author

Special Counsel

Kai Zhang is a special counsel at the firm’s London office. He is a member of the Payments, Banking Regulation and Consumer Financial Services practice group.

+44.(0)20.7360.6404
Philip J. Morgan, Investment Management Attorney, KL Gates Law Firm
Partner

Philip is a partner in the firm's Investment Management practice group and has wide experience in all aspects of law and regulation in the UK financial services industry.  He works closely with U.S. and other colleagues to provide international financial services regulatory advice and his practice also focuses on investment funds, particularly hedge funds, real estate funds, private equity funds and listed investment funds.  His transactional work also encompasses corporate projects such as joint ventures and establishment of limited liability partnerships, with a...

+44.(0)20.7360.8123
Judith E. Rinearson, KL Gates, federal consumer protection lawyer, anti money laundering attorney
Partner

Judith Rinearson is a partner in the firm’s New York and London offices. Ms. Rinearson concentrates her practice in prepaid and emerging payment systems, electronic payments, crypto/virtual currencies, reward programs, ACH and check processing. She has more than 25 years of experience in the financial services industry, including 18 years at American Express’s General Counsel’s Office. Her expertise focuses particularly in the areas of emerging payments and compliance with state and federal consumer protection laws, anti-money laundering laws, state money transmitter...

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