FIRST SUPERVISORY NOTICE

To:
Probitas Fidelis Limited (‘Probitas’)(‘The Firm’)

TAKE NOTICE: The Financial Conduct Authority (“the Authority”) of 12,

Endeavour Square, London, E20 1JN has taken the following action pursuant to

regulation 12(1) of the Payment Services Regulations (PSR):

ACTION

1. For the reasons given in this notice, and pursuant to regulation 12(1) of the PSR,
the Authority has decided to vary the authorisation granted to Probitas by imposing
with immediate effect the following requirements:

a) Probitas must not without prior written consent from the Authority carry out
any of the activities for which it has been authorised under the PSR, namely
money remittance. For the avoidance of doubt this requirement applies to
business carried out on behalf of existing clients;

b) Probitas must set out in a prominent place on all of its websites and must email
all of its clients a statement that it is no longer permitted to provide payment
services;

c) Probitas must not on-board any new payment services users;

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d) Probitas must not become or apply to become the EMD Agent of any firm for
which it does not already hold that status as of the date of this notice without
the prior written consent of the Authority; and

e) Probitas must secure all books and records and preserve information and
systems relating to its authorised activities and must retain these in a form and
at location to be notified to the Authority in writing within 48 hours of the issue
of this notice such that they can be provided to the Authority, or to a person
named by the Authority, promptly on its request.

REASONS FOR ACTION

2. On the basis of the facts and matters described below, the Authority considers that
the variation to Probitas’s authorisation is necessary because it appears to the
Authority that the Firm no longer meets, or is unlikely to continue to meet, the
conditions for authorisation in the PSR, including the conditions detailed in
regulation 6(6)(b)-(c), (7)(b) and (8).

3. The PSR requires that Probitas be included on a register maintained by HMRC
pursuant to the MLR. However, HMRC has cancelled the Firm’s registration on the
grounds that it is not fit and proper. This means the Firm does not meet the
conditions of authorisation and also that it is unlawful for it to provide payment
services. These are sufficient grounds for the proposed variation. The Authority is
concerned by the circumstances in which the Firm has been deemed not to be fit
and proper, including that it may have breached terms of a suspension of its
registration imposed by HMRC and, at the same time, an undertaking agreed with
the Authority.

4. In the circumstances, Probitas poses a risk to trust in payment systems should it
be permitted to provide payment services.

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DEFINITIONS

5. The definitions below are used in this First Supervisory Notice:

a)
“the Act” means the Financial Services and Markets Act 2000;

b) “API” means Authorised Payment Institution, a firm authorised under the PSR
to provide Payment Services;

c)
“the Authority” means the Financial Conduct Authority;

d) “conditions of authorisation” mean the minimum conditions under the PSR
which a firm must meet in order to be authorised to provide payment services

e)
“EG” means the Authority’s Enforcement Guide;

f)
“EMD Agent” means the status of a firm permitted to act as the agent of a
principal firm pursuant to the Electronic Money Directive;

g) “HMRC” means Her Majesty’s Revenue & Customs;

h) “MLR” means the Money Laundering, Terrorist Financing and Transfer of Funds
(Information on the Payer) Regulations 2017;

i)
“Probitas”/”the Firm” mean Probitas Fidelis Limited

j)
“the PSR” means the Payment Services Regulations 2017; and

k)
“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber).

FACTS AND MATTERS

6. Probitas was registered as an API on 12 July 2018. The Firm is authorised to provide
a single payment service, namely money remittance. Requirements in place since
that date mean that the firm is not permitted to provide payment services to
individuals but it has a number of business customers.

Suspension and cancellation of registration on HMRC’s Supervised
Business Register

7. The Firm was formerly registered with HMRC, on the HMRC Supervised Business
Register. HMRC provided money laundering supervision of the Firm, pursuant to
the MLR. On 22 December 2020, HMRC suspended the Firm’s registration due to
financial crime concerns. Probitas did not immediately notify the Authority of the
nature of the concerns.

8. The Authority learnt of the matter in January 2021 and contacted the Firm about
it. The Firm appeared to admit that it had been providing payment services despite
the terms of the suspension, though it claimed not to be aware of the suspension
itself at that time. On 29 January 2021, the Firm signed an undertaking to the
effect that it would return customer funds and refrain from providing payment
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services and taking on new payment services customers. The Firm did provide
evidence that it had returned customer funds.

9. HMRC’s suspension remained in force and was renewed for a further 3 months on
26 April 2021. During this time HMRC continued to liaise with the Firm regarding
its initial financial crime concerns (which the firm took steps to rectify) as well as:
the fitness and propriety of certain directors and senior staff; the suitability of its
Anti-money laundering policies and procedures; and its adherence to the MLR.

10. On 22 June 2021, HMRC notified Probitas that its Anti-money laundering policies
and procedures were not compliant with the MLR (though the Firm challenged this
conclusion). On 22 July 2021, HMRC notified the firm that it had concluded it had
breached the terms of the suspension by making prohibited transactions. As a
result, it was deemed that the firm and certain senior individuals were not fit and
proper. HMRC therefore informed the firm that, pursuant to Regulation 60 of the
MLR, its registration on the HMRC Supervised Businesses Register was cancelled.

11. Probitas exercised its right to challenge that decision via HMRC’s Appeals and
Review Team. In July and August 2021, the Firm apprised the Authority of
developments including by providing letters sent to HMRC by its legal
representatives. The Firm submitted detailed representations and evidence to
HMRC.

12. On 22 October 2021, HMRC notified Probitas that, after consideration of the
representations and evidence submitted, its appeal had been rejected. HMRC
concluded that Probitas had breached the terms of the suspension by acting as a
money remitter and that it was therefore not fit and proper. The dates of the
transactions specified by HMRC also suggest that Probitas breached the terms of
the undertaking it signed with the Authority.

FAILINGS AND RISKS TO OPERATIONAL OBJECTIVES

13. The regulatory provisions relevant to this First Supervisory Notice are set out in the
Annex.

14. From the facts and matters described above, and having regard to its regulatory
objectives, it appears to the Authority that:

a)
Probitas no longer meets, or is unlikely to meet, the conditions for authorisation
set out in 6(6)(b)-(c), (7)(b) and (8) of the PSR. In particular, Probitas no
longer complies with a requirement to be registered in a register maintained
under the MLR. It also appears as though Probitas does not have effective
procedures to identify, manage, monitor and report financial crime and conduct
risks and the internal control mechanisms to manage them – this is evidenced,
amongst other things, by its apparent breaches of the suspension and
undertaking. Further, it appears from the Firm’s conduct as though certain
directors and persons responsible for managing the firm are not of good repute
and do know have the appropriate knowledge and experience;

b) It is unlawful for Probitas to provide payment services as a result of the action
taken by HMRC under Regulation 60 of the MLR; and

c)
Probitas poses a threat to trust in payment systems by virtue of its apparent
willingness to breach the MLR, undertakings and to provide payment services
when not permitted to do so.

15. Each of the issues identified at (a)-(c) above is a sufficient and separate ground for
varying the Firm’s authorisation by imposing the proposed requirements. The
Authority considers that these requirements are appropriate and proportionate in
order to advance its objective of protecting and enhancing the integrity of the UK
financial system. The Authority considers that these requirements should be
imposed immediately.

PROCEDURAL MATTERS

Decision Maker

16. The decision which gave rise to the obligation to give this First Supervisory Notice
was made by an Authority staff member under executive procedures.

17. This First Supervisory Notice is given to Probitas under regulation 12(6) of the
Regulations and in accordance with regulation 12(7) of the PSR.

The Tribunal

18. Firm has the right to refer the matter to which this First Supervisory Notice relates
to the Tribunal. The Tax and Chancery Chamber is part of the Tribunal which,
amongst other things, hears references arising from decisions of the Authority.
Under paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper Tribunal)
Rules 2008, the Firm has 28 days from the date on which this First Supervisory
Notice is given to it to refer the matter to the Tribunal.

19. A reference to the Tribunal can be made by way of a reference notice (Form FTC3)
signed by or on behalf of the Firm and filed with a copy of this First Supervisory
Notice. The Tribunal’s contact details are: The Upper Tribunal, Tax and Chancery
Chamber, 5th Floor, Rolls Building, Fetter Lane, London EC4A 1NL (telephone: 020
7612 9730; email: uttc@hmcts.gsi.gov.uk).

20. Further information on the Tribunal, including guidance and the relevant forms to complete, can be
found on the HM Courts and Tribunal Service website: http://www.justice.gov.uk/forms/hmcts/tax-
and-chancery-upper-tribunal

21. The Firm should note that a copy of the reference notice (Form FTC3) must also be
sent to the Authority at the same time as a reference is filed with the Tribunal. A
copy of the reference notice should be sent to Joe MacDonald at the Financial
Conduct Authority, 12 Endeavour Square, London, E20 1J

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Representations

22. The firm has the right to make written representations to the Authority. The
Authority will consider oral representations only in exceptional circumstances
where it is determined that prohibiting oral representations will likely impact upon
the fairness of the decision. The deadline for providing written representations
and notifying the Authority that the Firm wishes to make oral representations is 6
January 2022 or such later date as may be permitted by the Authority. The
Authority must be informed – by 6 January 2022 – in writing of any request to
make oral representations. The address for doing so is:

Supervision, Policy and Competition Decision Making Secretariat
The Financial Conduct Authority
12 Endeavour Square
London
E20 1JN
Email: SPCDecisionMakingSecretariat@fca.org.uk

Confidentiality and Publicity

23. Paragraph 10 of Schedule 6 to the PSR provides that section 391 of the Act shall
apply to supervisory notices given under regulation 11(6) of the Regulations.
Section 391(5) requires the Authority, when the First Supervisory Notice takes
effect (and this First Supervisory Notice takes immediate effect), to publish such
information about the matter as it considers appropriate.

24. Probitas should note that this First Supervisory Notice may contain confidential
information and should not be disclosed to a third party (except for the purpose of
obtaining advice on its contents).

Contacts

25. Any questions regarding the procedure of the Executive Decision Maker should be
directed to the Decision Making Secretariat by email:
SPCDecisionMakingSecretariat@fca.org.uk

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ANNEX

RELEVANT STATUTORY PROVISIONS

1.
By sections 1B to 1H of the Act, the Authority has operational objectives which
include securing an appropriate degree of protection for consumers and protecting
and enhancing the integrity of the UK financial system.

2.
Regulation 6 of the PSR details the conditions for authorisation which an AMI must
meet. These include:

(6) The applicant must satisfy the Authority that, taking into account the need to
ensure the sound and prudent conduct of the affairs of the institution, it has—

(b) effective procedures to identify, manage, monitor and report any risks to which
it might be exposed; and

(c) adequate internal control mechanisms, including sound administrative, risk
management and accounting procedures,

(7) The applicant must satisfy the Authority that—

(b) the directors and persons responsible for the management of its electronic
money and payment services business are of good repute and possess appropriate
knowledge and experience to issue electronic money and provide payment
services;

(8) The applicant must comply with a requirement of the MLR to be included in a
register maintained under those regulations where such a requirement applies.

3.
Regulation 7(1) of the PSR provides that the Authority may include in the
authorisation of an AMI such requirements as it considers appropriate. Regulation
7(2) of the PSR provides that a requirement may, in particular, be imposed so as to
require the person concerned to (a) take a specified action; (b) refrain from taking
a specified action.

4.
Regulation 8 of the PSR provides that the Authority may, on the application of an
AMI vary that person's authorisation by, among other things, imposing a
requirement such as may, under regulation 7 of the PSR, be included in an
authorisation.

5.
Regulation 12(1)(a) of the PSR provides that the Authority may vary a person's
authorisation in any of the ways mentioned in regulation 8 if it appears to the
Authority that—(a) the person no longer meets, or is unlikely to continue to meet,
any of the conditions set out in regulation 6(4) to (9) (conditions for authorisation).

6.
Regulation 12(1))(c) of the PSR provides that the Authority may vary a person’s
authorisation if it appears to the Authority that the person would constitute a threat
to the stability of, or trust in, a payment system by continuing to provide a particular
payment service or payment services.

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7.
Regulation 12(1)(e) of the PSR provides that the Authority may vary a person’s
authorisation if it appears that the person’s provision of a particular payment service
is otherwise unlawful including where such provision of services is unlawful because
the person’s registration in a register maintained under the MLR has been cancelled
under Regulation 60 of the MLR.

8.
Regulation 11(2) of the PSR provides that a variation under this regulation may be
expressed to take effect (a) immediately, if the notice given under paragraph (6)
states that that is the case or (b) on such date as may be specified in the notice.
Regulation 11(3) of the Regulations provides that a variation may be expressed to
take effect immediately or on a specified date only if the Authority, having regard to
the ground on which it is exercising the power under paragraph (1), reasonably
considers that it is necessary for the variation to take effect immediately or, as the
case may be, on that date.

9.
Regulation 11(6) of the PSR provides that, where the Authority proposes to vary a
person's authorisation under this regulation, it must give the person notice.

10.
Regulation 37 of the PSR provides that, where it becomes apparent to an electronic
money institution that there is, or is likely to be, a significant change in
circumstances which is relevant to the fulfilment of the conditions of authorisation,
the firm must provide the Authority with details without undue delay. Regulation
37(2) states that an electronic money institution must inform the Authority of any
material change in the measures

11.
Section 391 of the Act, as varied by paragraph 10 of Schedule 6 to the PSR, provides
that:

a.
When a supervisory notice takes effect, the [Authority] must publish such
information about the matter to which the notice relates as it considers
appropriate.

b.
The [Authority] may not publish information under this section if in its
opinion, publication of the information would, be a) unfair to the person with
respect to whom the action was taken or proposed to be taken, (b) prejudicial
to the interests of consumers…

c.
Information is to be published under this section in such manner as the
[Authority] considers appropriate.”

RELEVANT HANDBOOK PROVISIONS

12.
The Authority's policy in relation to its enforcement powers is set out in the
Enforcement Guide (EG), certain provisions of which are summarised below.

13.
EG 19.20 outlines the Authority’s approach to enforcing the provisions of the PSR.
EG 19.20.5 provides that the PSR, for the most part, mirror the Authority’s
investigative, sanctioning and regulatory powers under the Act and that the
Authority has decided to adopt procedures and policies in relation to the use of those
powers akin to those it has under the Act.

14.
The Authority considers that the powers under regulation 12(1) of the PSR are
similar to those under sections 55J and 55L of the Act and that the provisions of EG
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8 “Variation and cancellation of permission and imposition of requirements on the
FCA's own initiative and intervention against incoming firms” are applicable.

Imposing requirements on the Authority’s own initiative

15.
EG 8.2.1 provides that the Authority will have regard to its statutory objectives and
the range of regulatory tools that are available to it, when it considers how it should
deal with a concern about a firm. The Authority will also have regard to: (1) the
responsibilities of a firm's management to deal with concerns about the firm or about
the way its business is being or has been run; and (2) the principle that a restriction
imposed on a firm should be proportionate to the objectives the Authority is seeking
to achieve.

16.
EG 8.2.3 provides that the Authority may exercise its formal powers under section
55J or 55L of the Act, where the Authority has serious concerns about a firm or the
way its business is being or has been conducted. Further, EG 8.2.3 suggests that a
requirement can be imposed where its imposition reflects the importance the
Authority attaches to the need for the Firm to address its concerns.

Use of the own-initiative powers in urgent cases

17.
EG 8.3.1 states that the Authority may impose a requirement so that it takes effect
immediately or on a specified date if it reasonably considers it necessary for the
requirement to take effect immediately (or on the date specified), having regard to
the ground on which it is exercising its own-initiative powers.

18.
EG 8.3.2 provides that the circumstances in which the Authority will consider
exercising its own initiative power as a matter of urgency include where the
information available to it indicates serious concerns about the firm or its business
that need to be addressed immediately (EG 8.3.2(1)).

19.
EG 8.3.3 sets outs out a non-exhaustive list of situations in which the Authority will
consider in exercising its own-initiative power as a matter of urgency. EG 8.3.3(2)
states that the Authority will consider using these powers where it has information
that a firm’s conduct has put it at risk of being used for the purposes of financial
crime, or otherwise involved in crime. EG 8.3.3(4) refers to circumstances
suggesting a serious problem within a firm or with a firm’s controllers that calls into
question the firm’s ability to meet (for an AMI) the conditions of authorisation.

20.
EG 8.3.4 states that the Authority will consider the full circumstances of each case
when it decides whether an urgent imposition of a requirement is appropriate and
sets out a non-exhaustive list of factors which will determine whether the urgent
exercise of the Authority’s own-initiative power is appropriate, including: the
seriousness of the firm’s failings (EG 8.3.4(4)); the risk that the firm may be used
to facilitate financial crime (EG 8.3.4(6); the risk that the firm’s conduct or business
presents to the financial system and confidence in it; the firm’s conduct, including
whether it brought the matter to the Authority’s attention (EG 8.3.4(8)); and the
impact which the use of the Authority’s own-initiative powers will have on the firm’s
business and on its customers (EG 8.3.4(9)).