Safeguarding for payments and e-money institutions

What is safeguarding?

In the U.K, payment institutions, e-money institutions and credit unions that issue e-money are required by regulation to safeguard customer assets.

Upon immediate receipt of funds, the FCA expects firms to ‘ensure appropriate organisational arrangements are in place to protect the safeguarded funds’. Much like CASS, these new provisions ensure that organisations are safeguarding client money in the event of insolvency.

The FCA is stepping up safeguarding expectations

While safeguarding measures have been in place since 2011 and then amended in 2017, the FCA has further elevated the importance of effective client funds safeguarding in times of market disruption.

During the pandemic, the FCA introduced temporary guidance on safeguarding and prudential risk, aiming to bolster firms’ arrangements to offset the disruption. However, in November 2021, the FCA made those guidelines permanent. This was done to better protect consumers.

In addition, the regulator now expects payments and e-money firms to write to customers to remind them how their money is protected through safeguarding measures, rather than the Financial Services Compensation Scheme (FSCS).

Rising to the challenge

The challenge for firms with safeguarding is not necessarily in the regulation itself but because safeguarding rules are not prescriptive in the same way that CASS rules are. In other words, the FCA say what the requirements are, but not how organisations should implement them.

Payments firms, e-money firms and credit unions will no doubt benefit from a more thorough understanding of safeguarding expectations.

Download the full paper to learn:

  • The history of safeguarding regulations
  • What the FCA expects from firms in relation to safeguarding
  • How to prepare effectively for annual safeguarding audits
  • Reconciliation requirements for safeguarding compliance
  • How AutoRek has developed the first to market automated safeguarding solution

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