Nvayo Limited v The Financial Conduct Authority

Under Rule 5(5) of the Tribunal Procedure (Upper Tribunal) Rules 2008, suspension of an immediately effective regulatory notice requires the Tribunal first to be satisfied that suspension would not prejudice the protected persons or interests. Only then does a discretionary balancing exercise arise.

The applicant bears the burden and must provide sufficiently detailed evidence that it can operate in a broadly compliant way pending the substantive reference. Fairness and the overriding objective inform the Rule’s interpretation, but do not create a presumption that a regulated firm may continue trading.

In an anti-money-laundering context, protected persons may include the public generally. Serious unresolved concerns about ownership, safeguarding arrangements, anti-money-laundering controls, customer redemptions, or an orderly wind-down can prevent the statutory precondition from being met.

Nvayo Limited was an authorised electronic-money institution. The Financial Conduct Authority issued supervisory notices which took immediate effect. They restricted new business, customer redemptions unless a Skilled Person found the relevant file adequate from an anti-money-laundering perspective, and dealings with Nvayo’s own assets.

The notices followed the arrest of Nvayo’s ultimate beneficial owner on United States criminal charges, concerns about Nvayo’s remaining safeguarding bank account, and the Authority’s review of ten high-value or high-volume customer files. The review identified deficiencies in risk assessment, due diligence, enhanced due diligence and ongoing monitoring.

Nvayo referred the notices to the Upper Tribunal and applied under Rule 5(5) of the Tribunal Procedure (Upper Tribunal) Rules 2008 to suspend the requirements pending determination of those references. The issue was whether the Tribunal could be satisfied that suspension would not prejudice the persons intended to be protected by the notices.

1. Application refused. The precondition in Rule 5(5) was not met. The Tribunal could not be satisfied that suspending any of the relevant requirements would avoid prejudice to the persons intended to be protected.

2. The applicable framework had three stages: whether there was a case to answer; whether the Tribunal could be satisfied that suspension would not cause the specified prejudice; and, only if that condition were met, whether a discretionary balancing exercise justified suspension. Fairness and the overriding objective informed the construction of the Rule but did not displace its threshold condition or create a starting presumption that the firm should trade normally.

3. The applicant bore the burden of showing an absence of relevant prejudice and had to provide detailed, relevant evidence of how it would operate in a broadly compliant way before the substantive hearing. Detailed evidence did not necessarily mean voluminous evidence.

4. Suspending the restriction on new business could prejudice future consumers. The ultimate beneficial owner remained in place despite serious, unresolved criminal allegations relating to money transmission and, in part, to Nvayo. His removal from management did not address his status as owner for the fit-and-proper requirements of the Electronic Money Regulations 2011. Further, Nvayo’s sole remaining safeguarding account was due to close, without a firm evidential basis for concluding that it would be retained or replaced.

5. Suspending the restriction on redemptions could prejudice the public at large, who were protected in the anti-money-laundering context. The deficiencies identified in the selected high-value or high-volume files, including missing identity verification, risk assessments and source-of-funds or source-of-wealth information, were fundamental rather than merely administrative. Nvayo had not supplied sufficiently detailed evidence that its remediation would identify and rectify such deficiencies before payment.

6. The restriction on Nvayo’s own assets also remained necessary. The possible loss of safeguarding facilities created an impending risk of wind-down. The Tribunal could not be satisfied that lifting the restriction would leave sufficient resources for an orderly return of safeguarded customer funds.

This was an application in the Upper Tribunal to suspend immediately effective requirements imposed by supervisory notices pending determination of Nvayo’s consolidated references. No prior judicial decision is stated in the judgment.