ModConnect Quarterly Round Up 1 2025
Top pick this month
- Compliance updates
- API Update | CDD information fields
- CDD Sampling process updates
- FCA Safeguarding regime
API Update - Client Due Diligence
We’ve updated our Create and Edit Customer APIs to enhance the way in which we capture CDD information for our Introduced Customers. Additional fields are available for Partners to share information on their customers, such as the nature of the relationship and expected transactional activity, which will enhance the data used by our Monitoring teams, enabling us to streamline our interactions regarding alerts. Details of these fields are available in our readme.
These fields are now available for all partners. We are working on usage of these fields with our Outsourced partners in Europe initially, and will provide updates in due course on plans to roll out more widely.
CDD Sampling changes
For partners to whom we outsource the introduced customer onboarding process, or do so under their own regulatory permissions, we periodically request samples to monitor performance of this process. As part of our regular review of policies and procedures, we've made some enhancements to our KYC/KYB sampling selection for those partners.
What will this mean for in scope partners?
- From April onwards, your Oversight Analyst will request samples of existing customers on whom CDD refresh has been conducted, as well as recently onboarded customers. This will enable us to sample initial and ongoing CDD processes.
- Your Oversight Analyst may request a larger numbers of samples on a regular basis. This will mainly apply to partners operating higher volume consumer programmes and will ensure our sampling continues to be proportionate to scale.
Partner Management Information - reminder to submit
Our Partner Platform model requires regular Management Information submissions through a template provided by the Oversight Analyst. This information allows us to monitor the performance of the activities, such as financial crime controls, that we outsource to our partners, which helps inform our engagement with our Partners. We greatly appreciate and value the continued co-operation of our Partners in providing the rolling schedule of Management Information and additional data requests. So we can keep providing a high level of service and engagement please ensure your Management Information is submitted to us by the 10th of each month due.
FCA Safeguarding Regime Changes
In December 2024 the FCA closed the consultation period for a paper on rules and guidance for the interim and end state stages of their proposed safeguarding regime. This guidance is intended to improve firms' compliance with the existing safeguarding requirements set out in the Electronic Money Regulations and Payment Services Regulations.
The regulatory changes are to enhance and clarify the industry approach covering the following key areas:
- Minimising shortfalls in safeguarded relevant funds
- Ensuring these funds are returned as cost-effectively and quickly as possible
- Strengthening the FCA’s ability to identify and intervene in firms that do not meet expectations
As an Electronic Money Institution, Modulr complies with this regime. As mentioned in last month's update, we have recently updated our safeguarding documentation for both our UK and EEA Partners accordingly. All Partners should link to the page relevant to their jurisdiction in their website footer so it is available to our introduced customers, and enabling us to ensure it is always up to date. Please reach out to your Oversight Analyst if you have any questions.
FAO partners using Modulr VISA cards: Introducing VISA's Fraud Reporting and Control Program (FRECOP)
Starting April 2025, VISA will launch its Fraud Reporting and Control Program (FRECOP), aimed at identifying under-reported fraud types and establishing new reporting signals. Effective April 12, VISA will update its rules to introduce the FRECOP fee for issuers that inaccurately report fraud.
This means that issuers deemed to be under-reporting fraud based on their card usage will incur a fee. It is therefore crucial that all instances of card fraud are promptly reported to Modulr, even in situations where chargeback rights may not exist.
Please email all instances of card fraud to compliance@modulrfinance.com, including details such as transaction information and how the fraud was detected.
Improved fraud reporting across the industry will enable VISA to enhance their fraud models, such as VAA and VCAS, ultimately helping to prevent fraud going forward.
In the news: Motor Finance Commission Complaints
A UK Court of Appeal judgement in October 2024 in 3 motor finance cases# determined it was unlawful for the car dealers to receive a commission from lenders providing motor finance without first informing and getting consent from the customer. Recognising that UK firms who provide motor finance are likely to receive a high volume of complaints in response to this judgement, the FCA has recently extended the time firms have to respond to such complaints to 4th December 2025.
The case has broader implications for the lending sector, setting out an expectation of transparency around commissions paid to intermediaries when providing credit to consumers. We would ask clients who may be affected by this situation: either through connection to motor finance or more broadly through provision of credit, to be aware of the outcomes of the case and consider potential impacts on your business. Further details can be found here and please feel free to reach out to your Oversight Analyst if you have any questions.
In the news: APP Fraud
UK finance has urged firms to be extra vigilant in the period leading up to the end of the UK tax year, as the increased value and volume of payments being made in some businesses creates opportunities for criminals to exploit. In particular firms should ensure they protect themselves against invoice and mandate scams. The Take Five to Stop Fraud tool is a free training tool that could help your business, or your introduced customers, protect against fraud.