Firms that are excluded from regulation

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Some firms that operate in or around payments may fall outside the scope of authorisation or registration under the Payment Services or Electronic Money Regulations because their activities are exempt or excluded. Common examples include firms relying on the limited network exclusion or the commercial agent exclusion, as well as other exclusions set out in the regulations. 

Whether a firm genuinely qualifies as exempt or excluded depends on the detailed facts of its business model, contractual arrangements and how services operate in practice. Getting this analysis wrong can expose firms to significant regulatory, commercial and banking risk.processes, and increase profitability.

The Financial Conduct Authority expects firms relying on an exemption or exclusion to be able to clearly demonstrate that the legal conditions are met on an ongoing basis. This includes having a precise understanding of how the business operates, how money flows, who the firm is acting for, and whether any thresholds or notification requirements apply. The FCA will also expect firms to monitor whether changes to the business, customer base or regulatory rules affect their status. Importantly, even where a firm is excluded, banks and counterparties will typically still require robust AML controls, governance and clear evidence of the firm’s regulatory position.

We help firms analyse their business model to determine whether an exemption or exclusion applies and, if so, which specific exemption is most appropriate. 

We prepare regulatory submissions and notifications to the FCA where required and produce clear legal opinions and supporting documentation for customers, banks and commercial partners. 

We also provide ongoing AML support, recognising that effective AML frameworks are still expected even for excluded firms, and deliver periodic attestations and horizon scanning to ensure the firm’s regulatory position remains valid as rules, guidance or the business itself evolves.