How does Payoneer legally provide bank accounts to non-UK residents?

It doesn’t create a real bank account for you.

Payoneer is an E-Money License holder in the UK, which means, they are allowed to hold money (or stored value) on behalf of a customer. This means, they work with banks and can obtain virtual IBANs or (segregated named accounts in their own pool) and hold your money. It is NOT a bank account as such, just a pseudo service that mimicks the incoming aspect of a regular bank account, i.e. being able to receive funds on a given address, where the address is your virtual IBAN.

EMIs are not restricted by the same constraints of the banking law that the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) impose on banks. Hence, Payoneer, an EMI is able to onboard non-UK resident customers.