The Financial Conduct Authority is now responsible for the regulation of the digital fundraising sector, after a revised piece of European legislation became UK law over the weekend.
As of 13 January, professional digital fundraising and crowdfunding platforms will now need to register with and be regulated by the FCA, after the revised Payment Services Direct (PSD2) came into effect. Civil Society News understands that this development will have no bearing on the Fundraising Regulator's continued efforts to bring digital fundraising platforms within its regulatory scope.
The revised directive is the EU legislation which sets regulatory requirements for firms that provide payment services. PSD2 removes certain exemptions enjoyed under the previous 2009 iteration of the legislation by digital fundraising platforms, as it now draws a distinction between “professional” organisations and those who raise funds “non-professionally and as part of a not-for-profit or charitable activity”, or as volunteers.
In its Guidance on the scope of the Payment Services Regulations 2017, the FCA says that “e-commerce platforms” will be subject to regulation under PSD2 if they are “providing payments services as a regular occupation or business activity and does not benefit from an exclusion or exemption”.
In response to a question in the handbook from an “online fundraising platform which collects donations in the form of electronic payments”, the FCA said that such organisations “do not fall within the exclusion, unless they themselves are carrying this out both non-professionally and as part of a not-for-profit or charitable activity”.
A list of exemptions and exempted organisations can found in the Payment Services Regulations 2017, which made provisions for a “limited number of exempt bodies, notably credit unions and municipal banks” for which the regulations did not apply.
Civil Society News understands that digital giving platforms which have had a turnover of over £30m for three years will be subject to the new regulations. They will pay an annual £5,000 registration fee to the FCA to register with and be regulated by it.
The FCA has a “wide range of enforcement powers – criminal, civil and regulatory” which include: withdrawing a firm’s authorisation, issuing fines against firms and individuals “who breach our rules” and applying to courts for injunctions, restitution orders, winding-up and other insolvency orders.
Fundraising Regulator to work closely with FCA to avoid ‘double regulation’
The Fundraising Regulator has told Civil Society News that it will “continue to work closely with the FCA” to ensure there is no doubling up of regulation, as it continues its own push to get digital giving platforms to register with it.
The Fundraising Regulator spent much of 2017 wrestling with its regulatory remit regarding digital fundraising platforms. Last April, the regulator said it was “assessing” is remit regarding commercial crowdfunding and digital giving platforms, in response to concerns raised about a possibly fraudulent JustGiving page set up in the memory of one of the victims of the Westminster attack.
The regulator subsequently held a joint digital giving summit with the Charity Commission in September before making moves to “update and expand” certain elements of the Code of Fundraising Practice to better cover the activities of commercial digital fundraising platforms in October.
A spokesman for the Fundraising Regulator said: “PSD 2 affects any organisation that is involved in transferring payments from “A to B” and the FCA has a statutory responsibility to regulate, by registering organisations that do this and where required, authorising them to trade. This includes on-line fundraising platforms because, for example, they transfer funds raised by individuals to charities.
“We are working with the platforms and the FCA to make sure that the platforms are registered and authorised before PSD 2 comes into effect on 13 January. With the Charity Commission we are continuing to discuss other aspects of regulation with the platforms, including advice and support to the public, fees and charges, anti-fraud measures and support for the Code of Fundraising Practice before inviting the platforms to join our regulation later in 2018.
“We will continue to work closely with the FCA to make sure there is no double regulation.”
JustGiving and Virgin Money Giving respond
Jo Barnett, executive director of Virgin Money Giving, said: “We welcome the regulation by the FCA of digital giving and fundraising platforms. We will continue to charge the same low donation fee to all our charities, charge no monthly fee and reclaim Gift Aid on their behalf at no extra cost.”
Neil Bannister, managing director of JustGiving, said: “JustGiving is proud to be the first online giving platform to achieve the status of an ‘Authorised Payment Institution’ by our new regulator, the Financial Conduct Authority.
“We have always worked hard to be as transparent as possible with the millions of fundraisers and donors who give via our platform every year, and we hope this will build on the already high levels of trust that our customers have in us and allow us grow the world of giving even further.”