The FCA's enforcement actions in 2025 sent a clear message to payment firms: weaknesses in systems and controls, particularly those related to financial crime and safeguarding, will attract serious regulatory consequences. Total fines reached record levels, with several high-profile cases involving payment institutions and electronic money institutions. This article analyses the key enforcement themes and provides practical lessons for payment firms.
Record Enforcement Activity in 2025
The FCA's enforcement output in 2025 reflected an intensification of the regulator's approach to payments sector supervision. Multiple payment firms received substantial fines for AML compliance failures, and the FCA used a range of enforcement tools beyond financial penalties — including requirements to appoint skilled persons, restrictions on new business, and voluntary requirement agreements.
The regulator's message is consistent: the payments sector has grown rapidly, and the FCA expects firms' compliance frameworks to keep pace with that growth. Firms that scale their business without proportionately scaling their compliance functions will face consequences.
Key Enforcement Themes
Inadequate transaction monitoring. Several enforcement cases involved payment firms whose transaction monitoring systems failed to identify suspicious patterns. Common failures included monitoring rules that were too narrow to capture relevant typologies, insufficient coverage of high-risk corridors, and failure to tune monitoring parameters as transaction volumes and patterns changed.
Safeguarding deficiencies. The FCA took action against firms where safeguarding arrangements were inadequate — including commingling of safeguarded and operational funds, failure to reconcile on a timely basis, and inadequate documentation of safeguarding account arrangements.
Suspicious activity reporting failures. Firms were penalised for failure to submit SARs in a timely manner, for submitting SARs of inadequate quality, and for failing to identify reportable activity despite clear indicators.
Governance and oversight. Several cases involved governance failures where the board and senior management lacked visibility of compliance risks, where compliance functions were under-resourced, or where risk escalation processes were inadequate.
Senior manager accountability. The FCA is increasingly using SMCR to hold individual senior managers accountable for compliance failures. In several 2025 cases, enforcement action was taken against individuals as well as firms, with personal fines and prohibition orders.
Practical Lessons for Payment Firms
Lesson 1: Transaction monitoring must be dynamic. Static monitoring rules deployed at authorisation and never updated will not meet FCA expectations. Firms must regularly review and tune their monitoring parameters based on changing transaction patterns, emerging typologies, and feedback from SARs and internal investigations.
Lesson 2: Safeguarding is non-negotiable. The FCA's tolerance for safeguarding weaknesses is zero. Firms must ensure continuous compliance with safeguarding requirements, including accurate reconciliation, proper documentation and governance oversight.
Lesson 3: Compliance must scale with business. Firms that grow rapidly without proportionately investing in compliance resources will attract supervisory attention. The FCA expects compliance functions to be adequately staffed, funded and empowered.
Lesson 4: Board visibility matters. Senior management must have clear visibility of compliance risks and must be able to demonstrate active engagement with compliance matters. Board packs should include compliance risk reporting with trend analysis.
Lesson 5: Document everything. In enforcement proceedings, the FCA will request comprehensive documentation. Firms that can demonstrate a clear paper trail of compliance activities, decision-making and risk management are in a significantly stronger position than those that cannot.
What Firms Should Do Now
- Review the FCA's 2025 enforcement decisions relevant to payment firms and conduct a self-assessment against the identified failures.
- Review and test your transaction monitoring framework — are rules current, comprehensive and appropriately calibrated?
- Verify that safeguarding arrangements are fully compliant, reconciled daily and properly governed.
- Ensure the board receives regular, meaningful compliance risk reporting.
- Assess whether your compliance function is adequately resourced for your current scale of business.
Regulatory Counsel advises payment firms on enforcement risk mitigation, compliance framework strengthening and regulatory self-assessment. Contact us for a free initial consultation.
Frequently Asked Questions
AML compliance failures — including inadequate transaction monitoring, weak suspicious activity reporting and insufficient customer due diligence — were the primary cause of enforcement actions.
Yes. Under SMCR, the FCA can take enforcement action against individual senior managers who fail to take reasonable steps to prevent regulatory breaches within their areas of responsibility.
By conducting regular self-assessments against FCA enforcement themes, maintaining dynamic transaction monitoring, ensuring adequate compliance resourcing, and providing the board with meaningful compliance risk reporting.
No. The FCA uses a range of tools including requirements to appoint skilled persons, business restrictions, voluntary requirement agreements and formal warnings, in addition to financial penalties.