If you are searching for a money transfer service as a customer in the UK or if you are using a UK based provider, it is likely that you will come across the term 'FCA regulated'. Understanding what this means is essential in order to make an informed choice about selecting your international money transfer provider. FCA regulated is a quick check that shows the provider is a legitimate company deemed able to provide the services it offers. We highlight this within our comparison table on FXcompared.

The FCA (Financial Conduct Authority) is one of the UK’s independent financial regulators, having replaced the Financial Services Authority in 2013. Independent of the government, it has the power to make and enforce rules and regulation designed to protect consumers through encouraging best practice and competition between financial firms, and to ensure the stability of the financial sector. (The other regulator, the Prudential Regulation Authority, part of the Bank of England, is responsible for ensuring the safety and financial soundness of financial institutions such as banks, building societies, insurers, and investment firms, and not oversee other services such as money transfer). The full set of the FCA’s rules is publicly available in its Handbook of Rules and Guidance.

Protection for Customers

The main purpose of regulating any industry is to ensure its stability and efficient functioning, as well as to protect customers in the event of any difficulty of - or wrongdoing by - companies within it. So what does this mean for the financial sector in in general, and money transfer operators in particular?

Different regulations apply to different areas within the financial industry, the strictest being for institutions such as banks which take deposits and make loans. Money transfer operators and foreign exchange brokers fall under the classification of money remitters.

Money remitters are defined as firms that simply facilitate the movement of money that is not paid into an account nor an investment product; rather, they simply transfer money from one account to another (in this case, in a foreign currency), a service for which they may take a fee. To be regulated, money remitters need to maintain a certain level of capital if their turnover exceeds EUR3m a month, meet rules on fair pricing, meet time requirements on executing transfer orders, and maintain extensive mechanisms for deterring and detecting money laundering and other financial crime.

These requirements aim to encourage good customer service. The most important regulations dealing with customer protection are the requirement for all transactions over £50 to be both insured and to be held in segregated accounts. This means that any money you send through a money provider must not be mixed with the company’s own, protecting your money in the event that the company goes bust.

Regulatory compliance, including good customer service and honest business practice are encouraged by the threat of fines. Customers unhappy with the level of service they receive from any financial institution can complain to the FCA as well as the Financial Ombudsman Service, a dispute resolution service, and the Office of Fair Trading. If a money transfer operator goes bust, then you may also be entitled to compensation.

Geographical Scope of the FCA

Consumers and businesses should bear in mind that the FCA's scope only extends to brokers in the UK, so when it comes to sending money from a broker based in another country, it is important to ensure that foreign companies are regulated by the appropriate body in their own country. A financial services firm registered in another European Economic Area (EEA) country may be entitled to offer services in the UK through the ‘passport’ scheme, but will not be FCA regulated. Firms registered in a country outside of the EEA may also operate in the UK, but these will need to be FCA regulated. All firms must state where they are regulated and display the regulator’s logo.

Given the protection afforded to customers, it is essential to establish that the money transfer operator you are considering is FCA regulated. All UK-registered money transfer providers/partners featured on FXcompared have been carefully vetted and selected and are fully regulated by the FCA, and so can be found on the FCA Register.

In recent years, international money transfer services have grown in popularity, becoming especially popular with expatriates, international students, wealthy investors and anyone looking to get a better deal on money transfers than previously received from their banks. While no longer a niche market, the operators and providers are not household names in the same way that banks are, so the issue of trust has arguably become just as important as that of high-quality customer service.