The Central Bank has fined BlueSnap Payment Services Ireland more than €300,000 for safeguarding failures and stressed again to the sector that it will have “no tolerance” for breaches of payment regulations.
The fine, totalling €324,240, was issued by the financial regulator after BlueSnap was found to have breached requirements of the 2018 European Union (Payment Services) Regulations between January 2021 and December 2022.
“BlueSnap failed to comply with its safeguarding obligations, which exposed its customers to significant risk, and failed to inform the Central Bank promptly of changes to the accuracy of the information it provided in its application for authorisation,” said Seána Cunningham, director of enforcement and anti-money laundering for the Central Bank
BlueSnap was authorised by the Central Bank as a payments institution in December 2020. The company provides “merchant acquiring services”, allowing its customers – businesses that sell products and services online – to accept payments.
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When an online sale is made by one of BlueSnap’s customers, BlueSnap should collect the money, hold it securely in a segregated bank account and then pay it onwards to the customer’s bank account.
But BlueSnap did not deposit its customers’ funds in its designated safeguarding account and it mixed its customers’ funds with other funds.
The company also delayed informing the Central Bank once it became aware that it was not following the safeguarding procedures that it had set out to the Central Bank in its application for authorisation.
The regulator said the failings arose due to “deficiencies in regulatory awareness and understanding of reporting requirements, in addition to inadequate oversight and monitoring” by BlueSnap.
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The company has admitted the breaches and agreed to the undisputed facts set out in the settlement notice. It has also confirmed to the Central Bank that it has remediated the safeguarding failures.
The Central Bank determined that sanctions comprising a reprimand and monetary penalty in the amount of €463,200 were warranted. The application of a 30 per cent settlement scheme discount brings the amount down to €324,240. The sanctions have been accepted by BlueSnap and are subject to confirmation by the High Court.
In a statement, Massachusetts, US-headquartered BlueSnap said the breaches related to “issues that arose in the early stages of our business in Ireland” and that these had been “fully resolved” since December 2022.
“In that time, we have invested significantly to expand our European resources on the ground in Ireland and enhance our systems and processes to comply with the complex requirements of EU safeguarding legislation.”
The regulations state that payment institutions must hold customers’ money securely for the duration of those transactions in a segregated bank account established for the sole purpose of holding funds, or have an insurance policy or comparable guarantee in place for an amount equal to the funds being held.
Customer funds must always be identified and clearly segregated from the firm’s own funds or funds of other group entities and their customers.
The aim is to protect customers’ funds pending a payment being made and to ensure that if a firm becomes insolvent, funds are available to be returned fully and promptly.
This is “particularly important” as there is no compensation or deposit protection scheme for the payment and e-money sector, the regulator noted.
“The Central Bank has repeatedly communicated to the sector that it has no tolerance for weaknesses in safeguarding arrangements,” it said.
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