FINAL NOTICE

ACTION

1.
By an application dated 29 January 2019 (the “Application”) Awesome3 Limited
(“Awesome3”) applied under Regulation 13 of the Payment Services Regulations
2017 (the “PSRs”) for registration as a small payment institution (“SPI”).

2.
For the reasons set out below, the Authority has refused the Application because
Awesome3 does not meet the conditions for registration as an SPI contained in
Regulation 14 of the PSRs.

SUMMARY OF REASONS

3.
For the reasons set out below, the Authority considers that Awesome3 does not
meet the conditions for registration as an SPI set out in Regulation 14 of the PSRs;
in particular, the Authority considers that Awesome3 does not meet the conditions
set out in Regulations 14(7) and 14(10). These conditions respectively provide that
the applicant must satisfy the Authority that its directors possess appropriate
knowledge and experience to provide payment services, and that the applicant’s
head office, registered office or place of residence must be in the United Kingdom.

4.
Awesome3 is owned by Angela Nkomo (“Mrs Nkomo”), who appears to be the firm’s
controller and is one of its two directors. The other director is Sanelisiwe Ndlovu

(“Ms Ndlovu”). Mrs Nkomo also submitted and signed the Application on behalf of
Awesome3.

5.
In summary, the Authority considers that the conditions set out in Regulations
14(7) and 14(10) of the PSRs are not met for the following reasons:

i.
Awesome3 does not satisfy the condition set out in Regulation 14(7) because
the individual who is proposed to be the UK-resident director responsible for
oversight of day-to-day operations, Ms Ndlovu, does not possess the
appropriate knowledge and experience to oversee payment services activities.

ii.
Awesome3 does not meet the condition set out in Regulation 14(10) because
of the overseas domicile of one of the firm’s two directors, Mrs Nkomo, who
also appears to be the firm’s controller. The Authority therefore considers that
it is unlikely that in practice any material business decisions will be taken in the
UK.

6.
For these reasons, Awesome3 has not met the conditions for registration in
Regulations 14(7) and 14(10) and the Authority has decided to refuse the
Application.

7.
By its Warning Notice dated 14 November 2019 (the “Warning Notice”) the
Authority gave notice that it proposed to refuse the Application and that Awesome3
was entitled to make representations to the Authority about that proposed action.
Awesome3 made various written representations which the Authority took into
account.

8.
By reason of its Decision Notice (“the Decision Notice”) dated 6 February 2020, the
Authority gave Awesome3 notice that it had decided to refuse the Application.

9.
Awesome3 had 28 days from the date the Decision Notice was given to refer the
matter to the Upper Tribunal. No referral was made to the Upper Tribunal within
this period of time or to date.

10. Under section 390(1) of the Act (which applies by reason of paragraph 10 of
Schedule 6, Part 1 of the PSRs 2017), the Authority, having decided to refuse the
Application and there having been no reference of that decision to the Tribunal,
must give to Awesome3 this Final Notice of its refusal.

DEFINITIONS

11. The definitions below are used in this Final Notice.

“the Act” means the Financial Services and Markets Act 2000 (as modified and
applied by the PSRs)

“the Application” means the application by Awesome3 dated 29 January 2019 for
registration as a small payment institution

“the Approach Document” means the December 2018 version of the document
published on the Authority’s website at the time of the Application, titled
“Payment Services and Electronic Money – Our Approach”, which describes the
Authority’s role under the PSRs and the Electronic Money Regulations 2011

“the Authority” means the body corporate previously known as the Financial
Services Authority and renamed on 1 April 2013 as the Financial Conduct
Authority

“Awesome3” means the applicant firm, Awesome3 Limited

“Mrs Nkomo” means Mrs Angela Nkomo

“Ms Ndlovu” means Ms Sanelisiwe Ndlovu

“MtR” means the letter from the Authority to Mrs Nkomo dated 9 July 2019 which
stated that it was minded to refuse the Application

“MtR Response” means Awesome3’s response dated 15 July 2019 to the
Authority’s MtR

“the PSRs” means the Payment Services Regulations 2017

“the RTC” means the Regulatory Transactions Committee of the Authority

“the RDC” means the Regulatory Decisions Committee of the Authority (see
further under Procedural Matters below)

“SPI” means small payment institution as defined in the PSRs 2017

“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber)

“the Warning Notice” means the warning notice given to Awesome3 dated 14
November 2019

“the Decision Notice” means the decision notice given to Awesome3 dated 6
February 2020

Details of the regulations and the Authority’s guidance relevant to this Notice are
set out in Annex A.

FACTS AND MATTERS

12. Awesome3 was incorporated on 22 January 2019. It appears to be owned and
controlled by Mrs Angela Nkomo who is a director. Ms Sanelisiwe Ndlovu is also a
director of Awesome3 and was appointed on 25 March 2019.

13. Awesome3 applied for registration as an SPI on 29 January 2019. The Application
contained an application form, a PSD Individual form and curriculum vitae for Mrs
Nkomo. Mrs Nkomo was and remains Awesome3’s primary contact in respect of the
Application and signed the accompanying declaration.

14. Mrs Nkomo is permanently resident of, and intends to continue to be located in,
South Africa. The Authority raised this as a concern with Mrs Nkomo in light of the
requirement set out in Regulation 14(10) of the PSRs that SPIs have their head
office, registered office or place of residence in the UK. On 9 April 2019, Mrs Nkomo
submitted additional documents for consideration as part of the Application. These
included a PSD Individual Form for Ms Ndlovu. Notwithstanding Ms Ndlovu's UK
citizenship and residency, the additional information submitted revealed her
professional background to be in nursing and no evidence of relevant previous
experience in payment services was provided. The Authority therefore was not
satisfied that Ms Ndlovu possessed appropriate knowledge and experience to
provide payment services, as is required by Regulation 14(7) of the PSRs.

15. This concern was communicated by the Authority to Mrs Nkomo on 12 April 2019.

16. Mrs Nkomo responded on 15 April 2019. She stated that the money remittance
service was incidental to the business and may never materialise in any event, and
that she had expected the authorisation decision to be put on hold until Awesome3
intended to undertake such a service. She also indicated that she would consider
withdrawing the Application but enquired whether a refund of the Application fee
would be issued in these circumstances.

17. The Authority responded on the same day. It explained that, as is stated on the
Authority's website and in the Approach Document, application fees are non-
refundable. Mrs Nkomo replied that as no refund would be issued, she would not
withdraw the Application.

18. On 9 July 2019, the MtR was sent to Awesome3. The MtR explained that, as a
result of its concern that Awesome3 was not meeting the conditions set out in
Regulations 14(7) and 14(10) of the PSRs, the Authority was minded to recommend
that the Application be refused.

19. Mrs Nkomo provided Awesome3's response to the MtR on 15 July 2019. The MtR
Response repeated that the money remittance service may not materialise,
conceded that Ms Ndlovu does not have "a financial training background and
experience in internal controls relating to financial services" and offered to address
the gaps in Ms Ndolvu's knowledge of payment services by her completing a short
course on anti-money laundering. Mrs Nkomo requested that the Application be
held in abeyance in the meantime.

20. The Authority responded on 17 July 2019, stating that the proposed training of Ms
Ndlovu would not address the shortcomings set out in its MtR and that it would not
be possible to 'hold' the Application, as applicant firms are expected to be ready,
willing, and organised to carry on regulated activities before applying to the
Authority. To carry out the money remittance activity, the Authority would expect
those responsible for the payment services of the firm to have appropriate
knowledge and experience of making payments, including Know Your Customer and
Anti-Money Laundering checks, through the appropriate use of due diligence tools.
The Authority would also expect an appropriate level of understanding of relevant
legislation governing the activity of money remittance.

21. Mrs Nkomo responded to the Authority on 19 July 2019, stating on behalf of
Awesome3 that the Application would not be withdrawn.

THE AUTHORITY’S CONCERNS WITH THE APPLICATION

22. The regulatory provisions relevant to this Final Notice are referred to in Annex A.

23. Pursuant to Regulation 14(1) of the PSRs, the Authority may refuse an application
for registration as an SPI only if any of the conditions set out in paragraphs (2) to
(11) of Regulation 14 are not met. The Authority is of the view that Awesome3
does not meet the conditions set out in Regulations 14(7) and 14(10) for the
reasons set out below.

Regulation 14(10) - Location of Mind and Management of the Applicant

24. The PSRs require applicants applying for registration as an SPI to have their head
office, registered office or place of residence based in the UK. The Approach
Document further expands on this requirement, stating that the key issue in

identifying the head office of a firm is the location of its central management and
control. According to the Approach Document, that is the location of the directors
and other senior managers who make key decisions on the firm's direction and
material management decisions on a day-to-day basis.

25. In its original submission on 29 January 2019, Awesome3 provided only one PSD
Individual Form, which was for Mrs Nkomo, who appears to be the sole owner and
controller of Awesome3. Mrs Nkomo is a South African citizen and a permanent
resident in South Africa. This did not meet the requirement for a firm's central
management and control to be based in the UK and was addressed in the Authority's
correspondence with Awesome3.

26. In response to these concerns, an additional PSD Individual Form was submitted, for
Ms Ndlovu. Whilst Ms Ndlovu is a UK citizen and is resident in the UK, this does not
allay the Authority's concern that the majority of material management decisions will
be taken by Mrs Nkomo in South Africa.

27. Mrs Nkomo appears to be the owner and controller of Awesome3, was the original
applicant and continues to be the main contact for all correspondence with the
Authority. The Authority considers that it is unlikely that in practice any material
business decisions will be taken in the UK by Ms Ndlovu.

28. Further, the UK-based director, Ms Ndlovu, who was appointed to address this issue,
clearly lacks the relevant knowledge and experience required to provide payment
services, which further heightens the Authority's concern that the key management
decisions will be taken by Mrs Nkomo in South Africa.

Regulation 14(7) – Lack of Knowledge and Experience of Payment Services

29. In considering an application for registration as an SPI, the Authority must be
satisfied that the applicant firm's directors possess the appropriate knowledge and
experience to provide payment services.

30. Ms Ndlovu has been put forward by Awesome3 for consideration as its UK-based
director, to meet the head office requirement set out in Regulation 14(10) of the
PSRs. The PSD Individual Form for Ms Ndlovu stated that Ms Ndlovu's key duties and
responsibilities would be "day to day management of operations of the company in
the UK; marketing the services of the business to clients in the UK; client
management; liaison with authorities and regulators in the UK; and compliance and
risk management”.

31. The Authority considers that Ms Ndlovu does not have the relevant experience,
qualifications or knowledge required to provide payment services. Ms Ndlovu has a
nursing background and her employment during the previous five years had been as
a nurse. No evidence has been provided of any previous experience or knowledge of
payment services activities nor of any experience or qualifications that would provide
Ms Ndlovu with relevant transferable skills on which she can draw to perform her
role. After these concerns were explained in the MtR, Mrs Nkomo conceded in the
MtR Response that Ms Ndlovu lacked the "requisite knowledge, experience and skills
required by the SPR 2017" [sic] and proposed to have Ms Ndlovu attend a "short
course on anti-money laundering" to address her knowledge gap. The Authority
considers that this does not address the issues raised as Ms Ndlovu would still lack
the required experience in carrying out payment services or similar activities. A copy
of Ms Ndlovu's curriculum vitae obtained later by the Authority confirms this.


32. The Authority is also concerned by Awesome3's responses in relation to the status
of its service to provide money remittance and repeated requests for the Application
decision to be put on hold until such time as it intends to undertake this service.
This strongly suggests that Awesome3 is not yet ready, willing and organised to carry
out regulated activities.

CONCLUSION

33. For the reasons set out above, the Authority has concluded, having regard to all of
the circumstances, that Awesome3 does not meet the conditions for registration as
an SPI, and so has refused the Application.

REPRESENTATIONS

34. Annex B contains a brief summary of the key representations made by Awesome3
and how they have been dealt with. In making the decision which gave rise to the
obligation to give this Notice, the Authority has taken into account all of the
representations made by Awesome3, whether or not set out in Annex B.

IMPORTANT NOTICES

35. This Final Notice is given to Awesome3 Limited under section 390(1) of the Act (as
applied by paragraph 10 of Schedule 6, Part 1 of the PSRs 2017).

36. By reason of paragraph 10 of Schedule 6, Part 1 of the PSRs 2017, sections 391(4),
391(6) and 391(7) of the Act apply to the publication of information about the matter
to which this Final Notice relates. Under those provisions, the Authority must publish
such information about the matter to which this Final Notice relates as the Authority
considers appropriate. The information may be published in such manner as the
Authority considers appropriate. However, the Authority may not publish information
if such publication would, in the opinion of the Authority, be unfair to Awesome3 or
prejudicial to the interests of consumers or detrimental to the stability of the UK
financial system.

37. The Authority intends to publish such information about the matter to which this
Final Notice relates as it considers appropriate.

38. For more information concerning this matter generally, contact James O’Connell,
Senior Manager, Retail Authorisations Department at the Authority (direct line: 020
7066 0328 / email: james.oconnell@fca.org.uk.

Hilary Bourne
On behalf of the Regulatory Transactions Committee

ANNEX A -REGULATORY PROVISIONS RELEVANT TO THIS FINAL NOTICE

The Payment Services Regulations 2017

1. Regulation 9 (as applied by regulation 14 for registration as an SPI) provides that
if the Authority “proposes to refuse an application or to impose a requirement it
must give the applicant a warning notice”.

2. Regulation 13(1) requires an application for registration as a SPI must contain, or
be accompanied by, such information as the Authority my reasonably require.

3. Regulation 14(1) states that the Authority may refuse to register an applicant as a
SPI only if any of the conditions set out in paragraphs (2) to (11) is not met.

4. Regulation 14(7) states that “the applicant must satisfy the Authority that:

a. where the applicant is a body corporate, the directors;

b. the persons responsible for the management of the institution; and

c. where relevant, the persons responsible for the management of payment
services,

are of good repute and possess appropriate knowledge and experience to provide
payment services”.

5. Regulation 14(10) states that “The applicant’s head office, registered office or place
of residence, as the case may be, must be in the United Kingdom”.

6. Schedule 6, Part 1 (10) states that Part 26 of the Act applies save for the
modifications detailed.

The Approach Document

7. In exercising its powers in relation to the approval of an application for registration
as a small payment institution, the Authority must have regard to guidance
published in the Authority’s ‘Our approach’ document, including the section titled
‘Authorisation and registration’. The version of the ‘Our approach’ document at the
date of the application was published in December 2018.

8. The paragraphs relevant to the refusal of the Application are set out below.

9. Paragraph 3.128 sets out guidance on Regulation 14(7). This paragraph states that
in its assessment of whether a director is of good repute, the Authority will consider
the factors relating to fitness and propriety set out in paragraphs 3.101 to 3.109.

10. Paragraph 3.109 states that in determining an individual’s competence, capability
and experience, the Authority would consider whether the individual has the:

a. knowledge

b. experience


c. training

to be able to perform the activity of payment services.

11. Paragraphs 3.130 states that SPI applicants must have their head office, registered
office, or place of residence in the UK. Paragraph 3.132 states that when
considering the location of the head office of an applicant, the Authority will take
the approach set out in paragraph’s 3.49 to 3.53 in respect of an applicant to be
an authorised firm.

12. Paragraph 3.51 notes that the PSRs do not define what is meant by a firm’s ‘head
office’. It states that this is not necessarily where the firm’s place of incorporation
or the place where its business is wholly or mainly carried on. It states that although
each application is judged on a case-by-case basis, the key issue is identifying the
location of a firm’s central management and control. This is explained to mean:

o
The directors and other senior management, who make decisions relating
to the firm’s central direction, and material day-to-day management
decisions; and

o
The central administrative functions of the firm (e.g. central compliance,
internal audit).


ANNEX B – REPRESENTATIONS

1.
Awesome3’s representations (in italics), and the Authority’s conclusions in respect
of them, are set out below.

Location of Awesome3’s head office

2.
Mrs Nkomo is not the sole owner and controller of Awesome3 as Ms Ndlovu holds
50% controlling equity in the firm. Whilst Awesome3 acknowledges that the
Companies House website shows that Mrs Nkomo is the only shareholder and
person with significant control, Mrs Ndlovu was tasked to update the details when
she became a director in March 2019, and it is possible she forgot to do so.

3.
Although Mrs Nkomo incorporated Awesome3 and submitted the Application to
the Authority on 29 January 2019, it was Ms Ndlovu who identified the opportunity
in the UK. Mrs Nkomo would not have been able to identify this opportunity as
she is not ordinarily resident in the UK.

4.
It was always Awesome3’s plan that Ms Ndlovu would come on board as co-driver
and the main driver of the operations of the business. Mrs Nkomo carried out the
administrative function of setting up the business and researching applicable UK
law as she holds relevant qualifications and has considerable experience in the
finance industry.

5.
Awesome3’s business model is that Ms Ndlovu would market the business in the
UK, carrying out all client interface work by herself, with unfettered power to
contract with clients as she deemed fit.

6.
Accordingly, it is incorrect for the Authority to assert that the location of
Awesome3’s mind and management is not in the UK.

7.
Although the Authority received a PSD Individual Form and a Controller Form for
Ms Ndlovu, Awesome3 has not provided any additional evidence to support its
statement that Ms Ndlovu holds 50% controlling equity in the firm. According to
the Companies House website, Mrs Nkomo owns 75% or more of shares and
voting rights in Awesome3, with the right to appoint and remove directors, whilst
Ms Ndlovu is stated to have significant influence or control. On the basis of all the
evidence it has seen, it appears to the Authority that Mrs Nkomo is the owner and
controller of Awesome3.

8.
The Authority notes that the explanation regarding Ms Ndlovu’s role in identifying
the business opportunity was not provided at any point by Awesome3 in its
correspondence with the Authority regarding the Application. Further, Mrs Nkomo
submitted the Application on 29 January 2019, has remained the Authority’s sole
contact throughout the application process and Ms Ndlovu was only appointed as
a director following concerns raised by the Authority in respect of Mrs Nkomo’s
residence in South Africa. These matters lead the Authority to conclude that it is
likely that Mrs Nkomo will take the key management decisions relating to the
business, and that Awesome3’s central management and control, and therefore
its head office, will be outside the UK.

Ms Ndlovu’s knowledge and experience

9.
For the reason given in paragraph 11 below, Ms Ndlovu would not be operating
any payment service, and so does not require payment services experience and
skills to contract with her UK clients.

10. The Authority notes that Awesome3 has not challenged the Authority’s conclusion
that Ms Ndlovu does not possess the relevant knowledge and experience to carry
on payment services. The Authority’s views on Awesome3’s submission that it
would not be carrying on any payment service are set out in paragraphs 14 to 17
below.

The Application was a mistake

11. Awesome3 does not intend to pursue an activity which would fall within the
definition of payment services in the PSRs. Although money remittance would
occur as part of Awesome3’s business model, this would not constitute a payment
service since the funds would not be transferred by Awesome3 on behalf of its
clients in the UK. Instead, Awesome3 would transfer its own funds, using swift
bank transfers on its behalf.

12. The Application was therefore a bona fide mistake, which Mrs Nkomo has already
admitted and apologised for to the Authority. It was submitted mistakenly due to
Awesome3’s initial limited understanding of the PSRs.

13. Accordingly, there is no valid application for the Authority to consider, which
means there is no decision for the Authority to make. In accordance with the
principle of fairness, to resolve this matter the Authority should set aside the
Application and refund the application fee, less a deduction of a percentage of the
fee as a penalty for the unnecessary application.

14. In its application form, Awesome3 described the services it planned to offer. These
included, although as an incidental activity to the main services provided, ‘the
remittance of funds on behalf of clients’ and the scenario where Awesome3 would
have ‘to perform swift transfers to beneficiaries’ bank accounts in South Africa or
Botswana’. Although, in correspondence following the Application, Awesome3
explained that the money remittance service might not materialise, it did not state
that its initial description of the services it planned to offer was incorrect. It was
not until after the Warning Notice was issued (and in fact after it had provided its
initial written representations on the Warning Notice), that Awesome3 provided
the explanation that it did not in fact intend to remit funds on behalf of clients.

15. Although he Authority accepts that the new description of Awesome3’s activities
raises the possibility that the activities proposed may not fall within the definition
of payment services in the PSRs, the Authority would need to receive further
information regarding the flow of funds and the nature of the services to be offered
in order to be able to determine whether money remittance or other payment
services would be offered. Further, given that Awesome3’s position had previously
always been that any funds transferred would be ‘on behalf of clients’, the
Authority remains concerned that the proposed activity could fall within the scope
of the PSRs as originally stated.

16. The Authority expects applicants to be ready, willing and organised before making
an application for authorisation or registration. As part of this, applicants should
make their own determination of the scope of their activities before making an
application. It is not the Authority’s role to provide advice to applicants regarding

the scope of the PSRs; applicants should review all available guidance, seeking
out independent legal or compliance advice where necessary. The Authority
therefore considers that Awesome3 should have made more detailed enquiries
regarding the scope of its activities before submitting the Application.

17. In respect of Awesome3’s submission that there is no valid application for the
Authority to consider, the Authority notes that it has provided Awesome3 with
multiple opportunities to withdraw the Application and that Awesome3 has refused
to do so. Awesome3 has been informed on several occasions that the application
fee is not refundable, either fully or in part. This is in accordance with statements
on the Authority’s website and in the Approach Document, which make it clear
that the application fee is not refundable other than in certain limited
circumstances (which do not apply here).

Timing of Application decision

18. The Warning Notice was issued approximately 10 months after Awesome3
submitted the Application. Awesome3 has suffered prejudice due to the delay in
the Authority arriving at a decision regarding the Application. For example,
Awesome3 has had to suspend executing its planned business activities due to a
lack of clarity on the Authority’s attitude towards such planned business activities.

19. The Authority considers that its position in respect of Awesome3’s planned
business activities, as set out in the Application, has been clear and consistent
throughout the application process. It also notes that Awesome3 has stated that
any money remittance might not materialise and would be incidental to its
business, so it considers it unlikely that Awesome3 would have suffered any
prejudice whilst waiting for the Authority to determine the Application. If
Awesome3 wishes to make a formal complaint in respect of this matter, it may do
so using the Complaints Scheme established under the Financial Services Act
2012.