The Bank of England says it has fined the paytech “in respect of a compliance failure under section 196 of the Banking Act 2009”.
UK paytech Vocalink has been fined £11.9 million by the Bank of England, marking the first time the central bank has fined a financial market infrastructure firm.
The Bank of England says it has fined Vocalink “in respect of a compliance failure under section 196 of the Banking Act 2009”.
In a news release posted to its website on 9 July, the Bank of England states: “Vocalink was required by the Bank to remediate a number of identified systems and controls issues via a direction issued under section 191 of the Act”.
The central bank’s statement continues: “Vocalink implemented a remediation programme in response and had until 28 February 2022 to comply with the Direction’s requirements. However, an ineffective risk management framework, combined with weaknesses in its controls, governance arrangements and escalation processes meant that it failed to comply in full with the Direction’s requirements by the deadline.”
The Bank of England claims that its investigation “identified the root cause of Vocalink’s non-compliance was the failure to have in place a sufficiently integrated risk management framework for the remediation programme”.
“This would have ensured that risks facing the programme could be properly understood, monitored and shared amongst the three lines of defence (and external assurance providers),” the central bank says.
The Bank of England’s statement continues: “It also found there were failures to escalate key risks and information to senior committees, which undermined the firm’s ability to fully comply with the direction. The bank considers Vocalink’s governance arrangements fell below the standards expected of a financial market infrastructure firm.”
Vocalink’s infrastructure is currently used to power the UK’s real-time payment, batch payment and cheque image clearing systems, and is described by the Bank of England as “critical to the functioning of financial markets and the economy”. The firm is the result of the 2007 merger of payment services companies Voca and LINK Interchange Network, the UK’s ATM network. The combined entity was acquired by Mastercard for $920 million (around £700 million) in 2017.
“Vocalink fell short of its obligation to have adequate risk management and governance arrangements when responding to the Bank’s Direction,” comments Sarah Breeden, deputy governor for financial stability at the Bank of England. “Its failure to comply with that Direction in full has resulted in a significant fine,” she adds.
The Bank of England says that Vocalink has “invested significantly in remediating the issues which led to both the direction being issued and the subsequent compliance failure”.
The central bank adds: “Vocalink’s cooperation throughout the investigation, including the early admission of a compliance failure, resulted in a 15% reduction to the penalty. Vocalink agreed to resolve the matter and therefore qualified for a further 30% reduction in the fine. Without these reductions, the fine imposed by the Bank would have been £20,000,000.”
In a statement sent to FinTech Futures, a Vocalink spokesperson says: “We are pleased to resolve this matter which related to issues identified in 2020. Since then, we’ve delivered a number of improvements, as recognised in the Bank’s final notice. The historic issues related to internal systems and controls and had no impact on the service we delivered to the UK’s consumers and businesses.”
Source: https://www.fintechfutures.com/
