This Week in Compliance Vol. 13

What's been occupying our compliance attention lately? Here's a rundown of notable updates in the world of payments from the past weeks.

UK to Scrap Payment Systems Regulator

The UK Government has announced plans to scrap the Payment Systems Regulator (PSR), aiming to simplify the regulatory environment and accelerate economic growth. Under the new proposal, the PSR’s responsibilities will be consolidated into the Financial Conduct Authority (FCA), eliminating one of the three regulatory touchpoints for payment firms. This move comes in response to longstanding industry complaints about regulatory complexity and rising compliance burdens. The PSR will retain its statutory powers until formal legislation is enacted, with transitional steps already underway to align leadership roles and operations between the PSR and FCA.

While government officials and some industry voices have welcomed the decision as a step towards fostering innovation, others have questioned the practical impact of the change. Critics suggest the closure is largely symbolic, given the PSR’s existing ties to the FCA. Nonetheless, the move is part of a wider government initiative to overhaul regulatory bodies perceived as hindrances to business and growth—signaling a new era of streamlined oversight in the UK financial services landscape.

Senate Votes to Block CFPB Oversight of Big Tech Payment Apps

The U.S. Senate has voted to repeal a Consumer Financial Protection Bureau (CFPB) rule that would have brought Big Tech firms like Apple, Google, PayPal, and X under the bureau’s supervision for their digital payment services. The move, led by Republican Senators Pete Ricketts and Mike Flood, still requires approval from the House of Representatives but signals a strong pushback against expanding regulatory oversight to tech giants entering the financial services space.

Critics of the CFPB rule argue it imposes a “one-size-fits-all” framework and could hinder innovation, while supporters claim it’s a necessary step to ensure consumer protection and a level playing field with traditional financial institutions. The vote comes amid a broader rollback of CFPB activities under the Trump administration, with notable legal cases dropped and increased scrutiny over Elon Musk’s influence through the Department of Government Efficiency (DOGE), particularly in light of X’s and Tesla’s growing financial services interests.

CFPB to Withdraw BNPL Credit Card Rule

The Consumer Financial Protection Bureau (CFPB) is preparing to revoke its interpretive rule that sought to regulate "pay-in-four" Buy Now, Pay Later (BNPL) products like traditional credit cards. The rule, which would have extended consumer protections such as chargeback rights and dispute resolution to BNPL transactions, faced immediate pushback from the Financial Technology Association (FTA), which filed a lawsuit claiming the rule exceeded the CFPB’s authority and failed to follow proper rulemaking procedures.

In a joint court filing this week, the CFPB and FTA requested a stay of the case, indicating the Bureau’s intent to withdraw the rule—effectively rendering the legal challenge moot. The move is part of a broader trend under acting Director Russell Vought, who has overseen a significant rollback of CFPB activities, including dropping high-profile lawsuits against major banks and scaling back enforcement actions across the payments sector.

Block Fined $40M for AML and Crypto Compliance Failures

Block Inc. will pay a $40 million penalty to the New York Department of Financial Services (NYDFS) following a regulatory investigation that uncovered major deficiencies in its anti-money laundering (AML) and virtual currency compliance program on the Cash App platform. The company was found to have critical gaps in customer due diligence, weak risk-based controls, and a failure to adequately monitor transactions.

NYDFS cited Block’s mishandling of high-risk Bitcoin activity, noting that lack of oversight enabled largely anonymous transactions to bypass proper scrutiny. A surge in user growth between 2019 and 2020 also led to a backlog of unreviewed alerts, which went unresolved for an extended period. Alongside the financial penalty, Block has agreed to appoint an independent monitor to assess its compliance practices and oversee corrective actions. Regulators emphasized the need for compliance systems to scale with business growth to maintain financial integrity and consumer trust.

ECB Renews Push for EU Digital Payments Independence

The European Central Bank (ECB) has reiterated its call for a sovereign European digital payments ecosystem, aiming to reduce reliance on dominant foreign players such as Visa, Mastercard, PayPal, and Alipay. The ECB supports the development of a Europe-controlled payments solution that ensures data protection, retains value within the region, and strengthens long-term economic resilience. This ambition is closely tied to the European Commission’s broader Capital Markets Union initiative, which could unlock up to €3 trillion in value and drive innovation across the financial sector.

However, significant obstacles remain. Low interchange fees, high infrastructure costs, limited consumer adoption, and the need for deep political coordination across member states make the creation of an alternative particularly challenging. Amid rising geopolitical tensions and growing trade friction with the US, the urgency of securing Europe’s digital financial independence has become more pronounced, positioning payments sovereignty as a key pillar of the EU’s economic future.

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