The Finnish Financial Supervisory Authority (FIN-FSA) announced in mid-January that it will investigate the operating models of invoicing service companies to determine if they need to be licensed under the Payment Institutions Act (297/2010). This action follows the FIN-FSA’s discovery that several companies offering employment and related invoicing services as platform services may be acting as payment facilitators without proper authorisation. According to the FIN-FSA, many invoicing service companies act as intermediaries, transferring payments from the buyer to the seller, which involves receiving funds from the purchaser of the work and then transferring these funds to the person performing the work. Such activities may fall under the category of payment services.
The provision of payment services involves stringent regulations concerning the organisation of activities. These include the obligation to safeguard client funds, typically fulfilled by depositing client funds in a client funds account within a credit institution. Additionally, payment service providers must adhere to requirements related to the prevention of money laundering and terrorist financing, management of operational risks, compliance & internal revision, and ensuring the fitness and propriety of company management.
In the coming weeks, the FIN-FSA will reach out to invoicing service companies operating in the Finnish market with a request for clarification. The FIN-FSA’s actions are part of a broader regulatory landscape influenced by European directives such as the PSD2 and the NPL Directive, as well as interpretations by the European Banking Auhtority’s (EBA). The EBA has already in 2022 indicated that debt collectors and invoicing service firms could fall within the scope of payment service regulation (Question ID 2020_5216). Specifically, it stated that the receipt and forwarding of funds qualifies as a payment service (such as money remittance or execution of payment transactions depending on the design of the services and the contractual agreements) according to the PSD2. This means that entities involved in such activities may require appropriate authorisation, adding a layer of regulatory compliance.
Similarly, the new government proposal 208/2024, which implements the NPL Directive in Finland, underscores the increasing regulatory scrutiny on certain financial service providers. The proposal briefly mentions that invoicing services can be considered payment services requiring a license if they involve the receipt of funds for onward transmission.
Invoicing service companies must now carefully evaluate their operating models to ensure compliance with the Payment Institutions Act and other relevant regulations. The FIN-FSA’s request for clarification serves as a reminder of the importance of regulatory adherence and the potential consequences of non-compliance, which, in the worst case, could mean the suspension of the business in its current form. Companies may need to either modify their invoicing services / business model or apply for a license or registration with the FIN-FSA to provide payment services and implement robust compliance measures to meet the stringent legal requirements.
If you are concerned about how this may affect your business, our Financial Regulatory team at Waselius is always ready to assist you with compliance analysis, service re-design and the potential license application process and any other questions related to payment services you may have.